Microsoft Price Increases: Here it Comes Again!
The topic is quite obvious, but here is the quote that actually stuck out for me:
Anything being sold “as a service” to an enterprise today is probably being sold at a big loss in order to gain market share. Whether it’s Microsoft, Amazon, or someone else, the pricing is not sustainable. Subsequently, expect future cost increases to be much larger than the ordinary rate of inflation.What does this mean, in practical terms? I believe we are in a "free cloud services" bubble, and that this quote means it is about to burst.
Amazon runs two very important cloud IaaS - Infrastructure as a Service - products: EC2 and S3. When they introduced EC2, they disrupted dramatically the hosting market. Suddenly, you could run your own server on Amazon's CPU power, on a "pay-as-you-go" model, at rock bottom prices. And you could store all of your server's data on S3 for equally disruptive rock bottom prices.
This enabled the appearance of a large amount of free cloud-based products that many educators know and love: Dropbox, Pinterest, Instagram, Voicethread, Edmodo... You can find some more interesting examples in their case studies page.
Amazon has been effectively subsidizing the EC2 (and all their other Amazon Web Services, quite a lot of them) with other parts of their business, to become the main player in this space. Eventually, they will need to increase their pricing to bring it back to sustainable levels. A price increase on Amazon's side will also enable Rackspace, Microsoft's Azure, and other cloud IaaS providers to increase their pricing in parallel. See above: "increases much larger than the ordinary rate of inflation".
When that happens, we will see a lot of their customers, all these free cloud providers, struggle with their business models. The key question is: How many of them will successfully absorb the increased costs? How many will choose to pass on these costs to their users?
What I see is a bubble about to burst. And we will need to get used to either paying for our cloud, or give it up.
What do you think? How much are you ready to pay for your cloud?