OnDemand WTP Pricing Research

How multiyear contracts with big business are changing the economics of the cloud | GeekWire

When lock-in is good
Cloud pricing starts off simple: you can rent virtual machines in the cloud by the hour, reserve a certain amount of computing capacity for an extended period of time, or, in a growing number of emerging cases, pay only for what you use.

That simplicity disappears quickly. Compute, the most basic element of the cloud, costs between $0.02 an hour and $13 an hour on AWS, depending on the amount of horsepower you need to throw at your application. Storage is relatively cheap, while moving your data out of a cloud provider’s network tends to be expensive.

Higher-level services, such as managed databases or Kubernetes, generally give cloud providers better margins than basic services like compute and storage. After years of pricing cuts, cloud providers are competing less these days on raw costs and more on differentiated managed services that handle more complex parts of their customers’ technology infrastructure.

The industry is also moving toward more granular units of consumption. Companies can now rent the flagship EC2 compute instances by the second (the minimum charge is a minute), and the AWS Lambda serverless service takes this concept even farther. Serverless pricing is a fraction of regular compute pricing, although serverless applications can also generate a lot more billable activity than you might first think.

But the thinking around cloud buying is starting to change as more and more large companies sign multiyear cloud computing contracts in hopes of pricing discounts and predictable budgeting. You’re still paying for what you use, of course, because the cloud companies bear the costs of acquiring and maintaining the equipment, but multiyear deals offer security and the chance to feel like you’re getting a good deal.

A three-year contract signed with AWS by South African connected car-tech provider MiX Telematics in 2017 (which is somehow available on the internet, unlike most such contracts) provides a template for how AWS strikes these deals, which require a spending commitment of $1 million a year. In exchange for a commitment to spend $1 million through 2020, AWS agreed to give MiX Telematics a 9 percent discount across a host of key AWS services, including EC2 and the DynamoDB database.

Read complete article here:

How multiyear contracts with big business are changing the economics of the cloud – GeekWire.

Post a Comment

WP-SpamFree by Pole Position Marketing