Can Cloud Storage Costs Fall to Zero? - Page 2


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These examples are interesting for two reasons. Firstly, there is no obvious need for a fair use policy: subscribers are unlikely to store Exabytes of data because the data they store is business app data – documents, spreadsheets, and that kind of thing. That's very different from vast troves of data from all kinds of sources that many companies would like to store and use for Big Data analysis purposes – and which are unlikely to be stored in Google Drive for Work or Box.

And secondly, these unlimited storage offerings are part of other services which customers pay for.  "Box is often referred to as a storage company, [but it is] really a SaaS company that happens to have storage," says Mark Peters, senior analyst at Enterprise Strategy Group. "The value is in the application – streamlining sharing and collaboration across the knowledge worker ecosystem of collaborators and devices. The more people (and therefore data) you get into your ecosystem the stickier this scenario becomes for the provider – because there might now be a commensurate increase in enterprise licensing fees to balance the increased demand for ‘free’ storage, and for the users - because migration costs become painful,” he says.

"So free storage is good for the provider as it compels usage, and can lead to an inability to go elsewhere, even if the ‘free’ starts to cost sometimes," he adds.

That's significant because it provides a clue to how storage may well be offered in the future: as a resource given away for free  – but only to subscribers of the provider's other services.

What kinds of services? The obvious candidate is cloud computing services, which also just happen to be offered by storage service providers. The likes of Amazon, Google and Microsoft have huge Infrastructure-as-a Service and Platform-as-a Service offerings. And as another way of differentiating their services there's no reason why they shouldn't offer unlimited cloud storage to customers  for free. Peters suggests services such as backup, file sharing and analytics as other examples of these extra services.

Henry Baltazar, a senior analyst at Forrester Research,  concurs. "The reason Google, Amazon, Microsoft, and other providers are dropping cloud storage prices and in some cases making it unlimited is because these vendors don't want to make their money on storage. 'You own the data, you own the customer,'" he says . "They want to sell compute, analytics, security, collaboration, developer service, and so on to customers - and all of these things are high margin.”

He continues: "None of these players have a legacy enterprise array business to protect, so every dollar they carve out of that can go to other cloud services."

Baltazar does point out, though, that the type of storage that's likely to be offered free is object storage for unstructured data. High performance cloud storage – the type you need to actually run apps – is not cheap, although the amount needed is far more limited than the amount you may want to use to store unstructured data. "If anything, that the block storage options like Amazon EBS with provisioned IOPS are rising as the providers add more flash to options and charge more for higher guaranteed performance," he says.

There is the danger that offering unlimited free storage would distort customers' behavior, encouraging them to store far more data than they would if they had to pay per gigabyte, of course. But this is mitigated by the fact that moving large amounts of data to and from the cloud is a time consuming business that can affect the performance of corporate WAN links – and cloud providers can and do charge transport costs for moving data out of the cloud.  In Amazon's case this amounts to about 10c per terabyte for network egress.

"It is expensive to pull data out or push it to another cloud," says Baltazar. "There are some efforts with data center providers like Equinix to connect clouds that are located within their data centers, but more work needs to be done. Until then, providers have a solid lock in on customers."

These factors mean that if providers do offer free unlimited storage that they might not have to impose fair use policies or other terms to prevent the free storage being exploited in ways that were not originally intended.

So as enterprise storage requirements increase, the good news is that the prospect of free storage is certainly on the horizon. But since storage has a cost it will never be truly free: you'll still be paying the storage provider for something, even if it isn't billed as storage.

When it comes to storage, in other words, there is unlikely ever to be such a thing as a truly free lunch.

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