How the cloud wars are beginning to enter a new phase

Opinion Imagine a business where the product keeps getting better and better, like storage space and video quality, but the prices keep falling steadily as the product continues to improve. It’s happening in cloud computing – and this ‘race to zero’ has people in the industry deeply worried.

The current leader, Amazon Web Services (AWS), slashed their prices an astounding 44 times in the past six years. Amazon’s strategy, it seems, is more of a low cost, high volume model. This strategy seems to be working according to research company Gartner, who reported that AWS stores twice as much customer data as the next seven leading public cloud companies. AWS profits in 2016 grew over 120% and sales grew over 60%, extinguishing any assumptions that AWS was a loss leader product for Amazon as a whole.

Amazon is betting at such a low cost, enterprise businesses will treat cloud services like you treat products at Walmart. With such low prices on products, you’ll keep adding more to your cart. The other leading cloud providers, like Microsoft and Google, are willing to keep up and match Amazon’s prices, with Gartner analyst Raj Bala describing it as aggressive, even ‘punitive’.

Aaron Levie, CEO of Box, has predicted that storage will be free and unlimited in the future. If the current race to lower prices continues, it looks as if Levie’s prediction will soon come to pass. This means, however, that cloud companies have to build in other functionality besides storage alone. From security improvements to converged storage where data storage is combined with data computing, cloud companies are looking for related and integrated services they can charge for.

In the race to differentiate, Microsoft rolled out a hybrid cloud which integrates into its subscription based Office 365 program in April 2016. Satya Nadella, Microsoft’s CEO, explained how this integration works. “If a certain calculation needs massive resources, the transaction can be handed off to its cloud products to provide a sort of turbo charge,” he said. This strategy might be very successful, since many people already use Office at work and the ease of integration might be the incentive for companies to choose Azure over AWS.

Google’s Cloud Platform has strengths with its big data analytics capability, but also has some restraints as it is unable to integrate with existing data platforms, making it more difficult for late adopters to convert to the service. As Kurt Marko explains, it can be a ‘poor choice for cloud laggards and organisations looking for a place to offload legacy virtual infrastructure and applications’.

In March this year, IBM announced it was rolling out more cloud offerings in an effort to compete with AWS and to make the point that storage is not the aspect of the cloud which enterprises really need. One study predicts 85% of enterprise businesses will move to multi-cloud architectures by 2018. IBM’s new products utilise Watson to help clients manage and leverage data stored between multiple clouds.

One analyst, Rodney Nelson at Morningstar Inc., questioned how effective IBM’s rollout would be, noting “the major cloud vendors are flooding the market with new features on a consistent basis…all have moderate to major leads on IBM in that regard.” IBM’s most competitive idea may be moving focus away from offering cloud services and moving towards offering services that will integrate with all cloud providers.

The intensely competitive cloud computing environment is volatile, with new companies throwing their proverbial hat in the ring, such as the Chinese company Alibaba. It’s also pushing out current competitors, with telecom companies like Verizon and AT&T losing market share due to lack of expensive yet impactful infrastructure investment and innovations.

There are so many facets which will affect the final outcome of the cloud computing industry. From the businesses who are quickly trying to implement and then harness the cloud’s potential, there are CIOs who are actually choosing the cloud provider, business people who are learning how to use big data and cloud computing for business intelligence, to companies who are fighting for the biggest piece of the pie and are investing millions to stay competitive. It’s impossible to predict what the final outcome will be.