Amazon faces commodity cloud competition

By Bernard Golden, CIO |  Cloud Computing, Amazon, Amazon Web Services

If you want to know what this market will look like, consider the airline business: Cheap seats and no amenities. While many experienced flyers lament the disappearance of old-style travel with its associated luxuries-see these classic airline tv ads; the first discusses the steak AA serves!-the current market serves many times more travelers at far lower prices, albeit without any frills. (My favorite was the Ryan Air plan to charge to use the plane lavatory. Now that's frill-free! Expect to see lots of cheap computing with a "serve yourself" approach.

3. Enterprises will struggle to locate expertise.The corollary of the last point is that adoption, implementation, migration and operation skills have to be somewhere. If the providers don't offer them, it falls to the user. As cloud skills are in short supply, enterprises will be challenged to develop or hire sufficient talent. This shortage will be exacerbated as lower prices drive additional demand.

4. Private cloud economics will need to be re-evaluated. Many companies have justified building their own cloud infrastructure because they calculated that they could deliver computing less expensively than AWS. While those plans may have penciled out when AWS charges $.08 per hour for its smallest instance, what will the numbers look like when AWS, locked in a market share battle with Google and Microsoft, starts giving price haircuts?

Cloud Competition Means Bargain Basement Pricing

What can we expect this dynamic look like in practice? We have already seen a couple examples of what happens when commodity economics start to bite.

1. Dropbox doubles storage. A couple weeks ago, I woke up and found that Dropbox doubled the amount of storage it provides for me-at no extra price. Dropbox maintained that it was responding to increased user consumption of digital media, so the new pricing supported consumer demand. A different spin came from industry observers who noted that others, including Microsoft, offered better pricing. In my view, commodity economics meant the price of online storage was dropping, and Dropbox needed to respond. Winner? Customers.


Originally published on CIO |  Click here to read the original story.
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