4 key takeaways from 451 Research’s Report on economics of cloud computing for enterprise IT

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economics of cloud computing in IT architecture

451 Research has recently published its report on cloud economics. This report examines the state of price cuts worldwide and points us to some interesting insights from the cloud market- private cloud and public cloud.

According to 451 Research, private cloud providers are adopting flexible approaches and public cloud providers are introducing new models and beneficiary features for their buyers.

Greg DeMichillie, the head of product for Google’s cloud aptly remarked “The secret to cloud economics is utilization — every minute unsold is money you don’t get back,” said. “There are very few of us who can work at this scale.”

We know that cloud computing helps save money, but cloud service providers (CSPs) are not sure how to maximize these savings. So, the key is in understanding how the applications you place in the cloud align with the economics of various cloud services, like, understanding when to use a public versus private cloud.

Check out the key insights on the direction of economics of cloud computing, where it is heading, today and tomorrow and turn it to your advantage.

Key takeaways for Cloud Service Providers from 451 research report

 1. Cloud optimization market is the new opportunity

The cloud optimization market is growing rapidly with tools like cost, governance and control. No doubt, cloud’s usage is growing, yet companies lack cloud optimization processes and face challenges in managing cloud costs and performance, resulting in significant waste in cloud spend. CIOs and enterprise IT organizations need to develop new approaches and processes to manage and optimize cloud costs. They are yet not ready to handle cloud.

For Cloud Service Providers, “cloud cost optimization is a new market opportunity”. They can add value to customer deployments via it.

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2. Private cloud market is becoming more flexible

451 Research reports that the public cloud providers are now offering commitment discounts, while private cloud providers are offering pay-as-you go consumption. Report says that there is a rise in interest in pay-as-you-go private clouds, including AzureStack, HPE, Nutanix and a host of others, plus build-operate-transfer models.

Private cloud providers are offering great flexibility to their buyers with different approaches – pay-as-you-go and build-transfer-operate, allowing them to consume, be metered and billed in the manner they prescribe.

Today enterprises want a choice of best execution venue, driving a need for different variations of public and private cloud, thus leaving a room for opportunity for optimization across these multiple venues.

It reports that there are no signs of existential crisis for the private cloud.

3. No more price cuts, companies are introducing new models and economically beneficial features to boost profitability and trust

Despite the falling cloud prices, cloud service providers are responding with improved reporting capabilities for their own services and are differentiating in procurement and product choices.

Public cloud providers are adopting portfolio expansion to meet their customers’ needs including, committed pricing models, better reporting, smaller time increments, additional instance sizes, and improved regional price competitiveness.

They are introducing new models and economically beneficial features saying, Use us and we’ll always try to give you the best value, to win customers’ trust and increase their wallet share.

Top cloud service providers introduced new features, namely:

  • AWS and Google – Per-second
  • Microsoft – Cancelable reserved instances.
  • AWS, Microsoft and Google– Spot
  • Google and Oracle– Serverless computing.
  • Microsoft through Cloudyn acquisition– Commitment discounts and improved reporting.

4. Big Price cuts are inevitable

Virtual machines and storage will continue to become cheaper but price cuts on higher-stack services like AI, big data, IOT and serverless computing will drive greater volume and more stickiness for cloud providers as these higher-stack services derive greater margins than the basics.

It is also expected that hyperscalers will resolve their complexities on their own and third parties will start optimizing across multiple clouds, both public and private.

Thus, enterprises will want the right mix of public and private clouds to address different workload requirements.

So, CSPs in order to avoid price erosion, should build more value-added services and integrate them to their commodity services and price their offerings sensibly.

If you have any doubt regarding this write-up, feel free to share via comments.

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