Comment by scarface74
4 years ago
The cloud providers have no desire for higher rents. Andy Jassy the CEO of AWS just said in his keynote that only 4% of enterprise workloads are on any cloud provider.
The cloud providers want market share. Right now, they are competing against non consumption. AWS has never raised prices on any of their services. In fact, they are aggressively trying to reduce costs by creating their own processors purpose built for their needs and passing them on to consumers. I would think the same is true for Azure. Amazon and Microsoft both know that the minute they raise prices, it’s going to scare companies away.
Who knows what the heck Google is doing with GCP.
They're also running up against significant competition in the form of extremely inexpensive local hardware.
Ten or twenty years ago a company with a thousand employees typically needed multiple racks full of servers, in some cases to handle the load but in many cases just because each separate service would have its own physical machine.
Today all of that can fit on a pair of local physical machines hosting virtual guests. A single machine can have over a hundred cores and terabytes of memory. Moreover, a physical machine can be amortized over ten years provided you have a load that doesn't vary significantly over time. And because it's such a small number of physical machines, you no longer need exotic local power and cooling solutions.
Cloud providers are already more expensive than this in many cases. They need every cost advantage they can get just to be in the game.
Hardware is cheap. People are expensive. Besides that, procuring resources with your cloud provider is simply a matter of writing a yaml file. Not to mention the lack of an upfront investments and only paying for your resources you need instead of having hardware that you are spending money on because you have to have enough hardware to handle peak load. You would be amazed at the amount of resources you can buy at the cost of the fully allocated salary of one engineer.
And yes you can buy hardware. But can you run a data center in multiple regions? Besides that any cloud provider offers more than just a bunch of VMs. AWS alone has 260 services with an entire team of people keeping them patched and optimized. I don’t keep up with Azure as carefully. But this isn’t meant to be an Azure vs AWS comment. I just don’t know Azure.
> Hardware is cheap. People are expensive.
Except that you still need the people, because most of the labor isn't putting the hardware in the rack, it's managing the software which you have to do regardless of where the hardware is.
> Besides that, procuring resources with your cloud provider is simply a matter of writing a yaml file.
That is no different than it is locally.
> Not to mention the lack of an upfront investments and only paying for your resources you need instead of having hardware that you are spending money on because you have to have enough hardware to handle peak load.
But hardware is cheap, remember? And most companies don't actually have large load variations.
> But can you run a data center in multiple regions?
Obviously yes. Any company of non-trivial size would have multiple sites and could locate a host at more than one. This doesn't even necessarily raise the price, because you already need enough machines to provide redundancy, so locating them at different sites doesn't even require additional hardware, only locating some of the existing hardware at other sites.
This is also mostly overrated for companies smaller than that, because cloud providers have had company-wide outages at a frequency not all that much higher than site-wide outages for sites that have a reasonable level of redundancy.
> Besides that any cloud provider offers more than just a bunch of VMs. AWS alone has 260 services with an entire team of people keeping them patched and optimized.
This is only relevant if you're using 260 different services and not just a bunch of VMs, and plenty of companies are using just a bunch of VMs.
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I don’t think it’s mutually exclusive. They might be commoditizing a complement to get market share or find areas of vendor lock-in to raise prices later. I.e. they could be seeding commodity tools that their customers can plug in, while also generally lowering prices for a more pressing immediate land grab before raising prices later.
The cloud has been a viable alternative for about a decade and still has only about 4% of enterprise spend combined. By the time the market is saturated and the only path to increased profitability is raising prices, most of us will be retired. Is that really the most pressing risk that most business have? In any of our lifetimes, when has the cost of technology ever increased- besides phones?