Global energy pressures look set to spill over into the world of cloud computing in 2023. As Microsoft announces a 9% increase in its cloud licensing prices, we expect its close competitors could follow suit.
The State Of Cloud Computing
In the last 10 years, the interest in and adoption of cloud hosted services has developed at an accelerated rate globally.
As it’s evolved, the cloud services marketplace has been dominated by “the big three”: Amazon Web Services, Microsoft Azure and Google Cloud Platform.
Amazon is the largest cloud provider, with a market share of 32%. Microsoft Azure is smaller but still a giant with a 20% market share, and Google follows with 8%.
Each has its own angle to cloud services but competition between them remains fierce. This has historically been a good thing for consumers: cloud services prices have decreased as each organisation looked to promote their cloud platform.
Amazon is now doing everything in its power to stay ahead of the competition by continuously innovating and developing the cloud offering in order to keep up with business and consumer needs. Similarly, Microsoft and Google are doing the same, trying to catch up with Amazon.
The rate of development is now accelerating at a pace which is not only a result of consumer/business needs but also of the development of competitor offerings. Cloud services prices are therefore no longer the priority to providers.
Impact Of Energy Costs On Cloud Services Prices
While cloud-hosted services typically save businesses money, the data centres that run cloud environments are energy intensive.
As a result of rising global energy costs, data centres across the globe – large and small – have been hit hard with increased costs. The UK market is no exception, with some smaller providers seeing over 500% increases in their operational energy costs.
While the big three providers are of a scale where they can adapt to cost fluctuations without them affecting end-users, triple-digit rises in costs can’t be ignored. Growth at the end of 2022 dropped by around 30%.
Microsoft has been the first to announce price rises. A 9% increase will be applicable on all cloud service licensing (including Microsoft 365 business licences) from 1 April 2023.
While there is no direct confirmation at this point, there’s a likelihood that Amazon and Google will need to emulate Microsoft in increasing the margin on their cloud-hosted services.
What Can Businesses Do About Price Rises?
Much like wider inflationary pressures, businesses will need to be strategic in their approach to cloud cost rises.
From a Microsoft perspective, purchasing any required annual licensing before 1 April 2023 will safeguard organisations from price rises for 2023.
For other cloud providers, having a ‘spring clean’ could reduce data amounts and therefore storage amounts. Equally, there may be ways of configuring applications to reduce storage levels (eg. reduce retention times on backups).
More simply, just checking that a business is using the level that they’re paying for could be a way of reducing costs.
Such measures should be approached with care, however. Akita will be happy to assist organisations with an assessment of their AWS, Azure or Google Cloud platforms – or work on new strategies for their private cloud setups.
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