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Will Public Cloud Make Us Prisoners Of Pricing?

858 Words. Plan about 5 minute(s) to read this.

A Packet Pushers listener wrote in with the following theory about public cloud eating all the private data centers of the world. Here’s an excerpt.

I think the more interesting division is the Morlock-Eloi division that is rising through cloud computing. Business people as Eloi can pick from a menu and decide what they need. The Morlocks in the cloud do all  the technical work and make things happen. Once the Morlocks have the Eloi in complete cloud lock-in, they will raise prices. Those of use who are Morlocks will have to switch to providers to find work that is interesting. Only the companies that have the funds to afford their own Morlocks will avoid the price gouging that is to come…

What do you think?

TL;DR

I think the formula is a bit more complex. I believe market pressures exist in the unsettled cloud market that will keep prices under control for the foreseeable future.

Public Clouds Competing For Your Business

I think the Morlocks vs. Eloi comparison is apt. The more consumable we make IT, the easier it will be for the technically ignorant Eloi to use it successfully, but cluelessly. This will put the Morlocks in a position of power. And yes, that could mean that people working in enterprise IT today might find the most interesting job opportunities working for big cloud providers. 

However, I think there’s more in play here than the knowledge haves vs. have-nots. Public cloud is a competitive marketplace, and not a monopoly. Therefore, market forces are at work. As long as there are several public clouds to choose from, there will always be price competition.

That said, cloud is still young, and the competitive landscape isn’t in its final form yet. For example, there are the recent exits by Verizon and HP. And then there are reportedly immature players like SoftLayer. AWS is the strongest public cloud provider today, but Google & Azure offerings are catching up rapidly. Both of these have built-in markets to go after — lots of existing customer relationships they could turn into cloud consumers. Therefore, I believe pricing will remain part of the equation for the long-term.

Private Cloud Becoming Viable (?)

Another monkey wrench in the “public cloud is going to charge whatever they want” notion is OpenStack. OpenStack is hard to implement now, and that’s an adoption barrier for the mass market. But eventually, OpenStack matures. When it does indeed grow up and become predictably easy to setup, reliable to operate, and stable in its codebase, I believe that will be a big factor in helping the Eloi decide to maybe keep their clouds private.

And don’t count out VMware. Sure, running a private cloud on VMware is hard on the budget. But VMware has valid reasons to keep their private cloud product set salable. A VMware private cloud keeps their enormous customer base in the fold, and generates revenue for its own sake. If VMware gets enough market pressure, I think they’ll figure out how to sell private cloud at less than extortionate prices.

The Talent Pool Will Grow

A big problem right now is that there is no one predictable way to build a private cloud — and built into that statement is an assumption that private cloud is desirable for all organizations. I’m not sure it is yet. But because there is no one standard way to go about the brave new IT, finding talent with experience and wisdom to guide an organization is hard to come by — at least for right now.

For sake of argument, let’s assume that private cloud does become a generally accepted approach to IT. Having a generally accepted approach will reduce the barrier of private cloud adoption. Getting to technology stability — i.e. OpenStack or VMware becomes a standardized way to build private cloud — then we end up with products to train the masses on. In that case, we’d have an accessible talent pool to build out private clouds. As a result, we would yet again have downward pressure on public cloud pricing.

Public Cloud Still Has Architectural Issues

And let’s not forget that public cloud still has both latency and security challenges with answers that cost money. Overcoming latency challenges is addressable with enough money thrown at the problem (as well as carefully considered design), but that money adds to the cost of consuming public cloud. Security issues are similar — solvable with money perhaps, but that eats into the public cloud value proposition.

That means that the decision to move to public cloud is, ultimately, complicated. I don’t think the decision will ever be so easy or obvious that everyone will just do it. Thus, public cloud pricing will always be under pressure. And even for those organizations fully committed to public cloud, there will be other cloud alternatives.

I suppose a follow-up post would be a consideration of cloud lock-in. Would it be simply too hard to move to another cloud, and might that cause some price gouging? Could be. Of course, you could always build greenfield and migrate. Perhaps migrate is the new upgrade.