Public cloud prices in Europe are forecast to rise by nearly a third over the next year as borrowing and energy provider costs fall. For the US, the price list is expected to increase by a fifth.
The market exploded in the early days of the pandemic as much of the world transitioned to teleworking and continues to grow at over 30 percent each quarter, with AWS, Microsoft and Google being the primary beneficiaries.
But challenges loom, according to Steve Brazier, CEO of channel analyst Canalys, who pointed out that the cost of ever-expanding public cloud infrastructure is “incredibly high.”
“That’s probably the biggest capital investment [that] has never happened in any industry and it’s happening quarter after quarter, year after year,” he said at the Canalys Channel Forum EMEA 2022 in Barcelona.
This includes buildings, network devices and other IT equipment. For example, the analyst estimates that half of all servers shipped worldwide this year will be consumed by these top seven vendors.
“Public cloud is a tremendous success,” said Brazier, “and it emerged in the era of easy money. Things are changing.”
Borrowing costs are rising in Europe. They rose 22 percent in September and energy costs hit record highs in the region last month. Brazier said he’s spoken to data center providers whose energy costs have quadrupled, so he thinks some of his calculations may be conservative.
A seemingly unrelenting rise in inflation is also a problem in the US, and the Federal Bank is expected to raise interest rates to 4.75 percent before the end of the year.
“This is a big market shift,” he told an audience of resellers, integrators and service providers. “You must prepare your customers for an almighty response [from the hyperscalers].”
The largest cloud providers can raise capital, optimize power supplies, and have ways to mitigate growing overheads, but “the change in their business is pretty dramatic.”
“We expect public cloud prices in Europe to increase by at least 30 percent in 2023, causing a huge shock to many of their customers who are also trying to reduce their costs and creating too much tension and anger between you and us will lead them and providers.”
One UK cloud provider told us it “unfortunately” could be a case of “Hobson’s choice for hyperscale cloud consumers who must balance rising costs against significant exit costs”.
“Most customers will incur the cost of redesigning applications written to proprietary APIs, retraining internal technical teams, and data egress, our source added.
“The energy crisis will clearly highlight the impact of the lack of competition in this market and I very much hope Ofcom will take this into account in its current review of the UK hyperscale market.”
Mike Norris, CEO of Computacenter, one of Europe’s largest resellers, didn’t comment on the pricing specter, but said the most common request from customers is how to get a handle on cloud costs.
“Cost control is the biggest challenge with the cloud,” he said on stage. “Because it’s not software-as-a-service, it’s software held hostage. You have no choice, you can’t get out.”
We asked AWS, Microsoft and Google if they expect to change the price list upwards next year. ®
https://www.theregister.com/2022/10/20/public_cloud_price_rise/ Cloud prices in the US and Europe will rise due to inflation • The Register