Navigating the nuances of global cloud pricing

Posted by Mike Vizard on Mar 3, 2016 9:01:32 AM

cloud_pricing.jpgFrom a technical perspective, one of the more appealing things about cloud computing is that an application can be hosted almost anywhere in the world. However, because the laws of physics haven't been suspended, many organizations prefer to host applications in the cloud as close as possible to where they're most likely to be invoked by end users in order to maximize application performance. Accessing an application hosted in the U.S. across a wide area network (WAN) from, for example, Europe is not going to be nearly as good an experience as a cloud application that resides on the same continent.

The challenge is that the cost structure around the globe for hosting applications is significantly different. A new Cloud Price Index report from 451 Research finds that organizations pay 7 to 19 percent more to host an application in Europe and 14 to 38 percent more in Asia Pacific than they do in the U.S.

Reasons to spread out application hosting

Besides the impact of network latency, there are plenty of other good reasons to host the same application in multiple places. In some countries it’s actually a legal requirement. Data sovereignty issues essentially come down to either the local government wanting to be able to exercise control over their citizens or a concern over legal standing. In order to be able to bring a lawsuit against some entity in a country, the data that might be subject to a subpoena has to be within the jurisdiction of a local court.

Whatever the motivation, it does not appear that the total cost of cloud computing is going to decline meaningfully any time soon. The 451 Research report finds that while the cost of cloud computing has dropped 6 percent since October, those price declines span a broad range of services. The report finds that pricing for widely used services such as object storage have remained unchanged for 18 months.

Navigating global cloud pricing

Put it all together, and it’s clear that in an era where even the smallest of businesses is now a global entity, IT service providers need to be able to navigate a global network of cloud services. It may, for example, be less expensive to using one cloud service provider in the U.S. and another in Latin America. But the cost of replicating data and moving application code between two disparate providers might encourage IT services organizations to negotiate a discount with one single provider whenever feasible. That’s doubly true if that international contract is being negotiated with a provider in the U.S. that also has data centers in other countries. After all, it’s hard for that provider to justify charging one fee in the U.S. and higher one overseas in the context of a single contract to host the same application.

Of course, that assumes that all things are equal in terms of the quality of the data centers a cloud service provider has at its disposal in every single country. The odds of any one cloud service provider having the best data center in every geography are fairly low, so IT service providers would be well advised to make sure they test application performance in every region before signing on the dotted line.

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Photo Credit: Mikou07kougou via Used under CC 2.0 License

Topics: Cloud Trends

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