The big service cloud providers have been in a full-blown price war over the past week and a half. Pricing for Google’s Cloud Platform was slashed last month. Amazon Web Services (AWS) and Microsoft Azure pricing was in turn chopped.
The big three in the cloud space have slashed pricing on various cloud services by between a third and a half in this latest round of jostling alone. Pundits expect the brutal price war to continue as Google, Amazon and Microsoft continue their land grab in these early days of cloud computing.
They’re at war over pricing, and they’re also expanding as they build more and more huge data centres – and creep closer to New Zealand. Microsoft and Google’s nearest cloud data centres are in Singapore but Amazon now has AWS cloud centres in Sydney – and has begun push it aggressively through New Zealand based partners such as Datacom and the New Zealand office of Australasian company Vocus, which now offers a dedicated “Cloud Connect” link to AWS in Sydney (via dedicated bandwidth it leases on the Southern Cross Cable).
Companies like e-tailer Fishpond, Westpac, MetService, Victoria University, Snapper and online gaming SmallWorlds have signed up with AWS.
Before the latest round of price cuts, Fishpond general manager Ben Powles told NBR his company was paying around $30,000 to host its site with AWS – perhaps the bluntest measure of cloud pricing. A key point is that Mr Powles has discovered the best pricing by – up to 60% – is to be had with “reserved instances” or the more traditional model of taking a punt on how much bandwidth you’ll need in the month ahead rather than taking advantage of the flexibility of the cloud to throw more, or fewer, servers at a site as traffic and requirements like software testing demand. Still, that’s a very keen price given the etailer’s traffic (around 250,000 visitors generating nearly two million page impressions a day).
Now, it will be keener, and Google and Microsoft have pledged to match Amazon’s pricing (exact comparisons are tricky as each has different charges for services such as hosting, compute, storage and bandwidth, and bigger customers get offered better rates, and rates vary by region).
For the big three, and other multinationals, it’s all about scale and commoditising the cloud. During a visit to Auckland, AWS chief technology officer Dr Werner Vogels told NBR Amazon has cut its pricing 33 times since it launched in 2006 and will continue to do so. The same goes for its rivals, which also include the likes of HP and IBM, playing catch up.
Some commentators wonder if local cloud providers will simply get steamrolled. Some said privately-held local data centre operator Revera’s decision to sell itself to Telecom for $98.5 million in August last year was well timed.
“Moore’s law tells us that the cost of computing halves roughly every 18 months. Add to that the fact that we have multiple public cloud vendors competing for a massive market and you have a real recipe for continuing price cuts. For some time we’ve seen Google, AWS and Microsoft take turns to set new price levels. This race looks likely to continue – a real boon for customer,” Christchurch-based cloud computing commentator and Forbes.com contributor Ben Kepes tells NBR.
“Any New Zealand organisation that has a requirement to have its data within New Zealand has no option but to look at a local provider since none of the large cloud vendors are here yet,” he says.
“The only other reason to go local is if there is a specific service need that a local vendor delivers. Large global vendors may not be as responsive to customer inquiries than a smaller local vendor will be.”
“But outside of that, there are few use cases that really demand a local provider –with most of the large vendors having services in Australia now, the concerns with regards latency [lag] have largely been removed. It should be noted that Xero, since its inception, has hosted in the US with Rackspace and it suffers no latency issues because of it.”
So can the locals cut it?
Revera head of innovation Keith Archibald says, for starters, most larger organisations have a patchwork of cloud services. Things will get neater but for now they have series of “cloud silos” – using some public cloud services, some private cloud services, some local, some offshore – and with traditional on-premise services mixed in too.
“It’s not about the price war but how they’re going to manage the transition,” Mr Archibald says. Revera offers a dashboard interface that he says makes it easy for a company to manage a patchwork of different cloud services while they undergo the process of “cloud aggregation.”
He also pitches that Revera’s services help a company control costs as its staff use a stew of different cloud services.
Mr Archibald essays a couple of arguments NBR often hears about the large providers, including that there can be hidden costs, especially in terms of data egress – extracting data from the cloud – which he says often causes sticker shock for New Zealand customers. And that the likes of AWS, Google and Microsoft offer cloud platforms that are optimised for large companies, and those that have a lot of expertise inhouse (to return to our early example, Fishpond has two server experts inhouse (although it no longer has any servers at its Auckland headquarters), who keep an eye on its network, and AWS. Maintaining and tweaking a cloud setup with one of the big players is far beyond most small to medium businesses’ wherewithal, Mr Archibald says.
Yet, like rival Datacom, which both maintains its own data centres in New Zealand and Australia and partners with AWS, Mr Archibald says there is a place for the multinationals (definitely the right answer now that his company is part of Telecom, which includes the vendor-neutral services division Gen-i).
Revera will soon add support for a number of the offshore providers’ cloud services to its dashboard interface, the head of innovation says.
The likes of Datacom and Revera have a natural bias toward local services, of course, with a dash of access to the multinationals thrown in for good measure (shortly, for Revera).
But, from his independent perspective, IDC’s Adam Dodds says such a mix is a good approach.
“The global theme across all of the provider community is hybrid – whereby a mix of local, near shore and global will provide an organisation with the requirements needed for each workload. Workloads can be categorised by whether they are network intensive, storage-intensive or process-intensive,” he says.
Like all-comers, he adds that possible legal requirements to keep certain data in New Zealand, also weigh on the decision.
NZ a laggard
Mr Dodds adds that, “New Zealand organisations have been slow to migrate from an on-remises to hosted and cloud based solutions,” By IDC’s estimate, 66% of NZ racks are still on a customers’ premises.
Why are we behind?
“It’s because of our traditional DIY approach to everything,” Mr Dodds says.
“In the new world of social, mobile, cloud and big data organisations must choose what they are not going to do – and therefore buy from the market. Compute services such as hosted or cloud infrastructure are the easiest option as they are a scale based business model. All New Zealand chief executives should be asking their CIOs [chief information officers] how they are going to leverage cloud solutions and providers.
“Google, AWS and Microsoft [public clouds] are all credible providers in the market. Arguably Amazon is significantly larger than that of its nearest competition.” (IDC’s market research rival, Garner, estimates Amazon has 14 times the cloud capacity of its nearest 14 rivals combined).
“New Zealand organisations should be aware and knowledgeable about these solutions and the relative price differences between a local and a global provider, “ Mr Dodds says. “There will be a premium for local which is acceptable based on the additional ‘costs’ of a public cloud provider, for example, the network costs, the risk cost of location and the variability costs (if the workload requirement is stable then buying something that is scalable is not a high requirement).
Do a bit of bargaining
“My guidance to New Zealand organisations is that they should look to link local pricing with global pricing. That is, when the global goes down [from Amazon, Google, Microsoft etc], then so to should the local pricing. Develop rules for controlling the costs of an opex [operational-expenditure]-based IT model, contract to shorter term agreements with hosted and cloud providers [avoid being locked into agreements over two to three years and continually evaluate what workloads that can be deployed into the cloud to ensure that the environment is optimised].”
A guide through the maze
Appserv managing director Graham Clarke takes a more hardline approach in the local vs international hosted service debate.
“I remain firmly of the view that the dollar-focused, vanilla ice cream service will be fought by the international players,” he says. But, if you want end-to-end service, configured and managed to the specifics of your business ,there’s a strong place for us and now and in the future.”
Mr Clarke says that even if you’re just dipping your toes in the cloud with, say the cloud version of Microsoft Office (Office 365), “You still need a local resource – someone in your own company or an integrator who can work with your business, and you existing applications, and guide you through the maze.”
He says the cloud mantra is that you can outsource all your computing to the internet, and focus on business. But in reality it’s still a very new frontier. And unless you have sharp inhouse skills, or help, the opposite could be the case
Webdrive general manager Robin Dickie agrees, saying ,”AWS and Google App Engine require specialised skills to architect, deploy and manage. The reason for this is the utility nature of IaaS (infrastructure as a service), where you pay for what you need and nothing else - including backups and support.
The multinationals offer a blunt set of services – as they have to, with hundreds of thousands of customers. A local provider has more scope to start with what your business needs to do, and where, then work backwards to the technologies you need to achieve it.
Another point of local flavour: like other local hosting and cloud companies, Appserve will work with you optimising your network and internet connection, including a UFB upgrade.
Dedicated vs shared bandwidth
Australia’s Vocus – an Amazon Web Services Partner – bought Auckland’s Maxnet in 2012, giving it a local data centre presence, and a foot in both camps.
Vocus spruced up and expanded Maxnet’s data cente on the North Shore, which was reopened by ICT Minister Amy Adams last year – complete with a pledge form the Aussie company that it will increasingly use the Auckland facility to manage cloud services for its Australian clients – especially once the Tasman Global Access submarine cable goes live next year (a joint venture between Telecom, Telstra and Vodafone that will give NZ, finally, a second major transtasman broadband link).
Vocus’ Steven Stanford says data sovereignty regulations should be one of the primary factor in deciding whether you want to go with a local or international provider.
If you do decide to go offshore he says it’s important to note that “International connectivity comes in two major flavours. Standard internet connectivity and point-to-point connectivity.
“For small companies moving small volumes of data standard internet connectivity will normally suffice. At a minimum they need to understand the amount of bandwidth required to ensure minimal degradation of service and understand their suppliers’ contention policies – contention being the number of times the service provider sells the same bandwidth they are using to other customers.
“For larger companies moving significant data point-to-point services are recommended. These dedicated links allow for consistent, secure, uninterrupted data movement.”
The same goes for a link to a domestic provider: dedicated bandwidth is better.