Skip to main content

Why Value-Added Cloud Computing Services Matter

According to the latest global Cloud Price Index (CPI) study, the cloud services sector isn't a commodity market, with price barely impacting market share as customers look for value-added services. Moreover, cloud computing skills and proven experience are still in short supply. That's why cloud service buyers seek information, guidance and support from vendors.

The CPI research demonstrates that reduced cloud pricing hasn't significantly changed buyer sentiment. Instead, the supply of higher-value cloud services is key to long-term, sustainable and profitable vendor growth strategies.

451 Research finds that virtual machine pricing has dropped 12 percent on average over the past 18 months, while the price of storage, NoSQL, load balancing, bandwidth and other cloud services have remained stable and continue to provide margins.


Exploring the Cloud Market Dynamics

Analysts believe that as the price for cloud compute continues to fall toward zero, the savvy hyperscale vendors will add higher-value cloud services as quickly as they can, recognizing that the margins currently enjoyed on bulk sales of compute resources are not sustainable.

Furthermore, data from the CPI study shows that the lowest-cost service providers have not won greater market share as a result of their pricing strategy. Instead, customers value their additional services, local hosting and support by partnering with a familiar brand.

"Despite all the noise about cloud becoming a commodity, our research demonstrates a very limited relationship between price and market share. Certainly, being cheap doesn’t guarantee more revenue, and being expensive doesn’t guarantee less. Cloud is a long way from being a commodity," said Dr. Owen Rogers, research director at 451 Research. "In fact, the real drama is the race to the top, rather than a race to the bottom."

451 Research correlated global pricing for the CPI small basket of goods against market share data. The resulting Cloud Commodity Score (CCS) measures this price sensitivity -- the higher the CCS, the bigger the impact price has on market share.

According to the 451 Research assessment, the U.S. market is where a lower price is most likely to drive market share, yet even here, the CCS is only 18 percent. By virtue of its size and economies of scale, the U.S. is currently the cheapest market for cloud services.

Cloud Service Market Development Opportunities

451 Research analysts believe this low CCS score demonstrates that there are still opportunities to add-value in the U.S. market, although most service providers still need to find their key point of differentiation in a crowded me-too vendor marketplace.

In Europe, price has less impact on market share with a CCS of 12 percent, and customers paying on average 3 percent more than the U.S. market. With a CCS of just 4 percent, APAC cloud price changes have minimal impact on market share, reflecting the finding that services in this fractured market cost about 19 percent more than in the U.S. market.

451 Research analysts believe Europe and APAC present more opportunities for cloud service providers than the U.S. because the markets are fractured, with concerns about data protection across borders and a need for local services to meet local performance needs.

Popular posts from this blog

Mobility-as-a-Service Creates Disruptive Travel Options

Building on significant advances in big data, analytics, and the Internet of Things (IoT), more innovative transit service offerings aim to increase public transport ridership and reduce emissions or congestion within metropolitan areas. By providing these services through smartphone apps, the transit services also significantly increase user convenience, providing information on different human mobility offerings -- including public transport, ridesharing, and autonomous vehicles. Mobility-as-a-Service Market Development According to the latest market study by Juniper Research, Mobility-as-a-Service (MaaS) subscribers will generate $53 billion in revenue for MaaS platform providers by 2027 -- that's rising from $5.3 billion in 2021. Let's start with a basic definition. MaaS is the provision of multi-modal end-to-end travel services through single platforms, by which users can determine an optimal route and price. The study identified a monthly subscription model as key to incr

Hybrid Work: How to Enhance Employee Productivity

When you hire qualified talent for a key role and trust them to perform, you'll likely achieve the best outcome. Skilled and experienced people will deliver results, regardless of the challenges. That's a key lesson learned from the pandemic experience as most knowledge workers were asked to work from their homes. However, some resist returning to an open-plan office. It's unacceptable. Meanwhile, forward-thinking leaders decided a "return to normal" is undesirable, and in hindsight, everyone should aspire to be more accomodating than before. Therefore, location flexibility is okay. Hybrid Workforce Market Development How will people adapt to these changes? They'll apply the modern IT tools at their disposal. They'll learn new skills and thrive. Nearly 80 percent of employees are now successfully using online collaboration tools for work in 2021 -- that's up from just over half of workers in 2019, according to the latest market study by Gartner. This g

Robocall Mitigation Solutions to Halt Criminal Threats

If you answer the phone and hear a recorded message instead of a live person, it's likely a robocall. A robocall is a phone call that uses a computerized autodialer to deliver a pre-recorded message. In 2020, the U.S. Federal Trade Commission (FTC) received 2.8 million consumer complaints about robocalls. Offering solutions to robocalling and associated fraudulent business practices, computerized mitigation platforms are an integral part of the solution. Platforms that are focused on actionable systems to disrupt unsolicited and potentially criminal phone calls help telecom service providers and industry regulators. Issues of whether one-size-fits-all developments are sufficient to be effective across the spectrum need to be addressed, and whether a single telecom network operator working unilaterally with a third-party platform could compromise desired or mandatory industry-wide standards. Robocall Mitigation Market Development According to the latest worldwide market study by Jun