Cloud computing has been growing rapidly, some tech giant companies offer many benefits to users such as huge gigabyte storage with encrypted security, integrated with other apps and even free for its trial use. Most cloud computing companies struggle to get more users and become the market leaders.
However, the competition between tech companies enter the dark side in the industry called “the race to zero”, according to Business Insider. There is so much competition in the cloud industry that cloud companies keep cutting their prices, while keep increasing their storage limits.
There’s a couple of reasons for this. For one, computer storage is getting cheaper overtime. A gigabyte’s worth of storage on a hard drive in 1993 cost over $9,000, but it cost a mere 4 cents in 2013.
Now you can really thank Amazon for making sure that cloud computing companies pass those savings along to customers. As its cost continuing to drop, Amazon cuts its prices for its cloud services.
At the Fortune Brainstorm Tech 2014 in early July, AWS Senior VP Andy Jassy said AWS currently has “hundreds of thousands” of customers in over 190 countries, including some of the hottest startups like Dropbox, Pinterest, and Airbnb.
They’ve been expanding to large enterprises and the public sectors too, lately, as they now have over 800 government agencies and more than 3,000 academic institutions using their service worldwide. Last year, for example, AWS snagged a $600 million deal from the CIA to help build their “private cloud” solution.
While Jassy declined to comment on the actual finances of AWS, he shared the customer-centric approach it takes when setting the prices. “We’ve decreased our prices on 44 different occasions over the last six to seven years,” Jassy said. “It’s primarily because the way we think of all our businesses at Amazon is that everything starts with the customer and then moves backward from there.”
Meanwhile, Microsoft and Google have vowed to keep up matching Amazon’s prices while beefing up their own selection of services. And that means the whole cloud industry has to cut prices as time goes on, not raise them.
Aaron Levie, CEO of cloud storage company Box just told The Information, “We see a future where storage is free and infinite.”
That’s great news for those of us with a growing stash of documents, photos, and smartphone videos.
But it also means that companies like Box, Dropbox, Google, Microsoft, HP, IBM, and others have to come up with unique cloud services that people are willing to pay for.
The large companies are working to build apps on top of their storage stack, so that they can have a unique value proposition when the price of storage itself finally reaches nil. In cloud computing, it could be that the value add that the large companies will use to compete will be their app environment.
For instance, Microsoft have put Office apps in the cloud, and they toss in the cloud storage as part of that. Google builds app ecosystem, your cloud computing might be free. If Google’s app ecosystem is the best, you’ll want to work over there.
Box, which still hopes to go public one day, is doing a similar sort of thing. It offers extra security around files, something enterprises are willing to pay for to make sure they comply with all laws.
Box is also building other applications, things like a project management app. That’s like a GitHub for documents, where all the files for the same project live in one place and people can collaborate, or a sales portal that lets salespeople see which customer has been given which bit of marketing materials.
In the future, the cost of storage keeps falling and the competition for the company increases, offering more value on the end of the service will be a weapon available to all. The race to zero is awesome.
Do you have any thoughts about “the race to zero”? Tell us in the comments.