USA Cheapest Place to Use Public Cloud – 451 Research

451 Research LLC published its latest Cloud Price Index report analyzing the variances in cloud pricing across the world.

The findings show that US pricing is the most competitive globally while users pay, on average, between 7% and 19% more to host the same application in Europe and 14% to 38% more in AsiaPac, depending on the complexity of the application. Latin America is the most expensive region – 38% higher on average than the US with a far greater variation in prices, in part because it has the most limited selection of providers.

Reflecting global pricing cuts from AWS and Microsoft in early 2016, 451 Research also announced that the Cloud Price Index has dropped by 6% since October 2015. While this is good news for users, analysts note that it is nowhere near the double-digit drop that many users might expect given recent headlines. 451 Research’s index measures the price change across a range of cloud services, and encourages buyers to consider the costs of all their cloud services, not just VMs. For example, the Cloud Price Index object storage price has remained at the same level for 18 months, and, because of data gravity, 451 Research believes this will become an increasing expense for users.

Despite the average premium pricing outside the US, the study unearthed one cloud provider that bucked the trend by offering services in Europe and Latin America that are cheaper than average US prices.

The range of costs reflects a higher premium for large applications, composed of compute, storage, platforms and support, compared to simpler VMs. 451 Research analysts believe these discrepancies are due to skills shortages, compounded by an SME market willing to pay more for support when implementing complex applications.

CIOs pay a ‘protection premium’ to use in-country or in-region services – rather than the cheaper option of US services – to ensure compliance with local regulations; to improve performance by bringing applications closer to users; and to take advantage of local customer service.

In Europe, the biggest driver of local cloud demand is data protection legislation. Uncertainty about who has access and who has responsibility for data is confusing cloud buyers and service providers alike. 451 Research analysts believe local demand will continue given the uncertainty around legislation including Safe Harbor, the Patriot Act and the new US-EU Privacy Shield agreement.

Dr. Owen Rogers, research director of 451 Research’s Digital Economics Unit and the report’s author commented: “When evaluating cloud providers, enterprises should consider how they will take advantage of variances in prices in the short and long-term to cut costs. This means being aware of the real impact of price-cuts and understanding geographical differences. We found one provider charged more than twice the average US price for hosting in Latin America, whilst another offered an 11% discount for hosting in Europe compared to the US. The global market for cloud is complex and cloud buyers need to understand typical pricing to properly evaluate their options and negotiate with suppliers.“

(Source: 451 Research’s Cloud Price Index)

Cloud Price Index is designed to give enterprises and service providers insight into the cloud pricing landscape so they can make more informed decisions when buying and selling cloud services. Like a consumer price index, it is made up of a basket of goods, but in this case it is a specification of the services required to operate a typical Web server application including compute, storage, databases, management. For this study, 451 Research’s Digital Economics Unit surveyed 45 cloud providers, representing up to 90% of each region.