Cloud storage providers must rely on more than price to compete

November 13, 2014

Cloud providers are engaged in a fierce price war, and it looks like the customers are going to be the true winners when all is said and done. While the cost of cloud computing solutions, especially in regards to storage, has fallen dramatically for enterprises, providers are finding themselves caught up in what is known as the "race to the bottom."

Falling storage costs, rising demand lead to price war
Cloud storage providers have been increasing the amount of storage space they offer their more demanding customers while simultaneously charging users less to store their data. There is a technological underpinning to this trend – storage capabilities have improved substantially in just the last two decades. Tech Times reported that it cost $9,300 for 1GB of hard drive space in 1993. Today, that same amount of space costs about $.04.

As storage capacity increases, the price of that storage plummets. And no one is more equipped to deal with steep discounts like one of the earliest entrants to the cloud storage market: Amazon. With Amazon Web Services, the tech titan is carrying its retail mindset over to the world of cloud storage, offering steep discounts for top quality products. As one of the earliest entrants to the cloud market, Amazon is setting the tone. Every time it slashes its prices, Google, Dropbox and other competitors must follow suit.

Customers will start looking for other differentiators
Eventually, due to the torrid pace of technological innovations and the continuing declines in the price, the cost of cloud storage will be about as close to zero as it can get. The major players in the space have already proven willing to race all the way to the bottom. So what happens when everyone's prices are at rock bottom?

Taking price out of the competitive equation means that providers are going to have to find other selling points to attract customers and gain market share. Business Insider reported that most major providers are already doing that. Microsoft and Google include their Office apps with their storage. Box offers additional security measures – an attractive offer as data regulations become more stringent.

Regardless of how cloud providers find their way of differentiating themselves, the one certainty is that cloud adopters will benefit from the low prices and added functionality.