The race to zero: On the path to no-cost cloud computing

It seems that everyone is in a race, and the pace of business in the modern world is no less evident than in cloud computing. While prices for just about anything are going up, cloud storage prices are nosediving. The competition between leaders such as Google, Amazon, and Box is driving prices down and providers across the industry are being pressured to be part of the “race to zero”.

This race has been accelerating. Microsoft began providing unlimited storage in October 2014, for its OneDrive service included with Office 365. This was in response to Google Apps for Work that provided numerous features that threatened to outdo Microsoft’s well-known business products.InformationWeek provided insight into this story. Also mentioned was a system of checks and balances that exists because while vendors are providing lower and lower cost and even free storage, managing physical resources is expensive.

For example, Amazon made 47 price reductions in six years by late 2014, while its revenue growth slowed from about 80% to below 39% between 2011 and 2014.

Storage will soon be free, many experts are not shy to admit. However, there are many ways around this, and Office 365 is an example. The resources with this Microsoft product are not free and require an annual subscription, so technically users must still pay for what they get. Storage can essentially be thought of as part of it. This represents another trend being seen in the race to zero.

Cloud services worth paying for

Cloud services company Box is also on the bandwagon. Offering affordable storage, it has introduced services people and companies don’t hesitate to pay for. Security is one of them. Nobody is willing to skimp on security, as data is more vulnerable than ever. Box is also developing apps for document and project management as well as collaboration. Dropbox is another example: it is pushing Dropbox for Business with a range of security and administrative functions.

In 2014, IBM announced it was investing $1.2 billion in expanding its data centres. Microsoft has said it is spending $750 million to improve its Wyoming data centre alone. The trend has been to offer services companies don’t pay for in a one-off purchase, but throughout the year. These services must be great enough that just a few companies can handle the pressure.

Memory prices plummet

The falling price of memory is supporting the race to zero. According toBusiness Insider, a hard drive with a gigabyte of capacity cost $9,000 in 1993. In 2013, the same amount of storage was about $0.04. Providers have also passed on the savings in processing power. A $3 million IBM mainframe had 65 kilobytes, operated at 0.043MHZ, and supported a lunar landing mission in 1969. The iPhone 6 has more power at 16GB and 2.6GHz. It costs about $200.

Isn’t it really a race to the top?

It seems the race to zero is being driven in part by competition, despite the diminutive costs of memory today. Dallas Salazar, writing for Seeking Alpha, discusses this very topic. There’s a logical notion that cloud storage gets people’s attention. Amazon is now offering mobile apps for Cloud Drive, a product now available for $60 per year under a plan which it calls Unlimited Everything. The Unlimited Photos plan is even cheaper while the storage has no limits at all. Free storage is a pretty good selling point for larger-scale paid services, as companies gain greater knowledge on cloud computing.

Whether free storage is a strategy to draw customers, or simply a passing of dirt cheap costs from provider to customer, there is no doubt the race to zero is well and truly on.