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Is a price war about to break out in the cloud?

March 26, 2014

More and more companies are moving their information assets to the cloud. This, in turn, has led to intense competition among cloud service providers, including technology giants Amazon.com, Google, Microsoft and others. In the most recent turn in this race, there's news that Google is cutting its cloud computing service prices.

According to a piece by Urs Hölzle, a senior vice president with Google, on the company's Developers Blog, the price for cloud storage will be cut by roughly 68 percent and computer engine services by 32 percent.

Market cloud pricing, according to Mr. Hölzle, is too high. "Over the past five years," he wrote, "hardware costs improved by 20-30 percent annually but public cloud prices fell at just eight percent per year."

Last year, Microsoft cut prices for hosting and processing online data in an attempt to cut into Amazon's market share lead. Amazon Web Services, according to a TechRepublic report, had the most frequent and deepest price cuts in 2013.

According to Reuters, Cisco Systems announced earlier this week that it plans to spend $1 billion over the next two years to build a cloud services business of its own.


Discussion Questions:

What are the biggest impediments keeping companies from moving their data needs to cloud services? What benefits to cloud services have you seen? What effect will service provider price cuts have on the cloud computing market?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

What is the most important reason for moving to the cloud?


What makes us think "more and more businesses are moving their information assets to the cloud?"

All our data tells us that for at least 80% of retailers, the cloud is neither a motivator or de-motivator for a system selection. That number has been validated by at least one vendor who offers a choice between on-site and cloud-based services.

What the Cloud IS killing (or likely has already killed) is off-site backup data storage via tape or other media. Heck, it has just about killed it off in the consumer market.

It might be also accurate to say that more and more tech vendors are offering their services through the cloud.

Apart from that, I just don't see it.

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Paula Rosenblum, Managing Partner, RSR Research

The biggest advantage for moving to "cloud" services is the speed at which an enterprise can implement meaningful solutions. When an enterprise purchases a software solution, it becomes a significant project for the IT department to integrate the software into the enterprise infrastructure. In many cases this effort is simply not a priority for the IT department and therefore the full potential of the investment is rarely ever achieved.

Cloud-based solutions can be quickly implemented without disrupting existing IT processes while at the same time achieving results and an ROI in short order. It also places the burden of best-practices and optimal operational excellence on the provider. The additional effort on the buyer is to make certain they spent the time and effort on designing the workflows AND documenting ALL operational expectations and service level agreements in a detailed contract. It is highly recommended that marketing departments hire consultants with marketing and technical chops to author these contracts in order to protect your interests and project objectives and expectations.

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Adrian Weidmann, Principal, StoreStream Metrics, LLC

Worries about security are the biggest hurdle for companies who are considering cloud computing. Companies want to know that their data is secure. In reality, most reputable cloud services are more secure than a company's own systems.

Cloud services offer the ability to access data from anywhere and provide unprecedented ability for employees to collaborate on projects.

Cutting prices should make the decision to move to the cloud more economical.

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Max Goldberg, President, Max Goldberg & Associates

Retail business solutions and predictive customer analytics in the cloud have tremendous potential. IT can partner with business to drive new innovations and results enabled by technology and not have to struggle with keeping the lights on with operational systems.

Retailers can also take on an innovation project to gain high performance to do things like drive next best offers and relevant personalized communications and inventory insight. A cloud strategy can power innovation, reduce costs and build a roadmap to the future for retailers.

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Diana McHenry, Retail & CPG, LLamasoft, Inc.

The difference between early adopters and followers in retail is huge. The biggest impediment is vendors not knowing how to cross that chasm.

Vahe Katros, Consultant, Plan B

This has nothing to do with price wars but simply my 2 cents about cloud services and retail. In all my 35+ years of being in the retail industry, retail has lived with cobbled-together systems and redundant data. The more cobbled and redundant, the harder it has been to address innovation or even stay current.

Welcome the cloud. Retail now has a way to address new concepts, raise non redundant data above the enterprise and make it available across all entities. And the best part is, they don't have to have the resources on board to manage new technologies and security issues. The cost to change is minimal and, for once, retail can be nimble.

If price wars are driving down the price while not losing the quality and depth of service, that is even more of a win for retail!

Lee Kent, Sharing Insights for Success in Retail, YourRetailAuthority

The largest impediment to the adoption of cloud computing is the lack of understanding of its benefits by the non-IT leadership in many companies. The cloud has become far more than simply a cost-cutting measure for IT. The cloud is helping Retail and CPG organizations of all sizes become more agile as the marketplace evolves. Additionally, the cloud helps enable innovation via leveraging global capabilities. Whether the organization is considering a private, public, or hybrid cloud environment, the opportunities are there for continuous profitable growth for the company.

The benefits of the cloud are virtually limitless. One can accelerate business process innovation, deliver business analytics at point of impact that matters most or simply connect people with collaborative business networks across the world.

Just like most any competitive situation, cloud services will settle into a normal pricing structure that will be maintained for the foreseeable future.

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Ralph Jacobson, Global Retail Industry Analytics Marketing Executive, IBM

This discussion about cloud services reminds me a little bit of book published in 2000 by consultant George Gilder, called Telecosm, that predicted how "infinite bandwidth" from fiber optics would reduce the cost of data transmission to effectively zero. Didn't exactly work out that way then, although giga-miles of dark fiber were constructed back then on the hope that it was true.

"Infinite cloud," enabled by massive expansion in storage technology, (and perhaps linked today through formerly "dark" fiber) is certainly making its presence felt in the consumer market. How many of us already have free cloud accounts from Google Drive, Dropbox, Evernote, Skydrive, Verizon, or other providers, with multiple gigabytes of capacity?

Corporations will wisely consider which parts of their critical data infrastructures might benefit from location within cloud-based (or SaaS, or platform-on-demand, or however they define it) solutions.

Core financials, certain customer data and internal R&D, which require more exacting security, may continue to reside within enterprise systems, which require both infrastructure capex and a continuing fixed operational expense.

Many other current business solutions can be anticipated to have shorter lifecycles, which may make them ideal candidates for the cloud. Plenty of CPG and retail companies have grown comfortable with solutions like Salesforce.com, or third party e-commerce platforms. Price optimization modeling and trade promotion management are often SaaS these days. In-house versus in the cloud becomes a strategic and financial choice.

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James Tenser, Principal, VSN Strategies

The cloud is a security nightmare that has only one saving interest, cost. Transaction based companies charged with customer and company security needs have been slow to commit simply because there is no way to determine if the data is secure and accurate. Storage of data that is of limited importance and having little or no monetary or security value should consider the risk as a nuisance or slight annoyance. Important personal information should never be placed in a system architecture that can be jeopardized leaving the owner irreparably damaged.


Cloud computing has gone by many names. First there was software on demand and SaaS. Then as cloud services became all the rage, functions went up and down the stack, yielding IaaS and PaaS.

The transition of software, platforms, infrastructure and data from proprietary servers to third party servers is a long term movement. Today's discussion mentions data services in particular, but to understand the real trends you need to look where adoption began.

The highest adoption has already occurred in email (many browser-based models), followed by collaboration tools. This ranges from file storage in portals like Sharepoint to completely server-based applications like Google Docs. Next in line is sales and marketing automation via CRM applications like Salesforce.com and Eloqua. Following that is customer care (e.g. Zendesk) and procurement (including travel booking), etc.

In asking which companies will move their data needs cloud, start by looking at which companies are already one foot in the cloud. As these companies have success with the less security-intensive services above, they will increasingly move to the more mission critical functions like databases and transaction systems.

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Dan Frechtling, SVP Product and Marketing, CMO, G2 Web Services

Clearly, security concerns would be one of the factors hindering retailers from moving their data to the cloud. A data breach like Target's puts everyone into lockdown mode, and most companies trust their own policies more than a third party's, justified or not as they may be in that belief. However, reluctant in moving towards the cloud will hold many retailers back. Cloud-based technology is nearly ubiquitous, and will generally provide a significant speed and cost advantage versus in-house solutions. This occurs to me as a case of "s/he who hesitates, is lost." As for the price cuts, they will certainly help, but it is ultimately a case of of simply getting over the quasi-religious concern about all systems needing to be in-house.

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Alexander Rink, CEO, 360pi

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