Will Cloud Storage Become a Commodity, Like Electricity?

The future price of cloud storage is not a “race to zero,” as some predict. It is a race to the best price/performance technically achievable. Just look at computer processors. They continue to get cheaper, but no one is giving them away for free inside laptops and smartphones. That’s because they’re also getting faster, enabling us to innovate and do more with them.

The same holds true for cloud storage. A provider may decide not to charge you for it, but you can guarantee you will be paying for it somewhere else, with additional services designed to lock you in.

In my mind, the race to zero is just so much marketing. In order for companies and organizations to turn data into meaningful and actionable insights, they will need to be able to afford to store more data longer, but also have significantly faster access to it. What the industry really needs is a race to “cloud storage as a utility.”

A Utility, Just Like Electricity

When you plug an electrical appliance into a power socket, you don’t choose what quality of electricity you want. There’s only one flavor of electricity, and the price is the price.

When you buy storage from the current generation of cloud providers like AWS, Google Cloud Platform, or Azure, you must choose from a complex array of service tiers—Standard, Reduced Redundancy, Infrequent Access, Nearline, Coldline, Glacier—each with different pricing, speeds, and service levels. Pricing also changes based on region. Then there are all the additional fees (again different depending upon service tier) for API calls, such as GET, PUT, and DELETE.

These artificial tiers (I call them that because they all rely on the same underlying disk storage) force you to make tradeoffs between speed, reliability, and price.  These compromises are unacceptable in the era of big data analytics, automation, and agile decision making—and will be made more obvious when the Internet of Things (IoT), with its commensurate explosion of data, takes off in earnest. For cloud storage to meet our needs today, and enable us to innovate in the future, these artificial tiers must give way to a standard, one-size-fits-all utility that is fast, reliable, and inexpensive.

Commodity Pricing for Extreme Economies of Scale

When I launched Wasabi with my friend and co-founder, Jeff Flowers, we specifically set out to design a new storage architecture that was significantly faster than Amazon Simple Storage Service (S3), but cheaper than Amazon Glacier.  This breakthrough in price/performance allows us to eliminate all those complex service tiers. We offer one simple, highly reliable, lightning fast service called hot storage at commodity prices.

Gasoline is a classic example of a commodity product. Gas is gas. All regular gas is 87 octane, and any car can fill up at any service station. For cloud storage to become a utility-like commodity, it too must rely on standards and differentiate by price.

Standardization is the Key to Mobility and Lower Prices

Wouldn’t it be nice if you could move your storage from Amazon to Google or Microsoft without changing a single line of code?  There isn’t a standard API for cloud storage yet, though Amazon’s S3 API is clearly at the head of the pack.  That’s why Wasabi is throwing its weight behind the S3 API.  API standardization is key to driving down price because it eliminates vendor lock-in.  Once storage is truly portable, vendors will not be able to get away with locking you into their proprietary storage.

As prices drop, the migration from on-premise to cloud storage will be more compelling.  With cloud storage prices from Amazon, Google, and Microsoft in the $.02-.03/GB per month range, there is no significant savings versus the total cost of ownership of on-premise storage.  Cut the cost of cloud storage to $.0039/GB per month (Wasabi’s hot storage pricing) and you’re suddenly looking at savings of 75 percent or more compared to on-premise storage and current generation cloud storage.

At these commodity prices, new applications and business models become feasible. Media companies and law enforcement can now afford to save more video and bodycam files for longer periods of time. Developers wishing to create the next Instagram or Pinterest—or any ad-supported free app that requires a lot of storage—is suddenly viable and profitable.

But A Startup Can’t Compete Against the Likes of Amazon

Common wisdom says that a startup in Boston should not be able to store data as cheaply as giants like Amazon.  Yet history is replete with examples of innovation overcoming scale.

For nearly 100 years, US Steel was the largest steel company in the world.   Then in 1968, a little-known company called Nucor invented the highly efficient steel “mini-mill,” using a new technology called electric arc furnaces.  Today, Nucor is the largest steel company in the U.S. And in May 2014, due to its declining market capitalization, US Steel was removed from the S&P 500.

Am I suggesting that Wasabi’s David will topple Amazon’s Goliath? Of course not. Amazon eats entire industries for breakfast. Wasabi is only interested in revolutionizing cloud storage. It’s all we do.

Where Will the Industry Be 10 Years from Now?

My bet is that cloud storage will become a utility.  Almost every application needs storage. And with global data predicted to grow from 16 zettabytes in 2016 to 163 zettabytes in 2025, the world is going to need lots of it.

Nobody should be locked into proprietary vendor solutions.  You should be able to unplug Wasabi and plug in any other vendor if that’s what you want to do.  This is our dream and our mission: to deliver standard cloud storage that is so cheap, so fast, and so reliable that it works for every storage need. Just like electricity.