Public cloud price increases were inevitable following the Brexit vote.
Many years of price stability and low inflation have come to an end for UK tech buyers, as multinational vendors struggle to deal with the fallout of Brexit and its effect on exchange rates.
While consumer headlines focus on increased hardware costs, behind the scenes cloud prices have gone through the roof. Microsoft pushed up its UK Azure prices by 22 per cent from January 2017, and AWS customer pricing has been tracking the higher dollar rate ever since the Brexit vote. Oh, for the good old days of cloud pricing wars. As recently as last May, before the Brexit vote, everything suggested cloud prices would keep falling.
The FT’s clear that some businesses will hold back on investment decisions because of uncertainty about Brexit. From an IT perspective that could well involve re-evaluating or deferring migration to cloud until the dust settles.
So how can a UK organisation plan its technology roadmap at a time of such exchange rate volatility? Fortunately there are options that can help.
Technology price rises affect everything
Public cloud may appear to be becoming more expensive, but so are individual parts of the technology stack. One report suggests that before the Brexit vote you could only equip 29 users with new laptops and a year’s Office 365 E1 plan for around £50,000. Now, that same budget would only cover 20 users. If you enjoy grim reading, CBR has a handy – if somewhat dispiriting – run down of many of the major manufacturers’ post-vote price increases.
But if everything stands to be more expensive, that doesn’t mean public cloud necessarily represents worse value than running an on-premises data centre. After all, upgrading your servers, storage, switches, networks and software would involve buying components in dollars – and they’re also being affected by the weak pound.
If you’ve been considering a public cloud migration then the same arguments about manageability, security, scalability and speed to market still apply; it’s just that the answer is now more expensive.
Can private managed hosting in the UK help control costs?
Back in 2014 a group of vendors determined to prove that private cloud could compete on equal price terms with public cloud – and analysts were rightly sceptical. We weren’t involved in that initiative, but we think Brexit pricing fallout has now changed the game for UK firms.
One analyst – Owen Rogers of 451 Research’s Cloud Price Index – agrees. He has been quoted as saying: “Since Brexit happened, actual cloud pricing has gone down around 1% because of price cuts and price erosion. But due to currency fluctuations, for UK consumers it has actually gone up 20%.
Speaking to Computer Weekly, Rogers noted: “Many [European] users choose the US [providers] as it is cheaper than the rest of the world. Those users who have paid upfront or have financial commitments in local currencies will be protected to some degree. Those who pay on-demand will have to absorb those fluctuations themselves.”
“If I was a CIO and I was worried about my data, I’d choose to host it in the UK. And if I was to make a cost saving as well, there’s another tick box for the UK.”
Why does using a UK provider make such a difference? Because all the wraparound services you get with a UK-based private cloud are priced in sterling. Sure, hardware and software are still affected by dollar pricing, but everything else is unaffected by exchange rates.
Ritchie Sharma, Vohkus’s CEO, points out that this can have a huge effect: “Our partnership with Vodafone means that with a Vohkus solution even your network infrastructure is cushioned against currency fluctuations, and our in-house managed cloud services – like active monitoring and admin, 24x7 service desk, and software updates/patches – are all priced in pounds and therefore protected against volatility.
“Vohkus’s and Vodafone’s pricing is likely to be much more stable compared with overseas providers, and there’s peace of mind in knowing your data is secure and protected within the UK. With our approach, private cloud hardware costs are simply amortised over the life of the contract, so you have clear visibility of spend – and no nasty shocks – for several years going forward.”
Even if the benefits aren’t as marked, Ritchie points out that using UK-based managed services for public, hybrid and shared hosting solutions can still help absorb the shock of exchange rate-driven increases.
“Azure and AWS really leave you to get on with provisioning, optimising and managing the system yourself, which is a huge headache. We’ve years of experience managing on-premises data centres, and with our economies of scale we can manage public clouds, private environments – in fact, just about anything – far more cost-effectively than doing it yourself.
“Our managed shared, multi-tenancy cloud options are also worth considering, as we’ve already invested in the hardware up front. And even if you decide cloud isn’t for you at the moment, there are things we can do to help wring longer life and performance out of your existing on-premises system.”
Three steps to limit the impact of Brexit-driven cloud price increases
- If you have a traditional in-house data centre, understand what it’s costing to run right now (Vohkus can help with that if you’re not sure). Find out if there are ways of optimising it, or outsourcing management to improve operations and keep costs down when prices are rising.
- Compare your ideal in-house model with the costs of managed public, private, shared and hybrid cloud options – but take into account what inflationary/exchange rate pressures might have taken effect three or five years out when you’ll come to renew. By then Brexit may have happened, and you may well be grateful you chose to keep everything in the UK.
- If your sums still suggest going to public cloud is the best option for you now, make sure you understand the possible effect of exchange rate/inflation volatility going forward, and that you have robust plans in place to manage that environment.
In the current market we think you may well find UK-based managed private cloud to be a more attractive proposition than ever. But whatever your decision, Vohkus will stand shoulder-to-shoulder with you to mitigate pricing volatility and ensure you realise the best possible value from your investment.