Adding cloud storage to the economic model

The next stage in building the economic model of long-term storage is to add the ability to model cloud storage, and to use it to investigate the circumstances under which it is cheaper than local storage. The obvious first step is to collect historical data on cloud storage, to compare how rapidly it is decreasing against the Kryder's Law decrease in disk cost. The somewhat surprising results from looking at Amazon S3's price history are below the fold. I'd be grateful if anyone could save me the trouble of getting equivalent price histories for other cloud storage providers.


When Amazon launched S3 in March 2006 they charged $0.15 per GB per month. Nearly 5 years later, S3 charges $0.14 per GB per month for the first TB. For the first TB this is a price drop of less than 1.5%/yr. For the first month of the first TB of storage, you will pay $140, Even after the impact of the Thai floods, a 1TB Western Digital Green drive is $100 at Fry's. If we continue to assume that the media represent 1/3 of the 3-year cost of ownership S3 would cost over $4800 for a TB over 3 years where a raw local disk would cost $300, a factor of 16 difference.

What Amazon seems to have been doing is using the drop in storage prices to keep the price of a small amount of storage stable and introducing new, cheaper tiers for large amounts. At launch, a PB would have cost $15K/month. At current prices, it would cost about $10.3K/month, a drop of 31% over nearly 5 years, or about 10%/yr. Above 5PB the cost is now $0.055 per GB per month, only 27% of the launch price. Nevertheless, over the next 3 years a PB would cost about $3.36M versus about $300K assuming current inflated 1-off retail prices for local disk and the same assumption about other costs.

We can make two conclusions from this quick look at S3 pricing. S3 is competitive with local storage over the medium terms only if:

• extremely large demands for storage can be aggregated
• and either Amazon starts decreasing the cost of a given tier rather than simply adding lower cost tiers, or the Kryder's Law decrease in disk costs slows dramatically.

Amazon is pricing against value for smaller users, and pricing somewhat closer to cost for large users. Most S3 customers obviously value things other than cost of ownership.

Services such as Duracloud that act as brokers between customers and cloud storage providers thus depend in the medium term on aggregating very large, and rapidly increasing amounts of storage, and are assuming that cloud storage provider pricing policies change to more closely reflect media costs. Storing a TB in Duracloud for 3 years would cost $21K, a factor of 70 over the cost of raw local storage. Storing a PB in Duracloud for 3 years would cost over $3M, suggesting that they have negotiated favorable pricing with Amazon, or are using cheaper providers, or are using their current pricing as a loss leader to attract enough demand to get themselves into the cheapest tiers.

Of course, cloud storage providers such as S3 provide replication to enhance reliability, and brokers such as Duracloud or Oxygen Cloud layer additional services on top. We should expect them to cost several times the cost of raw local disk. But the factors are large, and at least for S3 appear to increase significantly as the price of disk decreases.