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Data sovereignty issues drive up cost of cloud for European CIOs

Addressing data sovereignty concerns means European CIOs are forced to pay more for cloud services than their US counterparts

European cloud users are getting charged up to 19% more than their US counterparts for opting to host their applications off-premise, research suggests.

According to the latest version of 451 Research’s quarterly Cloud Price Index report, CIOs pay anywhere between 7% and 19% more to host an application in Europe compared with the US.

Speaking to Computer Weekly, Owen Rogers, a research director working within the analyst house’s Digital Economics Unit, said the price difference is largely down to the fact energy costs are higher on the continent.

Furthermore, it’s also not uncommon to see relatively large differences between the prices European providers charge, as they look to cash-in on the data sovereignty concerns of European CIOs.

“You might expect all European service providers to charge roughly the same premium for their services compared with the US, but we uncovered huge variations,” he said.

“This suggests to me that European service providers are charging more because cloud buyers are willing to pay extra for data held locally or stored in-region because of privacy legislation.”

In certain European countries, a lack of competition forces cloud buyers to pay more as it is harder to shop around for better pricing, added Rogers.

“CIOs need to question if they really need to host their applications in Europe or in-region, because there is a chance they could get access to cheaper resources if they are willing to host their data elsewhere,” he said.

Biggest providers may not be cheapest

To compile the 451 Research Cloud Price Index, the organisation carries out a cost analysis of the cloud-based compute, storage, database and management resources needed to run a typical web server application.

Rogers said CIOs would be well advised to carry out a similarly comprehensive comparison when trying to work out which cloud provider to host their applications with. This is particularly because many assume it will be cheaper to go with a bigger provider.

“Amazon, Google and Microsoft are all embroiled in these so-called price wars, which we think is a great way for these companies to get publicity,” said Rogers.

“It would be natural to assume these companies are the cheapest in the market, but there are lots of local providers out there who are priced competitively. My advice would be to shop around.”

Cloud pricing ‘a downward trend’

He also cautioned CIOs against assuming that providers announcing a price cut will automatically translate into cost savings for their organisation.

“Sometimes CIOs might see a price cut mentioned somewhere and assume their costs will come down, but often it will not have a big effect,” he said.

“The nature of using cloud often means the amount of resources you consume goes up over time, resulting in your expenditure going up too.”

While the price of cloud services is steadily going down, anyone expecting to see huge double-digit drops in price is likely to be disappointed, he added.

“Cloud pricing is on a downward trend as the hyper scalers had such a large impact on pricing, and they can continue to cut their prices for the foreseeable future. But I don’t think pricing is coming down as quickly as people think,” added Rogers.

“I would expect a 5 to 10% drop towards the end of this year, as this latest Cloud Price Index shows prices are down 6% compared with the previous quarter.”

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