What Does Bezos's Law Mean for Your Data Center?

By Jack Rosenberger  |  Posted 06-27-2014 Print Email

If the cost of cloud storage is dropping by 50 percent every three years, it might be time for many CIOs to get rid of their data centers and move to a cloud platform.

Jeff Bezos, Amazon

By Jack Rosenberger

In a blog post earlier this year, Greg O'Connor, CEO of AppZero, proposed Bezos's Law, which he defined as the observation that, over the history of the cloud, "a unit of computing power price is reduced by 50 percent approximately every three years."

Named after Amazon CEO Jeff Bezos, the law is based on O'Connor's analysis of Amazon Web Services' cloud price reductions, which he calculates as occurring at a rate of 50 percent every three years, from May 2008 to April 2014, based on his analysis of public Amazon data. (For O'Connor's original blog post, "Moore's Law Gives Way to Bezos's Law," click here.)

For CIOs and other members of the C-suite, O'Connor's blog post wields a bold assertion: "… if Bezos's law reflects reality," O'Connor writes, "the only conclusion is that most enterprises should dump their data centers and move to the public cloud, thus saving money."

O'Connor's move-to-the-cloud argument is largely based on cost savings, as organizations that shed their data center operations will no longer have to pay for building construction and maintenance, employee salaries, utilities, and other costs. O'Connor also addresses the strategic issue of who the average enterprise, with its data centers, is competing against and asks, "How can an enterprise data center possibly keep up with the hyper-competitive innovation from Amazon, IBM, Google and Microsoft?"

For CIOs who want to change from being an order taker to a trusted business partner inside their organization, the transition from managing a data center to renting a public or hybrid cloud can provide numerous strategic advantages, starting with the ability to switch one's attention from data center oversight to exploiting the cloud's ever-expanding universe of advantages. Indeed, as a HCL Technologies survey recently disclosed, CIOs are doubling their cloud investments not for cost savings, but primarily to gain competitive advantages, with the top three business drivers being agility and speed; access to new technologies, such as smartphones and tablets; and improving customer satisfaction.

Infinite Cloud Storage Becomes a Reality

Since O'Connor proposed Bezos's Law in April, we've witnessed further cloud price reductions. Earlier this month, for instance, Apple announced it would cut its iCloud storage prices by up to 70 percent, just as Google had dropped its Drive file storage prices by up to 80 percent in March. Likewise, Microsoft increased its OneDrive for Business per-user storage from 25 gigabytes to 1 terabyte the same month O'Connor's blog post was published. Microsoft's generous data storage increase benefits users of the standalone version of OneDrive for Business and versions that are bundled with Office 365.

Not to be outdone by Microsoft, Google responded a few months later, in June, by offering unlimited cloud storage and extra IT controls with its premium edition of Drive for Work, which competes against Microsoft's OneDrive. "There are no asterisks on the storage," said Scott Johnston, Google Drive's director of product management, at the time. "It's truly unlimited at Google scale. We don't want customers to spend time worrying about storage."

Some analysts are arguing that, in the wake of Microsoft's decision to offer 1TB of free storage to commercial Office 365 users, cloud storage is changing from a separate service to a feature or, as Wes Miller of Directions on Microsoft told Gregg Keizer of Computerworld, "It's fast becoming a feature of the platform."

While these storage developments bode well for enterprise users, Bezos's Law provides a good reality check for CIOs: Is it time to get out of the data center business?

About the Author

Jack Rosenberger is the managing editor of CIO Insight. You can follow him on Twitter via @CIOInsight. To read his previous CIO Insight blog post, "Do Your Meetings Start on Time?", click here.



 

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