$0.01 Per Gigabyte Per Month

The hyper growth of cloud object storage is showing its first very early signs of slowing. The dramatic per quarter growth of Amazon S3 - which grew from 15 billion new objects per quarter in 2009 to 40 billion in 2010, to 125 billion in 2011 - has grown to 143 billion new objects in Q1 of 2012 - healthy, but clearly not the multiplier of previous years. There are many available explanations, ranging from improved sophistication of users, to increased competition, to market saturation. But I have a much simpler explanation: price.

The top-tier price per gigabyte for cloud object stores today ranges from $0.12 (Google) to $0.25 (Nirvanix) per month. This price range is almost identical to its entry price in 2007 - 2008. Compare this with the history of hard drive storage, which has been following a curve reminiscent of Moore’s Law over the last few decades. A one-time purchase of a gigabyte of hard drive storage has dropped from $200K in 1980, to $12K by 1990, to $15 by 2000, and to $0.10 by 2010 (note: this trend has recently been disrupted by the 2011 floods in Thailand). Tape and solid state storage have of course followed similar curves to hard disks.

For cloud object storage to continue its disruptive movement, there needs to be a dramatic drop in price, either through increased operational efficiencies, margin cutting, or most likely, technology changes (can anyone say tape?). There exists an enormous untapped addressable markets for cloud storage - quintillions of electronic and non-electronic documents - that will remain in their current medium until the price per gigabyte falls to an affordable level for these use cases. The owners of these dark documents desire the durability and accessibility that comes with the cloud, but at $0.12 per gigabyte per month cannot justify the move.

For example, a single personal Time Machine backup of my MacBook runs around 400 GB, and currently resides on a 1TB hard disk I purchased a few years ago for $110. At current cloud pricing, I would spend between $576 to $1200 per year to keep this single backup in the cloud. Economical? Not a chance. My personal media library, including music, video and audio books, also resides on local hard disks solely for economics.

Like many disruptive technologies, the next wave of innovation and hyper growth for cloud storage will come when one or more vendors find a way to slash prices, even if it is at the expense of features. The opportunity for new innovation substantially heats up at under $0.05 per gigabyte per month, but in my opinion, achieves escape velocity at under $0.03.

In the meantime, my dark documents will remain in their current format - local hard disks, CD-ROMs, DVDs, tape, storage cabinets, bookshelves - waiting for the day when a cloud vendor and technology innovator helps me take them to the cloud.