Amazon S3 Latest in Cloud Storage’s Falling Fees

Amazon is revamping pricing on its S3 cloud storage service, moving from set monthly fees to a tiered price approach that rewards heavy data owners.

As of Nov. 1, customers now paying 15 cents per gigabyte (GB) a month for storage used will pay that only for the first 50 terabytes (TB) of data. As usage increases, the fee drops: to 14 cents per GB for the next 50 TB, and to 13 cents from 100 TB to 500 TB, after which users pay 12 cents per GB. Those costs don’t include separate charges for bandwidth.

The move comes as businesses are facing a mounting wealth of data they need to store and manage. At the same time, cloud storage vendors are seeking to increase their appeal by citing cost savings as a key selling point.

Amazon (NASDAQ: AMZN) said the new pricing plan, reflects S3’s growth as a service provider and its lower costs for running the service. In May, it also reduced the prices for transferring data out of the service, and likewise added additional, discounted pricing tiers for heavy users.

“We have a relentless focus on reducing our operational costs for hardware, storage, and other aspects of operating the infrastructure,” Kay Kinton, an Amazon S3 spokesperson, told “As we continue to reduce these costs, we’re able to pass the savings on to our customers.”

“We’ve always said we would pass on savings to our customers when we could, and we’re doing so again now,” she added. “Since the service’s inception, we’ve brought down the costs for our customers considerably, and will keep working to do so.”

But Amazon’s not alone in making recent price cuts. At U.S. Data Vault, an eight-year-old data protection provider, users pay $29 a month for 10 GB or 80 cents per GB if they have 5TB or more of data. Those prices reflect a nearly 50 percent drop since summer, when it had undertaken an earlier price cut.

“In just the last two years, storage equipment costs have dropped significantly, and we passed the savings to customers,” Marc Shaffer, the company’s CEO, told

Industry watchers agreed that decreasing storage hardware costs are prompting lower cloud storage fees across the board — and sweetening the deal for enterprises.

“For those using [S3] purely as an archive, it’s very aggressively priced,” Charles King, analyst, Pund-IT, told

“In today’s economy, any kind of opportunity for IT to reduce cost is welcome but you have to keep in mind storage options are typically tied to specific needs,” he said.

Pitfalls in the cloud?

Of course, with services competing on price, enterprises have to ensure their data is properly safeguarded and accessible.

“It’s a matter of getting what you pay for,” King said, adding that higher-priced cloud options typically include additional features like data encryption and service-level agreements (SLA), promising reliability.

“Enterprises should look and see if this fits a particular need they have to archive certain data, King said. “Not all online storage is created equal.”

Page 2: Amazon’s SLA — and are more cuts ahead?

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An Amazon spokesperson said S3’s SLA provides service credits to customers if monthly uptime falls below 99.9 percent in a given billing cycle. Amazon measures uptime by monitoring the service for internal server errors.

Amazon’s two-year-old S3, which stands for “Simple Storage Service,” initially targeted developers needing housing for big data chunks. As of February, there were 330,000 registered users.

It hasn’t been all clear skies for the service, however, with occasional minor outages knocking S3 offline briefly. Users initially complained that the company had been slow to respond to the problem, prompting new efforts to improve communication during unexpected glitches.

Despite the hiccups, S3 is growing. Amazon said S3 currently stores 29 billion objects, up from 22 billion at the end of the second quarter in 2008. Activity, in the form of data service requests for storing, retrieving or deleting stored objects — is also increasing. Oct. 1 proved to be S3’s top transfer service day this year, with more than 70,000 requests per second.

More savings, considerations ahead

In addition to SLAs, additional services often come with data storage, such as security provisions and advanced management tools.

Storage price is not only tied to what it costs a vendor to store data, but the services it needs to put in place to help businesses meet their regulatory mandates, U.S. Data Vault’s Shaffer added.

“That’s why consumer storage is getting cheaper all the time, but businesses have a range of requirements and providers have to meet those needs — and that goes beyond hardware costs,” he said.

Even with prices dropping on online storage, insiders say there’s no sign of the trend halting.

A few years back, 1 GB of U.S. Data Vault’s RAM storage cost $300 to $400 a month, Shaffer said. That same service is now $39.95 monthly, and he said he expects that price to drop to $10 to $15 in the next year or two.

“What’s driving the costs down is technology as we have better management tools and automation tools,” he said, adding that just a few years ago an 8-megabyte USB flash drive cost about $100. Now, 4GB USB flash drives are routinely given away free at trade shows and conferences.

Another industry-watcher also said he sees prices continuing to decline for other reasons.

“In theory, it’s possible for cloud-based offerings that are loss-leaders for larger initiatives to not only go to free, but even provide a rebate or incentive to users to gain more traction,” Greg Schulz, senior analyst at StorageIO, told

“For providers who actually have to run a business as a non-loss-leader, you may see a la carte pricing, similar to what we are seeing with the airlines, where the base service is at a lower or reduced rate [and] then you get nickeled and dimed for add-on services,” he said.

As Schultz noted, the various pricing approaches in data storage requires that business do some research.

“Enterprises should look beyond the cost per GB and look at what the fees for accessing bandwidth or fees for using different services,” Schultz said. “Watch out for hidden fees and charges and look at the big picture, just as you would for regular storage.”

For instance, in addition to storage costs, S3 users also pay for the amount of data they transfer. Amazon charges 10 cents for every GB transferred into the service, while prices for transferring data out of S3 start at 17 cents for the first 10 TB, decreasing as more data is sent.

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