Update: September 7, 2023: This story has been updated to include comment from Tracy Woo, senior analyst at Forrester.
Dive Brief:
- The cost of IBM’s cloud infrastructure and platform services will increase in January, the company announced Wednesday.
- In the PaaS category, prices for IBM Cloud services will get a 3% bump globally. The category encompasses the firm's Kubernetes services and Red Hat OpenShift, all security services, and platform data solutions, including Cloud Database, Data Engine and Cloudant.
- While IaaS rates vary by data center location, cloud customers in every region will be impacted by certain data storage price increases, the announcement said. IBM Cloud Object Storage will see some of the sharpest rate hikes, with Accelerated Archive and Deep Archive storage increasing by 25% and 26% respectively.
Dive Insight:
Cloud isn’t immune to macroeconomic shifts. As inflation and interest rates rise, so do the costs of providing infrastructure and platform services.
Some of the larger cloud providers undertook cost control measures to help customers optimize their spending over the last year. Microsoft extended the useful life of cloud servers and network equipment in June 2022, saving billions in an effort to lower customer bills. IBM followed suit at the start of the year.
Across the largest cloud providers, including AWS, Google Cloud and Microsoft Azure, the cost of on-demand instances increased 2.5% last year, well below the inflation rate, according to a February cloud market analysis by Liftr Insights.
Nonetheless, infrastructure costs have crept up, as cloud providers have undertaken data center upgrades to accommodate AI workloads amid a scarcity of chips.
“IBM’s price increases are not unusual given semiconductor chip shortages, previous supply chain issues and energy shortages, especially in the EU partially due to the Ukraine war,” Tracy Woo, senior analyst at Forrester, said in an email.
IBM joins a list of vendors adjusting prices as operational costs increase.
Cloud-based CRM giant Salesforce raised fees by an average of 9% for several of its enterprise software products in August. Microsoft increased cloud and software services pricing for the Australian, Canadian and New Zealand dollar in July in response to currency fluctuations relative to the U.S. dollar.
IBM’s IaaS rate increases will not affect workloads running in its U.S. data centers, located in Dallas, Washington D.C. and San Jose, California, the company said. However, rates for the Sao Paulo data center in Brazil will effectively increase by 7.5%, London will see a 5.6% bump and prices at the company’s two data centers in Canada are scheduled for a 2.9% rate hike.
“As a whole, price increases haven’t been a regular occurrence in the past,” Woo said, adding that prices are likely to continue rising as more companies migrate to cloud and start using specialized infrastructure for AI, ML and other large, data-heavy applications.
