CIOs pay this ‘protection premium’ to use in-country or in-region services - rather than the cheaper option of US services - to ensure compliance with local regulations; to improve performance by bringing applications closer to users; and to take advantage of local customer service.
In Europe, the biggest driver of local cloud demand is data protection legislation. Uncertainty about who has access and who has responsibility for data is confusing cloud buyers and service providers alike. 451 Research analysts believe local demand will continue given the uncertainty around legislation including Safe Harbor, the Patriot Act and the new US-EU Privacy Shield agreement.
Penny Jones, Senior Analyst for European Services, examines the issues surrounding data protection at 451 Research.
“As European nations can place layers of regulation of top of agreements such as the EU-US Privacy Shield, we expect the latest agreement will do little to appease concerns, particularly in Germany,” she said. “It won’t be clear what the European Court of Justice thinks about the legislation until they have reviewed a case or two. The courts may then say the US needs to do more to protect EU citizens’ data privacy.”
According to the Cloud Price Index, although cloud services in Europe are, on average, more expensive than in the US, they are not as expensive as in Asia Pacific and Latin America. Comparable hosting in Asia Pacific costs, on average, 14% to 38% more than in the US and Latin America is the most expensive globally – up to 38% higher than US prices – and with a far greater variation in prices, in part because it has the most limited selection of hosting providers.
451 Research analysts also noted a substantial disparity in the premiums between the small and large applications in Europe. Users pay double the premium for a large application, composed of compute, storage, platforms and support, compared to simpler virtual machines. Analysts believe these discrepancies are because of skills shortages, compounded by an SME market willing to pay more for support when implementing complex applications.
However, the research unearthed one cloud provider that bucked the trend by offering services in Europe and Latin America that are cheaper than average US prices.
Dr. Owen Rogers, Research Director of 451 Research’s Digital Economics Unit who authored the report commented, “When evaluating cloud providers, enterprises should consider how they will take advantage of variances in prices in the short- and long-term to cut costs. We found one provider charged more than twice the average US price for hosting in Latin America, whilst another offered an 11% discount for hosting in Europe compared to the US. The global market for cloud is complex and cloud buyers need to understand typical pricing to properly evaluate their options and negotiate with suppliers.”
