IT Pricing Update – What’s a Fair Price for Storage?

Spend Matters welcomes another guest post from Kevin Davis of NPI, a spend management consultancy focused on eliminating overspending on IT, telecom and shipping.

Commoditization is common in IT, and the price of storage proves this point. Over the past 30 years, the cost per gigabyte has gone down by half every 14 months. In 1985, the average cost per gigabyte was $105,000. Today, that cost is a mere $0.05.

Most IT buyers know the drop in price has been precipitous, but they are surprised to see exactly how much or how steep the decline has been in recent years.

Here is a breakdown of the average cost per gigabyte over the last three decades:

  • 2013 – $0.05
  • 2010 – $0.09
  • 2005 – $1.24
  • 2000 – $11.00
  • 1995 – $1,120
  • 1990 – $11,200
  • 1985 – $105,000

From 2010 to 2014, the cost of storage dropped 44 percent. This is the case for all storage, not just mainstream EMC environments, and it covers all vendors that provide storage for backups, applications, etc. Yet an estimated 25 to 40 percent of companies continue to pay 2010 rates!

Paying above fair market value rates isn’t the only culprit for storage overspending. Overprovisioning is rampant. Radoslav Danilak, CEO and co-founder of Skyera acknowledges this in the following comments:

“Significant overprovisioning of SSD arrays artificially drives up the price of flash-based storage. Paying for an extra 28 percent memory – or more – that is not being sufficiently used because of a vendor’s ineffective design is just plain wrong. Flash arrays can be price-competitive with enterprise disk-based systems while enjoying the performance advantages that the technology provides. When data is intelligently written to the flash so that the media doesn’t degrade as much in the first place, overprovisioning can be kept to a minimum, thus eliminating the need to overcharge the customer.”

Any IT buyer wondering how overprovisioning will affect their IT budget only needs to look at the most recent Uptime Institute’s Server Roundup. This contest was introduced in October 2011 to encourage the removal and recycling of obsolete IT equipment in an effort to decrease data center energy use, and is based on the number of servers decommissioned and resources saved while businesses upgrade, eliminate, and repurpose data center infrastructure. The Uptime Institute’s most recent research indicates that decommissioning a single rack of servers can save a business approximately $2,500 annually (this includes maintenance, energy, and software costs).

If you’re not sure whether you’re paying too much for storage – you probably are. Before renewing storage contracts, enterprises should make sure they are paying the current fair market value rate, and explore areas where they can decommission or repurpose existing storage investments.

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