The mega-clouds are coming for your data center

There’s no longer a question of whether public cloud will win out over private cloud. The only remaining question is how any cloud vendor can hope to compete with the “relentless economies of scale” of the mega-clouds.

A year ago RedMonk analyst Stephen O’Grady dubbed such economies as “daunting” for traditional data center vendors, in one of the most polite understatements ever uttered. After all, a year later we’re seeing mega-cloud vendors — Amazon Web Services, Google, and Microsoft — drive server costs to lows impossible for any enterprise data center to achieve.

Oh, and they’re doing it while retaining significant margins for themselves — all of which means we may be on the verge of seeing a complete changing of the guard in enterprise IT that will play out over the next decade.

How low can you go?

The most obvious reason that the mega-cloud vendors can charge less for more computing, storage, and other resources is that they pay less per server than enterprises running private data centers, thanks to the huge volumes of hardware they buy. As O’Grady describes it:

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