Cloud Hosting

US small business

Its a companys dream business model the services are too difficult to switch, and small price hikes are often overlooked

Netflix recently announced another price increase. It was just a couple of bucks. No big deal, right? Wrong.

This price increase comes after another announced increase back in 2022 and this time actually ranges from 16% to 20% depending on the service. Why is Netflix doing this? Because it can. Netflix is no dummy. It knows that almost all of its customers will stick with the service even though its costing a little more. And theyre right. I love Netflix, so Im going to pay.

Netflix isnt the only online service provider thats increased prices in the past year or so. Big cloud is upping its prices everywhere. During this period Microsoft raised the prices of its Microsoft 365 office applications in various countries by about 9%. Its closest competitor in this space, Google, increased its Workspace monthly prices by as much as 20%. Salesforce.com, the leading provider of customer relationship management products, bumped up the monthly fees on many of its products by 9%.

Businesses getting internet service from Comcast are now seeing higher monthly charges and consumers getting their music from Spotify are now paying 10% more each month for its premium service. The largest providers of cloud storage and applications Microsoft, IBM, Amazon Web Services and Google Cloud all have increased their hosting and storage fees anywhere from 11% to as much as 50% compared with a year ago.

This is a business model unlike anything weve seen in the past and its awesome for the software providers. But what about users? What about my small business?

Lets say youre a company that has invested significantly in one of these cloud platforms to run your business. Youve got all your data there. Youve built integrations, customizations and specialized applications. Youve spent great amounts of money on consultants, experts and trainers to help your employees get the most from these platforms. Like Netflix and Spotify, youre used to these products and value their familiarity. So when theres a price increase you may grumble, but youre not going to change. You know it would be too costly and too disruptive. So you just accept it.

A business model where a company can increase prices almost at will? Thats the cloud. Some say that security of our data is the biggest challenge when hosting in the cloud. But thats not it. For most users, control is the real issue.

Because of the cloud, users get the most recent applications and software fixes in real time. They can easily access their information from anywhere and from just about any device. They can store their data with managed service providers who have more wherewithal and resources to secure and protect it. All of this is an improvement over having a server and a bunch of clunky Windows computers connected to it in your office thats supported by some IT geek down the road.

But having all of these benefits comes with a great variable: what will be your future annual cost? Thats not up to you. Its up to the technology industry. Its not just the monthly fees that consumers and small businesses are paying today, but the monthly fees that we will be forced to pay tomorrow. We dont have control over this.

Like Netflix, the big cloud providers and even smaller cloud-based software platforms can pretty much increase their prices at will. You may say that these companies need to be careful of a public backlash, and to some extent thats true because whenever a well-known brand like Netflix or Microsoft raises prices theres always some short-term media blowback.

But the media doesnt pay much attention to the frequent monthly fee increases levied upon small businesses by unfamiliar, but just as important, vertical applications that control their orders, inventory, billings and payroll. For example Zoho, a lesser-known but popular customer relationship management provider, increased monthly fees by 15% last year. Xero, a cloud-based accounting application, bumped up its monthly fees by about 6%. Zendesk, a leading provider of cloud-based customer support applications, also increased its monthly fees.

How can we protect ourselves from these inevitable cost increases? We cant. Unless youre a huge company, youre not going to be able to persuade your software vendor to lock into a multiyear agreement. And no software company is going to commit to holding prices the same. And unless the price has increased dramatically (which it never does, because these people know that small increments usually fly under the radar), youre not going to endure the pain and suffering of moving to another cloud-based provider, especially when that provider is ultimately going to do the same thing to you.

For small businesses and consumers, thats whats wrong with the cloud. But for the tech industry and companies like Netflix, its a beautiful thing.

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More:
Cloud service firms lock customers in while nickel-and-diming them - The Guardian