Cloud computing continues to break adoption rate records, with the Asia Pacific region expected to be the fastest-growing market in the next few years, according to a recent report by Mordor Intelligence. US-based hyperscalers, like AWS, IBM Cloud, Google Cloud Platform, and Microsoft Azure, are dominating the market, promising businesses simple and cost-effective solutions.
However, a second look and some research reveal an interesting reality: Southeast Asian businesses are paying significantly more for cloud services than their US-based counterparts. This disparity is largely attributed to the dominance of hyperscalers, who come with tricky pricing structures, a lack of local competition, and higher data transfer costs.
Hidden costs of Southeast Asian cloud adoption
A detailed analysis of the pricing schemes of some of the most popular cloud providers reveals that Southeast Asian businesses are paying 20 to 40 percent more for cloud services compared to similar US-based businesses. That means, if you are a mid-sized business in Indonesia, while your twin brother runs literally a similar business in the United States, he would be paying an average of 30 percent less by default.
That might seem confusing, especially if we consider the differences in purchasing power and economic development levels in the two countries. Nevertheless, that absurdity is the reality. Another strange aspect is that this information is not top secret – it is readily available to anyone who knows how to work with the pricing calculators on the providers’ websites.
Reasons for the price disparity
This staggering price disparity can be attributed to multiple factors, but can be broadly summarized as follows:
- Unfair pricing practices: US-based providers often employ opaque pricing structures with hidden fees and surcharges, making it difficult for Southeast Asian businesses to compare prices accurately. This lack of transparency allows providers to charge inflated rates without fear of competition.
- Lack of local competition: Southeast Asia lacks a strong local cloud ecosystem compared to developed markets like Europe and North America. This lack of competition leaves Southeast Asian businesses at the mercy of US-based providers, who can set their own pricing without fear of repercussions.
- Brand premium: Sometimes, companies charge more simply because they can, knowing that they can rely on the reputation and brand recognition that businesses are ready to pay for.
Detrimental impact of hyperscalers on Southeast Asian businesses
Several calculations executed for medium-sized businesses demonstrate that companies in Southeast Asia overpay for cloud services by up to $1,000,000 annually compared to their US-based counterparts. This can divert funds away from other critical business investments, such as innovation and employee salaries.
Furthermore, many of these providers have a history of increasing their prices, particularly for international data centers. For instance, IBM has recently announced price increases of up to 26 percent for 2024. And here is the trickiest part. These hikes will only be applied to international data centers. Prices for US customers will remain the same.
All these things mean that for local companies, such cloud adoption and operation strategy will continue to cost more and more in the long term.
The need for alternatives: Open-source-based cloud solutions
For those who are convinced of the need to find an alternative, the next question would be: what should this alternative look like? It should include every good thing that hyperscalers have and provide a better solution to things that hyperscalers are bad at.
Cloud solutions based on open-source technologies emerge as a promising option, providing several advantages:
- Cost-effectiveness: These solutions are built on a free open-source foundation, making them significantly more affordable than proprietary solutions.
- Innovation: With hundreds of contributors around the globe, open-source technologies are often the fastest to provide innovation and updates.
- Adaptability: They are easily customized to meet the specific needs of any company in any region.
- Locality: Open-source cloud solutions can be deployed on regional data centers, minimizing latency and ensuring optimal performance.
- Bonus! Supporting the local economy: By choosing a local provider, businesses can contribute to the growth of their own economy and reduce their dependency on other countries’ economies.
Addressing reservations about open-source cloud
Some may raise concerns about adopting open-source solutions, including the ones on complexity and reliability. These objections are absolutely legitimate. However, these reservations can be addressed by choosing the right provider, who will reduce the complexities of cloud deployment and operation.
Here are some tips that businesses should consider when selecting an open-source-based cloud provider:
- Company’s experience and track record: The potential provider should have a proven track record of success and a strong reputation in the industry.
- Local presence: Make sure that you are choosing a provider with data centers in your region: not necessarily next door, but within Southeast Asia at least.
- Transparent pricing policy: Double-check a potential provider for any hidden costs and fees. Some may charge for consulting services, others – for server overprovisioning or knowledge transfer. These surprises may drastically increase your cloud bill.
- Technical support: The provider should offer comprehensive support services for both hardware and software, ideally with direct communication lines with the technical team.
To wrap up
While cloud computing adoption is set to grow rapidly in Southeast Asia, the associated costs and risks with hyperscalers’ solutions pose significant challenges. In this context, open-source-based cloud solutions emerge as essential to address these challenges and empower Southeast Asian businesses to fully harness the benefits of cloud computing.
Dr. Kenneth Tan is the Executive Director at Sardina Systems, a global leader in automated, efficient, and reliable cloud solutions for enterprises. He brings over 20 years of experience in large-scale systems and high-performance computing and has been associated with companies such as CloudFabriQ, BNP Paribas, and OptimaNumerics.
Kenneth’s expertise spans a variety of topics, including cloud and edge computing, data center management, large-scale IT systems optimization, international business development, startup building, technology trends analysis, and sustainable technology practices.
Dr. Tan holds a PhD in Computer Science from the University of Reading, UK.
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