Price Wars in the Cloud?
My first experience with exactly how competition benefits the consumer was when the gas stations on opposite corners in my home town kept lowering the price of gasoline, in turn, until my dad joked that soon one of them was going to pay him to take their gas. Since then, I’ve seen numerous price wars, from deep price cuts on electronics and popular toys near the end of a slow holiday season to airline marketing ploys in the 80s and 90s that made the cost of flying less expensive, in many cases, than driving to the same destination.
We haven’t seen much cheap gasoline or inexpensive plane fares recently, but those of us who keep an eye on the tech industry are seeing what appears to be the beginning of a price war between the big players in the cloud provider space, as Microsoft, Google and Amazon try to woo customers in efforts to establish a lead as cloud computing comes into its own.
You can blame it on (or, as customers shopping for a cloud provider, give credit to) Google for starting it. In March, at the Google Cloud Platform Live event in San Francisco, the company announced that they were drastically cutting prices on many of their enterprise cloud services, including Google Compute Engine, App Engine and Cloud Storage.
With prices on these core services reduced by a little under 30 percent to as much as 85 percent (for big data analytics service BigQuery), top competitors had little choice but to respond with price cuts of their own if they didn’t want to lose their business to Google. Sure enough, the very next day after Google’s announcement, Amazon did a copycat routine, making the same sort of announcement at its own Amazon Web Services Summit. Amazon’s cuts weren’t quite as dramatic, percentage-wise, but at 35 to 65 percent were still some of the largest price drops the company had ever instituted. A few days later, Microsoft followed suit, announcing that it was following suit, matching AWS’s pricing, effective May 1.
In the wake of their opening salvo in this price war, Google’s Cloud Platform director suggested that cloud pricing should be following Moore’s Law, which would imply that prices drop by half every 18 months to two years. That sounds great, to those in the market for a cloud service. However, not everybody was impressed. As noted in the link above, an IBM spokesperson dismissed the cuts as “less than meets the eye” and warned that customers may not get the same level of service at the lower prices.
One thing that price wars do is make thoughtful customers suspicious. When prices drop to a certain point, you have to wonder whether quality will suffer. Will providers overload their servers to keep up with the competition and still retain their profit margins? Will customers’ performance suffer and users’ experience be diminished?
As with most products and services, price alone should never be the deciding factor in selecting between competing options, but the business (and human) reality is that we all want to get as much as possible for our money. Low prices get our attention. Now, with these large providers attempting to match one another in pricing, it’s more important than ever to look more deeply into what each is offering and how the services themselves stack up.
That means, in addition to many other factors, looking at the hardware and software being used by each provider to run its services. What are the architectural differences in their networks? For example, Google’s virtual instances are diskless and use NAS, whereas Amazon’s use local SSDs. How do the hypervisors compare? What are the CPU clock rates for different types of instances? How much memory is available?
Adrian Cockcroft did a good analysis of these differences on Battery.com, and it’s a useful supplement to my comprehensive five-part series on Selecting a Cloud Provider that was published over on CloudComputingAdmin.com. Together, they can help you navigate the maze of pricing and other options when you make the commit to go “to the cloud.”
By Debra Littlejohn Shinder
Debra Littlejohn Shinder is a former police officer/criminal justice instructor who now makes her living as an IT analyst, author, trainer and speaker. She has written or contributed to 26 books, published over 800 articles and has been living online, along with her husband Tom (whom she met via the Internet), since the mid-1990s.