Channeling the Cloud

Cloud Pricing: Amazon, Google and Microsoft Race to the Bottom

As cloud computing gets more competitive, market leaders and newcomers will continue to push pricing downward.

The economics of cloud computing continue to improve, and now we're seeing what appears to be a mounting price war among leading providers of public cloud services.

While cloud providers have incrementally cut prices for some time, the latest round took on a louder pitch last month when Amazon Web Services (AWS), Google and Microsoft on consecutive days slashed the pricing of their respective cloud services.

Amazon's reductions were the company's 19th since launching its first cloud service six years ago, making news of a price cut tantamount to a minor upgrade to the service. But as the three leading cloud providers announced their cuts almost in lockstep fashion, coincidence or not, conspiracy theorists would argue that these players are stepping up their efforts to one-up one another, a notion that Amazon looked to dispel.

"We will continue to drive AWS prices down, even without any competitive pressure to do so," asserted Amazon CTO Werner Vogels, in a blog post announcing the cuts. "Reducing pricing is not just a matter of passing on the benefits of economies of scale, although that certainly plays a role. Experiences with the highly scalable, ultra-efficient supply chains of Amazon.com drive great new innovations in the highly redundant supply chains for AWS, which lead to new efficiencies that we can pass on to our customers."

Steven Martin, Microsoft general manager for Windows Azure Business Strategy & Planning, struck a similar tone in a blog post announcing the March price reductions. "Customers tell us that cost savings is only part of the story," Martin said.

As Amazon continues to add capacity and new services, providers of all sizes appear to have Amazon in their sights, but prefer to steer the conversation away from pricing. At the recent IBM Partnership Leadership Conference in New Orleans, Rich Lechner, vice president of cloud for Big Blue's Global Technology Services, acknowledged Amazon's heft but talked up his own company's cloud prowess by pointing to its arsenal of security wares (Tivoli) and approach of vetting customers by not just letting anyone sign up with a credit card.

Meanwhile, HP next month is expected to jump into the public cloud race with the service it has been promising for more than a year. HP publicly said it's targeting Amazon customers but doesn't intend to compete on price. We'll see about that.

Yet to be seen is how the escalation of services by other players -- including Rackspace, Joyent, Verizon, Dell, Codero and Dimension Data, just to name a few -- will impact cloud pricing in the coming year.

True, the cloud battle won't be won or lost on pricing alone. Security, availability, reliability and breadth of offerings are requirements. But as the growing number of choices tips the scales and providers continue to lower pricing, it's natural that cost will play a key role in ultimate decisions. After all, that's what's driving the cloud movement, and why selling cloud infrastructure will continue to be a compelling business.

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About the Author

Jeffrey Schwartz is editor of Redmond magazine and also covers cloud computing for Virtualization Review's Cloud Report. In addition, he writes the Channeling the Cloud column for Redmond Channel Partner. Follow him on Twitter @JeffreySchwartz.