AWS Responds with Price Cuts: Google vs AWS Pricing Round 2

http://www.rightscale.com/blog/cloud-cost-analysis/aws-responds-price-cuts-google-vs-aws-pricing-round-2

by singold • 12 years ago

72 43 12 years ago

rightscale.com

lukaszg• 12 years ago

We waiting on dropbox now

scragg• 12 years ago

Now can they just lower the compute and storage outbound transfer rates? :)

lukasm• 12 years ago

Heroku could give startups 20% discount for a year.

beat• 12 years ago

Heroku runs on AWS (as do other competing PaaS offerings). They'll probably pass savings on to their customers, but they have to cover costs.

evan_2• 12 years ago

I'm surprised this is being cast as Amazon responding to Google's price cuts- the AWS conference was scheduled months in advance so if anything Google heard about the price cuts and announced their own just ahead of the conference as a (successful; apparently) attempt to take the wind out of Amazon's announcement.

Interesting that they dropped by the same amount; either it was a lucky guess, Amazon adjusted their adjustment at the last minute, or AWS has a mole.

pdq2• 12 years ago

I'll go with Occam's Razor: Amazon just responded to Google's newly announced pricing. To believe they guessed correctly or they have a "mole" is pretty far fetched.

dlgeek• 12 years ago

Except Amazon also dropped prices at the exact same event last year, when Google hadn't.

awj2• 12 years ago

So your version of Occam's Razor is "Amazon hurriedly cut prices on a profitable service without much time for evaluation" over "someone at Amazon told Google about upcoming price changes while Google had time to decide they could jump in early on it".

I'm not saying that either interpretation is wrong, but I think your use of Occam's Razor here says more about your assumptions than the nature of things.

outside1234• 12 years ago

At the Amazon, Microsoft, and Google level, I'd suspect that everyone is looking at the same costs in a spreadsheet and saying, "Well, I guess its time to drop to X since it costs Y -- and we might as well do that before the other guys".

nilsbunger• 12 years ago

If I were amazon, I would've prepared to do a price cut when Google announces one. Then when they announce it, just push the button. Why give up margin earlier than necessary? *

Of course waiting to do a price cut till their competitor does leaves a bad taste in some customers' mouths. But I bet they think they're far enough ahead that it doesn't matter. Would Netflix and similar big AWS customers really leave AWS over something like this?

* This strategy even has a name: "follow the follower". Very common strategy in sailing.

evan_2• 12 years ago

if it had been a random price-drop announcement then this might be applicable, but everyone was pretty sure that Amazon was going to announce a price drop at re:Invent.

qq66• 12 years ago

I've worked in competitive pricing before and have a little knowledge of how this works.

At all times, companies in competitive situations have a basic economic model they use for pricing. Individual sales reps are allowed to cut price to X level for orders above Y quantity, and if they want to violate that price floor they need executive approval.

Simultaneously, the companies have models that are dependent on competitive pricing -- that take into account some assumptions about price and how it affects market share. When a competitor moves in one direction, the executives consult this model to decide how to respond, but at least in the situation I was in, the final decision of how much to cut price was a seat-of-the-pants decision by the EVP of Sales.

By "model" I mean an Excel spreadsheet, but I'm sure Amazon is far more sophisticated.

bowlofpetunias• 12 years ago

I keep expecting Amazon to change their reserved instance policy. Who's going to commit to reserved instances during an ongoing price-war?

Amazon themselves proudly announce it as their 42nd price drop. That's not really a strong selling point for long term contracts.

bdicasa• 12 years ago

Kind of frustrating, really. I just bought 2 reserved instances about 6 weeks ago. Would have saved a nice penny if I waited.

It's definitely nice to see the pricing become more affordable over time though. Before this cut I really struggled going with AWS, but wouldn't even need to think about choosing them after this reduction.

avalaunch• 12 years ago

You should contact support. I hear aws is really nice about offering price reductions in situations like yours.

akh• 12 years ago

Contact AWS Support, I saw a case of this where a user bought RIs a few days ago and they offered a refund for the RIs, at which point they can decide to buy it again using the new lower price or just stick with on-demand.

Patrick_Devine2• 12 years ago

I've been wondering about this too. I'd love to see a price breakdown comparing reserved prices vs. prices with expected price drops.

There is still utility in knowing exactly what you're going to be paying, so for some people, that might be more desirable than getting the best deal.

akg_673• 12 years ago

I am wondering how many and who in enterprises are using Google cloud? I understand few startups, typically associated with Google in some way, are using google cloud. I just can't imagine many enterprises putting up with poor customer service and ego of Google.

h1karu3• 12 years ago

Amazon’s Elastic Load Balancer (ELB) is not designed to handle sudden spikes. Customers need to request AWS to pre-warm the ELB to get it ready to handle the expected load. This requires a subscription to AWS support. GCE’s Load Balancer doesn’t require pre-warming. It scales instantly to support spiky traffic. Compute Engine Load Balancing hits 1 million+ requests per second with no pre-warming.

jamiesonbecker• 12 years ago

You can pre-warm without a support subscription if you want to take the time (and know how) to do it yourself.

freehunter2• 12 years ago

I work for a large enterprise using Google's cloud. It's quite a different experience from using our own servers to handle the same thing. We are now at the whim of a company that doesn't always announce changes until they've happened, and those changes don't always work within our business model.

Yes, it's a nightmare.

akg_673• 12 years ago

Just curious why did you chose Google cloud over AWS or Rackspace. Migrating from internal servers to public cloud makes sense in some instances. Have you looked at private cloud for example using OpenStack or vCloud?

umsm• 12 years ago

As I look at the pricing wars, I realized something: If you choose to use "cloud" based in your projects or businesses, you will never know the long-term costs associated with operating in the cloud.

The cloud provider can raise or lower prices as they see fit. What prevents these for-profit companies to keep lowering prices and not raising them?

icebraining• 12 years ago

Nothing truly prevents them, but competition provides an incentive for doing otherwise.

Of course, that only works if you use provider-agnostic services (e.g. raw VMs, services with standard APIs) instead of locking yourself in to some proprietary service/API, otherwise the switching costs might be prohibitive.

bgray• 12 years ago

Competition?

bduerst• 12 years ago

Simple Answer: Competition.

The cost per performance ratio is always going down too, which translates into lowered costs for them and ultimately the customer. They also can't collude together (at least not legally) to raise prices.

ChuckMcM• 12 years ago

Nothing really, although on the flip side if you've got machines in a co-location data center that lease comes up for renewal and your prices are going to change. Often they will go up because the data center folks figure its harder for you to move than negotiate. As long as AWS and Google prices are 10x the cost of self running for large deployments that won't be an issue, but when they start getting closer to parity it is going to put the data center guys in a world of hurt.

Patrick_Devine2• 12 years ago

It's unlikely that AWS prices would increase because they're already making some healthy profits, and there is (as others have said) more and more competition. For the competition, they don't offer the same services at AWS, and don't have the same market share, so they have to offer at a discount.

That said, there can be quite a bit of customer lock-in associated with the "premium" services, such as DBaaS, or DNSaaS which make it really difficult to switch off of a platform. That could be the hook at some point in the future to keep people paying the "AWS tax".

mercenario• 12 years ago

The cloud provider can raise or lower prices as they see fit. What prevents these for-profit companies to keep lowering prices and not raising them?

This is different from non-cloud based providers how?

chimeracoder• 12 years ago

This is the old rent vs. buy debate, but for hardware instead of real estate.

Renting an apartment places a rough upper bound on your monthly expenses, since in most places, the landlord is required to do maintenance and cannot raise your rent until the lease is up for renewal.

Buying a house a rough lower bound, since your mortgage can increase unexpectedly, and you are responsible for all repairs and maintenance yourself.

So, you can never know all costs with certainty ahead of time, but if you care about predictability, it's probably better to rent (ie, go with the cloud) than to buy, because it's easier to bound your costs over a given duration.

slattery2• 12 years ago

I think the only reason prices would ever go UP, would be if the cost of generating electricity went up.. In which case, your in-house computing would cost more, as well.

Short of that, the trend seems to be costs going DOWN. Amazon recently noted their 42nd price decrease.

slattery2• 12 years ago

I wonder if Digital Ocean will even lower their rates?

For now, I've noticed their Competitor Pricing page is just redirecting to their normal pricing page.

https://www.digitalocean.com/competitor-pricing/ (just redirects)

Cached copy: http://webcache.googleusercontent.com/search?q=cache:I33lI_P...

AWS Responds with Price Cuts: Google vs AWS Pricing Round 2

Related Stories