The price of cloud computing should keep pace with the falling price of hardware, Google insists.
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Taking aim at Amazon Web Services, Google on Tuesday slashed the pricing of its Cloud Platform services and introduced new offerings to tempt developers to deploy their applications inside the company’s datacenters.
At an industry event in San Francisco, Urs Hölzle, senior VP of technical infrastructure at Google, said that during the last eight years, a niche has emerged between the price of cloud computing services and the hardware used to deliver these services. Cloud service costs have declined only 6% to eight% per year on average in this period while hardware costs have fallen 20% to 30% per year, he explained.
“We do not think this gap should really exist,” Hölzle said. “We believe the cost of virtualized hardware should follow an analogous price as real hardware.”
To bring cloud computing costs towards where they need to be in light of hardware cost declines, Google has reduced Compute Engine prices by 32% across all sizes, regions, and classes; dropped prices for Cloud Storage by 2.6 cents per GB (a savings of about 68%); and cut BigQuery on-demand prices by 85%.
Google also simplified App Engine pricing, with reduced costs for database operations and front-end compute instances. And it introduced Sustain-Use Discounts that kick in when a customer uses a virtual machine (VM) for greater than 1 / 4 of a month. This discount can add one other 30% savings to the hot on-demand prices for purchasers who use a VM for a complete month.
Hölzle invoked Moore’s Law to indicate that cloud prices haven’t fallen on the same rate as hardware. But among event attendees, there has been skepticism that Moore’s Law alone could explain Google’s price cutting, since the cost of running a VM extends beyond semiconductors to incorporate things that are not governed by Moore’s Law, like utilities, real estate, and labor.
Both Amazon and Microsoft are expected to reply with price reductions for his or her cloud computing offerings, Amazon Web Services and Microsoft Azure. But Amazon will have limited latitude to take action. The corporate generated $74.45 billion in revenue last year but only collected $274 million in income. It maintains low profit margins to grow, as though it were a tech startup, but it surely does intend to make money to thrill shareholders. It recently took flak from customers for raising the cost of its Prime subscription to $99 per year.
John Rymer, an analyst with Forrester Research, argues otherwise, noting that AWS is become independent from Amazon’s other operations. “Pricing is a fleeting advantage,” he said in a phone interview. “Both Amazon and Microsoft have found that. You progress, the competitor makes a countermove. Amazon has always been really aggressive on pricing.”
Rymer sees Google’s price reduction because the first of a sequence of steps the corporate must absorb 2014 to court developers, and Hölzle more or less committed to that prescription when he told event attendees to expect additional announcements later within the year.
“The truth is AWS has begun to drag away and [Google] really must raise its game,” said Rymer, pointing to AWS’s larger menu of cloud services. “Google must rethink its method to developer services.”
Google seems to be doing just that. It’s added new diagnostic tools to its Cloud Developer Console to cut back troubleshooting time, and it introduced Managed VMs, the way to combine the manageability of App Engine with the pliability of Compute Engine. To thrill enterprise customers, it added support for Windows Server 2008 R2 and made Red Hat Enterprise Linux and SUSE Linux Enterprise Server available to everyone. And Google launched BigQuery Streaming, to permit near real-time analysis of huge data streams.
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Thomas Claburn was writing about business and technology since 1996, for publications resembling New Architect, PC Computing, InformationWeek, Salon, Wired, and Ziff Davis Smart Business. Before that, he worked in film and tv, having earned a not particularly useful … View Full Bio
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