Let’s put this week’s cloud price cuts in context. Cash-rich Google has made it harder for Amazon to benefit on AWS. Even if Google steals a ton of AWS customers, Google wins.

In a remarkable display of the cloud’s pricing dynamics, first Google, then Amazon Web Services announced severe price cuts to basic services this week. Prices of popular virtual servers plummeted 30%, and a brand new round of competition was initiated in cloud storage, with prices cut in half.

Amazon didn’t quite match the fee cuts that Google made in entry-level storage, so it’s lost the associated fee leader’s mantle there. But it’s maintaining a brave front. Without mentioning Google’s name, AWS said Wednesday it was cutting prices for the 42nd time and it’s in its retailer’s blood to continue to discount prices.

“As more companies are available, we’ll take note of what other companies are doing,” said Adam Selipsky, VP of promoting and product management at AWS, in an interview Wednesday afternoon. But Amazon’s eye isn’t trained on any particular competitor, he continued. “We are going to be very predictable. We’ll lower our prices through the years” as Amazon realizes increased efficiencies from new components and economies of scale. It’s merely doing what it’s done all along, instituting another price cut, he said.

But if truth be told, Amazon has not cut storage prices 42 times by 51%. These cuts were much larger than usual and applied across a bigger service set than usual. Given Google’s announcement the day before, it’s fair to assert Amazon’s announcement Wednesday represents the 1st set of price cuts in a competitive cloud-service atmosphere. Reading between the lines, meaning AWS doesn’t need to overreact to Google’s sally into its space. It’s willing to concede a minimum of temporarily the cost leader’s spot on occasion and, publicly, it’s conceded nothing.

[Like to learn more about comparing cloud service pricing? See Why Cloud Pricing Comparisons Are So Hard.]

For example, a Google n1-standard-1 virtual server, its small, general-purpose server equipped with a single virtual CPU and three.75 GB of RAM, should be priced at $0.07 per hour starting April 1, a 32.7% reduction. It introduced a Sustained Use server to boot. An analogous virtual server running continuously for a month in “100% Sustained Use” will cost $0.049 per hour, a 52.88% reduction for Google.

How does that compare to Amazon Web Services? Setting aside the question of every virtual CPU’s power, it’d be in comparison to the M3.medium, which comes with a single virtual CPU and three.75 GB of RAM. Its price was dropped 38%, also to $0.07 per hour starting April 1.

Comparing further, Google’s new Sustained Use is roughly similar to Amazon’s Reserved Instance category. The Amazon M3-medium as a Reserved Instance for 365 days would amount to a different 45% reduction off the on-demand price, or $0.0315 per hour, after the upfront payment is added in. a 3-year Reserved Instance would get a 60% reduction off the on-demand price, or $0.028 (on average) per hour, after the upfront payment is added in.

So in entry-level virtual servers, whether on-demand, by the hour, or long-term sustained use, Amazon enjoys a slight price advantage — however the gap that formerly existed was largely closed. Google retains a bonus in that it charges by the minute after the primary 10 minutes, while Amazon charges by the hour, with a whole hour charged for any usage amounting to fifteen minutes or more. Within the sustained-use category, Google likewise has a more flexible approach, in that there are not any one-year or three-year contracts. It’s going to also start applying Sustained Use pricing on a sliding scale after a customer has had a virtual server in use for 25% of the month, although a user doesn’t get the total benefit unless the server runs 100% of the month.

In the important thing category of cloud storage, however, Google dropped prices so drastically that Amazon chose to not follow suit. Within the entry-level, first-TB category of Cloud Storage, Google’s price per GB a month is $0.026, when compared with Amazon’s $0.03 a GB. The Amazon drop for S3 storage as an entire was 51%. On this category it’s 65% because here is where new customers are won or lost, and it had to keep its price within striking distance of Google’s bargain-basement level.

Google also offers Durable, Reduced Availability storage at $0.02 a month. Amazon offers Reduced Redundancy storage at $0.024 per GB a month. Glacier storage, Amazon’s low I/O and rarely accessed permanent service, is $0.01 per GB a month.

That leaves Google being the cost leader only at the entry-level storage front. But Google, that is cash rich, is striking hard where Amazon could be vulnerable. Amazon CEO Jeff Bezos is expanding his company in a way this is going for broke and, some might claim, going broke. It’s using all

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Charles Babcock is an editor-at-large for InformationWeek, having joined the publication in 2003. He’s the previous editor-in-chief of Digital News, former software editor of Computerworld and previous technology editor of Interactive Week. He’s a graduate of Syracuse … View Full Bio

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