Your move, AWS and Microsoft: Google’s cutting basic cloud compute prices 10 percent

Once more into the fray: Google is cutting price on Google Compute Engine instances by about 10 percent across regions and all types.

[company]Google[/company] SVP Urs Hölzle disclosed the cuts, effective immediately, Wednesday during Atmosphere Live, but don’t expect that to be the end of it: Given past history, expect Amazon Web Services and Microsoft Azure to react with cuts of their own.

Up until this past year, [company]Amazon[/company] pretty much unilaterally cut prices on base compute and storage services, but last March Google made its presence felt with 30 percent price cuts  and — perhaps more importantly — sustained use discounts that kick off additional discounts automatically once virtual machines hit 25 percent utilization. And sustained use discounts do not require pre-payment.

Those moves persuaded even some skeptics that Google is, in fact, serious about competing head-to-head with AWS in public cloud. [company]Microsoft[/company] has also pledged to meet price cuts. At Structure 2014 in June, for example, Microsoft’s cloud chief Scott Guthrie indicated that he sees no end in sight to the price slashing. And he vowed to meet cuts on commodity services — base compute and storage —  within 48 hours.
google price cut
But, buyers beware: there are caveats to price cuts. Most are on basic storage and compute, which can be tied to lower disk prices and higher capacity drives coming online, as Server Density CEO David Mytton pointed out. And as big public cloud companies increase scale, they can offer the equivalent of volume discounts because they wring the most out of their hardware.

So far, he added, networking has bucked the trend, maybe because cloud providers rely on third parties like Level 3 and NTT for that. Google, which is building out its own fiber networks, might change that equation. It should be noted that some cloud providers rooted in the telco world — [company]CenturyLink[/company] and [company]Verizon[/company] for example — hope to combat the public cloud giants by offering reduced price or free data transfer, for example. But adoption of that to date has been unclear.

For cloud customers, when it comes to the public cloud triumvirate of AWS, Google and Microsoft, these price cuts on storage and compute need to be factored into the bigger picture. Given that prices for networking/data transfer and higher-level “differentiating” database, data warehouse and other services have not fallen, your overall cloud bill may not shrink if you add a lot of those services to the mix.