Diagram showing economics of cloud computing v...

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Finally, the cloud pricing war has begun. I have been complaining about the AWS pricing here at Cloud Ave for some time. In my Sept, 2009 post, I argued that Amazon needs to price aggressively to capture more market share.

However, I would like to to use this post to once again voice my concern about Amazon’s EC2 pricing. For example, if I setup a small on-demand linux instance and not send ANY traffic towards or from it, I would have to pay $72.00. In my opinion, this is pretty expensive and I am hoping that the competition will eventually drive down the prices. In fact, Amazon has cut the prices of reserved instances by 30% but it is not very appealing to me because on-demand pricing, which is at the very heart of cloud computing, is still expensive. In the case of reserved instances, I am left with the traditional hosting economics and not cloud economics. If Amazon is serious about getting more SMBs and, even, enterprises, they have to price their EC2 offering aggressively.

Finally, with the official launch of Windows Azure on Monday, the competition got heated up. Microsoft priced its cloud offering very aggressively compared to what Amazon was offering at that time. For example, Windows Azure compute pricing was as follows:

  • Compute = $0.12 / hour
  • Storage = $0.15 / GB stored / month
  • Storage transactions = $0.01 / 10K
  • Data transfers = $0.10 in / $0.15 out / GB

In November 2009, Amazon cut down their prices by 15% across all on-demand instance families and sizes. Today, Amazon countered the impact news cycle regarding the official availability with further reduction in their AWS data transfer prices. The pricing for data out has been reduced by 2 cents per GB. The first 10 TB has been reduced to 0.15 per GB from 0.17 per GB. The next 40 TB has been reduced to 0.11 per GB from 0.13 per GB and so on. Similarly, they have reduced Amazon Cloudfront pricing also by 2 cents per GB.

According to ChannelWeb, Microsoft is also running an Azure promotion for customers who sign up for a 6 months subscription.

For $59.95 per month, developers can get 750 hours of Azure compute time, 10 GB of storage, and one million storage transactions, along with 7 GB of inbound data transfers and 14 GB of outbound data.

The competition is really getting interesting and we can expect to see further reduction in prices by all these providers, leading to an all out pricing war. With Amazon coming up with the innovative idea of spot instances to increase the efficiency in the usage of their resources, further reduction in the pricing is possible in the future. Microsoft, with all its cash reserves and a strong desire to win the cloud game, will hit back with its own price reductions. With all these back and forth pricing reductions, the ultimate winner will be the customer. Long live price wars.

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Krishnan Subramanian

Krish dons several avatars including entrepreneur in exile, analyst cum researcher, technology evangelist, blogger, ex-physicist, social/political commentator, etc.. My main focus is research and analysis on various high impact topics in the fields of Open Source, Cloud Computing and the interface between them. I also evangelize Open Source and Cloud Computing in various media outlets, blogs and other public forums. I offer strategic advise to both Cloud Computing and Open Source providers and, also, help other companies take advantage of Open Source and Cloud Computing. In my opinion, Open Source commoditized software and Cloud Computing commoditized computing resources. A combination of these two developments offers a strong competitive advantage to companies of all sizes and shapes. Due to various factors, including fear, the adoption of both Open Source and Cloud Computing are relatively slow in the business sector. So, I take it upon myself to clear any confusion in this regard and educate, enrich and advise users/customers to take advantage of the benefits offered by these technologies. I am also a managing partner in two consulting companies based in India. I blog about Open Source topics at http://open.krishworld.com and Cloud Computing related topics at http://www.cloudave.com.

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