Google’s Cloud Pricing Announcement and the Young Cloud IaaS Marketplace

The Cloud Computing industry continues its push to drive physical and virtualized servers out of private data centers and onto the public cloud.  It’s never been a question of whether this would happen – it’s always been a question of when.

Yesterday, Google announced a drop in their Cloud Computing instances averaging 32%, which makes their pricing more competitive.

When we decided to drop ProfitBricks IaaS pricing by 50% seven months ago on July 31st 2013, we knew it would raise eyebrows and begin to wake up a young industry that was already starting to adopt the old, tired pricing games and high margins of the past (think Oracle, Microsoft, EMC, VMware). We knew our gross margins were over 90% and we knew that Amazon’s were, and continue to be as well.

Cloud Computing’s promise

By definition, Cloud Computing should be priced simply, be considered a utility by its users, be packaged for maximum flexibility, be completely automated and available via APIs, while providing access to a level of performance as good as or better than the local physical gear it’s replacing.

Somewhere along the way Cloud Computing got lost

Yesterday Google called the industry out on its pricing schemes, in particular Amazon and its EC2 pricing complexity. Google rightly realizes that for the industry to grow, and for buyers to trust Cloud providers with their workloads, we must move away from the high margins that Amazon imposes with AWS, along with their complex EC2 pricing and “non-cloudy” upfront commitments for EC2 reserved instances.

While we applaud Google for finally dropping their pricing to near ProfitBricks levels, they have introduced a new paradigm in cloud pricing with their “sustained use discounts”.  While laudable at first take, it does continue to make predicting costs difficult for cloud users.  We were also sad to see Google continuing to force buyers to pick Cloud instances based on pre-set sizes, essentially forcing buyers to over-buy or under-buy their Cloud resources.  We also did not see any news of performance improvements from Google.

The industry will react

We don’t expect Amazon and Microsoft to stand by and watch Google make these pricing claims, but we also don’t think Amazon will be bold enough to make the necessary changes in their architecture to be a price/performance leader.  Even Amazon’s recently launched new “high-performance” general compute instances, the “m3” instances, were supposed to usher in better performance and better pricing for Amazon users.  However, after a thorough analysis by the ProfitBricks performance engineering and product teams, ProfitBricks remains 48% to 78% less expensive and at least 2x the performance of Amazon’s newest instances.

How does Google’s new pricing compare to Amazon and ProfitBricks?

In the table below we make it easy for you to compare ProfitBricks with Google and Amazon’s on-demand pricing and their complicated saving schemes.  We’ll let the chart tell the story.

Google-Amazon-EC2-ProfitBricks-Cloud-Computing-Pricing

Cloud Computing Instances Price Comparison – Google vs. Amazon AWS vs. ProfitBricks

But what about performance?  Cloud buyers are smarter than just buying on price, right?

Yes, they are!  ProfitBricks is well-known for being the performance leader in the cloud, and that generates a lot of performance testing of the ProfitBricks platform.  A little over 47% of all of our potential customers run benchmark testing against our platform.  This is despite the fact that we publish numerous performance benchmark testing reports throughout the year.  ProfitBricks cloud instances are always at least 2x the performance of an Amazon AWS EC2 instance whether it’s an m1 or an m3 type.  Have a look at the chart below, it shows the comparison results of the standard open-source UnixBench benchmark tool.

Cloud-Performance-ProfitBricks-Amazon-EC2

What’s next?

I am not going to speculate on what the other Cloud providers will do. I can share with you that ProfitBricks will continue to be the price/performance leader in the cloud.  It’s what we do. It’s who we are.  And of course, I’d love to hear from you or meet you – I’ll be at Interop in Las Vegas, NV next week and I am always around on Twitter @gaugi