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Cloud Computing: It’s More About the Race to the Top, Rather Than One to the Bottom
Amazon has dropped AWS cloud service prices more than 50 times in it’s history as it tries to keep ahead of cloud rivals Google and Microsoft. A January headline in the Register read “Amazon, Azure and Google in race to the bottom … of cloud storage pricing.” The competition in the market is fierce argue the analysts as cloud vendors try to capture market share. But a report by 451 Research suggests that while those price cut announcements may be good at attracting attention, actually just the reverse is happening.
451 put together an index of cloud prices that they call the Cloud Price Index (CPI). Their conclusion is that the motivator for customers is usually not the price, rather it is the value that they can achieve. Vendors like Amazon AWS increasingly add high-end high-value options with healthy margins while they ruthlessly cut prices for entry-level compute resources. In this way vendors are moving up the stack in order to grow profits.
Owen Rogers, 451 Research digital economics unit research director, said that “being cheap doesn’t guarantee more revenue; being expensive doesn’t guarantee less. It appears users are willing to pay for other things, rather than always going for the cheapest… Despite all the noise about cloud becoming a commodity, our research demonstrates a very limited relationship between price and market share. Cloud is a long way from being a commodity. In fact, the real drama is the race to the top rather than the race to the bottom.”
