Google just fired the latest, loudest shot in the cloud computing price war. Yesterday, the tech giant announced that it is lowering the pricing from its flagship cloud product, Google Cloud Platform (GCP), by up to 30 percent.
The move should come as no surprise, Google and its co-belligerents, Amazon Web Services (AWS) and to a lesser extent Microsoft Azure, have been fighting a prolonged price war over cloud services for several years. The continued lowering of cloud computing prices have pushed some tech pundits to speculate whether the tech giants are making any money on cloud services, but, if recent figures disclosed by Amazon are any indication, cloud profits are stronger than ever, and there could be room for further shrinking of margins as companies challenge AWS for the top spot.
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Google’s newest set of price cuts range from 5 to 30 percent, depending on GCP configuration, and use of virtual machines (VMs), check out the chart below, provided by Google in their official blog post, for a breakdown of price reductions across configurations.
In the company’s official statement, Google claims these price cuts make its platform 40% less expensive than competitors. However, looking at the facts provided in the press release, it seems that most Google Cloud customers will see savings in the range of 20 to 30 percent.
Google has also introduced a new pricing scheme for VMs, which could mean big savings for certain customers. Googles new VM pricing structure, which the company calls Preemptible VMs, will allow businesses to run short-duration batch jobs for 70 percent less cost than regular VMs… but, there’s a catch. Preemptible VMs are identical to regular VMs, except availability is subject to system supply and demand. Since we run Preemptible VMs on resources that would otherwise be idle, we can offer them at substantially reduced costs
Here’s what Google has to say: “Preemptible VMs are identical to regular VMs, except availability is subject to system supply and demand.” That means that Preemptive VMs, which run on resources that would otherwise go unused, can be shut down at any time as those resources are provisioned to other customers (the ones paying for full price, on-demand VMs). “Since we run Preemptible VMs on resources that would otherwise be idle, we can offer them at substantially reduced cost,” says Google.
You can read more about Google’s Preemptive VMs at Google Cloud Platform’s website.
It’s Competition, Moore or Less
Google is well known for it’s “don’t be evil” philosophy (whether or not “be good” is an explicit directive at the company, which is currently facing anti-trust suits in Europe, is another matter). In the press release yesterday, Google referenced another, lesser known company policy; last year, the company announced a “pricing philosophy” for its cloud computing business, based on offering “affordable on-demand prices and a commitment to Moore’s Law.”
From where I stand, that sounds like lip-service. Google is committed to competition, not benevolent price drops. And they should be.
Among major tech companies, Amazon’s AWS is still the clear leader in cloud computing, with Microsoft coming in second, and Google in a distant third place. The next few years will be critical for Google’s cloud business, which has so far been unable to find steady ground among enterprise customers.
This price cut, along with a marketing push (Google’s NEXT conferences will be showing of Google’s platform in an enterprise context) could lead to significant long-term gains in the cloud market.
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