It’s been a pretty amazing 48 hours or so in the mega-cloud vendor space. We’ve rather lazily got used to continual price reductions from AWS, but this round of Google vs AWS price reductions are pretty special even given this context.
First Google announced some very big price reductions – it was the storage pricing that really grabbed my attention, at 2.6 cents/GB. But for the majority of workloads the compute costs are the dominant component, and so the 32% reduction in compute costs is probably more significant for many. It’s a minor point, but the Google announcement mentioned “reintroducing Moore’s Law to the cloud“, but Moore’s Law is of course finally running out of steam, e.g. according to Intel it’ll be game over by 2020.
AWS have responded with this, but interestingly seem to be calling time on the race to the bottom, knowing that they have a much more credible enterprise offering than Google I suspect. On S3 they’ve almost matched Google but not quite at 3 cents/GB reducing to 2.75 cents/GB with volume. Perhaps the bit that I’m most excited about is the price reduction of the M3 instance range by a whopping 38% (e.g. an m3.large in US-East is reducing from $0.225/hour to $0.140/hour), given that the M3 range is often our preferred weapon of choice these days. That’s a massive bang for your buck.
The next obvious thing to look out for is what Microsoft do with Azure pricing – the assumption is that they will match AWS as per their previous announcement to “peg” their pricing to AWS. Ouch – imagine being an exec and getting out of bed in the morning to find out that you need to drop your prices by 30-80% across the board!
[ADDED 2nd April - Microsoft have done just that - see announcement on their blog here]
So what conclusions can we draw from all this? Well here are mine:
- What’s cheapest today is not necessarily cheapest tomorrow – so optimise costs for the long term, not the short term. OK, if you just want some server or storage capacity for a short time then go with the cheapest I guess, but in reality I’m talking about enterprise workloads and it’s never “a short time” – storage is for life, not just for Christmas :), and the cost of moving between providers might outweigh any benefit. Also, the costs are now so low for some workloads (e.g. if I’m playing around with some feature on AWS) that they are trivial anyway – so convenience and sticking with whatever minimises any usage friction are paramount for me.So rather like when choosing a bank to save your money with, where you might want to go for the savings account with the best long term track record of consistent high interest rates rather than the headline grabbing “bonus” offer – when selecting an IaaS cloud provider it’s their trajectory that matters (and hence their ability to leverage mega-scale). It’s not a great time to be a sub-scale (and sub-scale these days still means freakin’ huge) cloud provider unless you’ve got some specific niche offering…
- In general, we don’t recommend buying AWS Reserved Instances (RIs) for longer than a 1 year term. The 3 year term often makes more financial sense at that moment in time, but in reality the prices are dropping quicker in a year than the additional saving. This makes sense really, as AWS virtually created the IaaS market only 8 years ago, so a 3 year commitment is still a lifetime in this market.In fact, now is a great time to buy 1 year AWS RIs as it’ll be a few months (you’d have thought!) until the next round of potential price drops – maybe timed to coincide with the next AWS Re:Invent conference in Las Vegas in November – so you’ll get the maximum saving. An exception to my point here is that sometimes 3 year RIs are useful for projects where the TCO needs to be completely fixed and predictable – i.e. cost predictability for a business case is the primary requirement.
- A mild concern about where all this is heading – in my view there’s enough competition in the market at present for it to be healthy (i.e. the consumer is winning at the moment), but there is a risk that all but the most massive cloud service providers are squeezed out and the resulting oligopoly means that prices start to creep up again. You could argue that Microsoft’s price pegging announcement is an early sign of an oligopoly forming – reminiscent of the behaviour of the supermarket sector in the UK (where 4 retailers have 76.5% of the market). We’re a few years away from this risk so I don’t think this should infuence enterprise’s investment and vendor selection decisions today.
We’re loving it – what a great time to be migrating customers’ IT workloads to a cheaper, more agile platform where the price is only going down!