The 10x difference in pricing between the least and most expensive cloud computing offers listed on the Cloud Price Calculator home page reflects an industry in pricing chaos. The long list of issues associated with sessions at the various cloud conferences from security to picking a hypervisor remain moot until the industry becomes more price competitive with on premise computing options. The ability to leave EC2 instance prices unchanged for years at a time may seem like good news for Amazon, but high costs keep the mass migration of computing to the cloud on hold.
A price war forces discipline among the companies contributing to the cloud computing value chain at the same time lower prices increase end user demand. Intel does need to chase chip cost reductions to the extent the cloud computing companies don’t compete on price. AMD can’t pressure Intel’s 90% data center share if there isn’t sensitivity to price. The companies delivering the software for the virtualization layer can set prices arbitrarily high in the absence of demand. The absence of price competition does not represent good news for anyone, it means there is not enough deployment activity for anyone to care.
VMWare’s nearly 100% share of server virtualization represents a cautionary tale. The VMWare monoculture leaves server virtualization an expensive proposition available only to deep pocket Fortune 500 IT departments. There exists very little upside in the virtualization ecosystem for anyone except VMWare. This weighs against innovation and presently makes VMWare vulnerable to cloud based (multi-server virtualization) developments. Large enterprises with the support of Intel announced the Open Data Center Alliance (opendatacenteralliance.org) in order to avoid repeating mistakes that produced the captive customer leverage achieved by VMWare.
All prosperous infotech sectors reflect a healthy degree of price competition. Linux takes the edge off Microsoft’s hedgemony. AMD takes the edge off Intel’s market power. SugarCRM keeps Salesforce.com from getting too comfortable. The growth of Amazon EC2 in spite of a failure to provide customers price performance improvements represents bad news for the mid to long term prospects of cloud computing. Microsoft’s Azure and Google’s AppEngine represent some competition, but neither address Amazon EC2 directly. The cloud computing industry will never convert theory to practice or hype to reality without a basis for comparing offers from different companies and price competition.
2 Comments
Hello,
Can we change the question ? Is the price an objective and then a purpose ?
If you are buying a Cloud Service what are you buying ?
- Some compute (Infrastructure as a Service),
- A platform (Platform as a Service),
- A Software delivered online (Software as a Service),
- What ever as a Service…
A Service !
Don’t you think the competition is not hard enough to help people just looking on the service they are paying for ?
In the case of Amazon, if their price is not competitive enough Microsoft / Google or Salesforce (or others) will deliver this service for the customer.
Maybe not on the way they expected (how they are delivering) but on a competitive price.
Then, Are the price to high for Cloud mass generalization ? We agreed we have some work on it !
Patrick,
The issue is not unique to cloud computing.
The electric utility industry does not exist if the utility does not provide customers a measure of what they are receiving?
Would people be willing to buy gasoline from a gas station that does not give them a reliable metric to know what they are buying?
Does it make sense for different gas stations to use different metrics?
Does it seem likely customers would be happy if the cloud computing industry decided to replace GB as the measure of Memory or TB as the measure of storage or GB as the measure of bandwidth with some vague abstractions as Amazon did with the ECU?
Customers can buy on-premise compute power without the compute metric because the unit of compute is the processor itself. This is not the case with cloud computing where processor resources get sliced and diced.
The issue here is fundamental and urgent. The cloud industry will not move beyond experimentation if there is no consensus measure of what we are selling?
Regards,
Dan
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