Amazon vs. Google, Microsoft: Cloud Price Wars Aren't Real

Amazon vs. Google, Microsoft: Cloud Price Wars Aren’t Real

Written by samdizzy
July 10, 2013

Amazon has cut cloud prices for the 37th time. Microsoft and Google will surely respond with their own cuts. But don't call it a cloud price war. And don't fear it. Instead MSPs and VARs should ride existing public clouds. Here's why.

Amazon Web Services (AMZN) has cut cloud pricing for the 37th time. Google App Engine (GOOG) and Microsoft Windows Azure (MSFT) are sure to respond with their own price cuts. But let’s not call this a cloud price war. And as an MSP or VAR, you shouldn’t panic about falling cloud services prices. Here’s why.

Instead of a price war, let’s call this the ongoing reality — the NORM: Public cloud pricing for IaaS will fall seemingly forever. Instead of fearing that reality, channel partners should embrace it. Aggresively.

The vast majority of VARs and MSPs should never attempt to build their own clouds. That’s like building your own power plant when power is cheap and widely available from multiple service providers. The far wiser strategy for channel partners is to ride third-party public clouds from Amazon, Microsoft, Google, etc. For channel-centric IaaS clouds, you can potentially check out Artisan Infrastructure, Peak Colo and Tier 3 (among others).

Examples of Success

Many MSP- and channel-oriented software companies (such as Kaseya and LabTech Software) already run their cloud workloads on Amazon Web Services. And each time Amazon cuts prices, Kaseya and LabTech can hold the line on their own pricing — which essentially means Kaseya and LabTech potentially get a margin lift from Amazon’s underlying price cuts.

How else can VARs and MSPs ride the public cloud wave without worrying about price cuts? I’ve previously offered some answers here.

Latest Price Cuts

And as for Amazon, the company today cut prices for Elastic Compute Cloud (EC2) dedicated instances. According to an Amazon blog post, the cuts include:

Dedicated Per Region Fee – An 80% price reduction from $10 per hour to $2 per hour in any Region where at least one Dedicated Instance of any type is running.
Dedicated On-Demand Instances – A reduction of up to 37% in hourly costs. For example the price of an m1.xlarge Dedicated Instance in the US East (Northern Virginia) Region will drop from $0.840 per hour to $0.528 per hour.
Dedicated Reserved Instances – A reduction of up to 57% on the Reserved Instance upfront fee and the hourly instance usage fee. Dedicated Reserved Instances also provide additional savings of up to 65% compared to Dedicated On-Demand instances.

In the hours or days ahead, you can expect Microsoft and Google to cut cloud prices too. It always happens. Accept it. Don’t fear it. Profit from it.