Google Targets Amazon with Price Cuts

Google (GOOG) is looking to gain market share by competing on price, targeting its biggest competitor, Amazon Web Services. Google announced sweeping price cuts to the Google Cloud Platform at the Google Cloud Platform Live event in San Francisco.

The new pricing is meant to be simple and provide customer with pay-as-you-go services at significantly reduced rates. See for yourselves what Google has done to its pricing:

• Compute Engine has been reduced by 32 percent across all sizes, regions and classes.
• App Engine pricing has been simplified. Pricing for instance hours has been reduced by 37.5 percent, dedicated memcache by 50 percent and Datastore writes by 33 percent. Many services, including SNI SSL and PageSpeed, are now being offered to all applications at no extra cost.
• Cloud Storage pricing has been reduced to 2.6 cents per GB, which is about 68 percent less for most customers.
• Google BigQuery on-demand prices have been reduced by 85 percent.

It looks like Google is trying to set a precedent usually set by Amazon Web Services—a consistently falling price point. As Urs Hölzle wrote in a blog post, cloud computing pricing has not followed Moore's Law. Instead, where hard costs improved by 20 percent each year, public cloud prices fell only 8 percent annually, he noted. Google seems hopeful about changing that, but if it wants to be king of price cuts, it's going to have to contend with AWS. With this price cut, it's a good step in the right direction.

Hassan Hosseini, product manager at RightScale, also chimed in regarding Google's price cut in a blog post of his own. Hosseini dove into the comparison of Google and AWS pricing, and according to the RightScale representative, Google is now far cheaper than AWS in on-demand and sustained used versus AWS's one-year heavy reserved instance pricing, in some cases up to 60 percent cheaper. But Amazon has the advantage when comparing Google's sustained use pricing against AWS's three-year heavy reserved instance pricing.

And although Google's new sustained use pricing "avoids the complexity, lock-in, and upfront costs of AWS reserved instance purchases," it's a more complicated issue than simple pricing schemes (which are rarely simple).

The simple comparison, though? Hosseini noted: "For many cloud users, Google now offers significantly lower prices for compute resources."

That will certainly be enough for some customers and partners, but doing a proper evaluation as to what works best in a given situation will continue to be critical.