Research shows full extent of cloud computing price war

A report from RBC Capital has revealed the full nature of the price war being fought out between cloud computing service providers

A report from RBC Capital has revealed the extent of the price war being fought out between the cloud computing service providers.

Amazon Web Services (AWS) is renowned for reducing prices on a regular basis as volumes increase, but the report from RBC capital – reported by website Cloud Tweaks – reveals cuts being made across the sector.

The big cloud suppliers – such as Amazon Web Services (AWS), Microsoft, Google and IBM – are locked in a battle to the bottom on price, which is unlikely to let up any time soon.

According to the RBC Capital report, AWS price per GB Ram was $42 in October 2013 and fell to $25 in December 2014. In the same period, Google’s price dropped from $52 per GB Ram to $32; IBM Softlayer reduced its price from $55 to $32; and Microsoft Azure fell from $46 to $34.

Price is highly elastic when it comes to raw cloud computing, with price cuts leading to increased demand but overheads for suppliers increasing at a fraction of the rate.

Limited effect for customers

451 Research senior analyst Owen Rogers recently told Computer Weekly that the price war has not had a dramatic effect for customers. 451 Research’s Cloud Pricing Index (CPI), compares changes to the cost of a typical application over time, averaged from a range of providers’ quotations for virtual machines, storage, database, bandwidth, support.  

Rogers said: "Although there has been a lot of excitement around pricing changes, we found that, since the last CPI measure in October 2014, the CPI has only declined by about 1%. The average monthly price for our typical app was $2.56 per hour in October 2014 and in December 2014 it was $2.53.

"So although any price cut is good news for consumers, enterprises need to remember their costs will amount to more than just virtual machines and storage, and they need to ensure they are aware of all their financial liabilities. The exact savings achieved depend on the application and its use case."

Corporations such as BP, Shell, Aviva and Investec use services such as AWS Elastic Compute Cloud (EC2), to reduce costs and gain access to more computing power.

But low cost is not the main advantage, rather the flexibility it offers, according to Iain Gavin, UK managing director at AWS, speaking to Computer Weekly last year.

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