ProfitBricks ignites cloud pricing war with AWS, Google and Microsoft

IaaS player promises to undercut rivals on price, but analysts question sustainability of business model

Infrastructure-as-a-service (IaaS) player ProfitBricks has vowed to match the price and performance of any workload that users have running in Amazon, Google or Microsoft’s clouds.

In fact, ProfitBricks claims it will cost less to run any workload in its cloud at the same performance level as those hosted on its competitors’ infrastructure.  

It also said the move makes it the first provider in the industry to offer a price/performance guarantee to its customers.

The guarantee only applies to ProfitBricks’ IaaS on-demand instances, and will be based on the publicly listed prices given by all three of these cloud giants.

The company is also offering to credit users with the difference in price should they discover that Amazon Web Services (AWS), Google or Microsoft are offering comparable services at a lower cost.

Andreas Gauger, chief marketing officer at ProfitBricks, said the company’s goal is to make it as transparent as possible for users to gauge how much a certain level of performance costs in the cloud.

“There is no learning curve when it comes to understanding our prices. It’s simple. We guarantee that ProfitBricks offers the best balance of price/performance on the market,” he added.

Market forces

The German-based company has been up and running since 2010, and – despite securing a $19.5m funding round in 2013 – is at a slight disadvantage to its competitors when it comes to economies of scale and financial backing.

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For this reason, Clive Longbottom, service director at Quocirca, said users should be wary of jumping ship to ProfitBricks as it’s unclear how sustainable its pricing/performance model is.

“Amazon and co are orders of magnitude larger than ProfitBricks, so where is it making the savings on its own business model to be able to undercut them?

“It may have made the decision to have very small margins, which will minimise the capability to plough money back into technology refresh and research and development.  

“It may be that it has cut corners somewhere – again, very worrying if this leads to problems with systems availability or support,” Longbottom cautioned.

For this reason, Amazon, Google and Microsoft can probably afford to keep undercutting ProfitBricks, potentially to the point where the company is no longer able to compete.

“There will be a proportion of the market that is price first, and this could allow ProfitBricks to be successful in the short term, until whatever aspect of its business model that’s allowing it to post such a price guarantee surfaces and causes problems.

“Of course, if ProfitBricks starts to affect the big players, all they have to do is dig into their pockets and drop their prices for a period of time until they kill it off,” Longbottom concluded.

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