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Amazon just changed the way that it charges for some of its cloud computing services. This barely qualified as a major announcement—Amazon billed it as a “simplification” of its pricing policy—but to some observers, it was a sign of something big. It showed that after years of playing catch-up in the cloud computing game, Google has finally arrived.
Amazon has long dominated the market for cloud computing—services that let coders and business run software without setting up their own hardware—but this week’s announcement looked like a direct response to a pretty serious threat from Google. “Google is making a dent and AWS is starting to feel the pain from a pricing perspective,” says one ex-Amazon employee who asked not to be identified because his current employer works with the cloud company.
Both Google and Amazon hand out discounts to customers that regularly use a lot of cloud computing power, but since March, there’s been a big difference in the way the two companies billed things out.
Amazon made users pay a big upfront fee for what it calls “reserved instances” of its compute resources. After paying upfront, users enjoy decent price discounts as they use up capacity. But this spring, Google introduced a product called Sustained Use Discounts, and this made things much simpler. If you used a lot of computing resources, you’d get a discount: no upfront fees.
That’s the model that Amazon took a step toward this week. The announcement was made quietly in a blog post, and Ed Byrne, the chairman of Copper.io, a cloud developer tools company and AWS customer, sees that as an odd move for a company that typically trumpets its price changes at its various cloud developer conferences. “Maybe they didn’t want to draw attention to what’s obviously a reaction to Google,” he says.
Byrne says that until Amazon changed its pricing, his company was toying with the idea of switching to Google, a move that would have saved Copper.io hundreds of thousands of dollars—until Monday, at least. “When I saw the Amazon announcement, I said: ‘Great. We don’t have to consider moving.'”
There are still differences. Amazon had previously demanded upfront payments from customers who wanted to take advantage of its reserved instances pricing. And while those payments are no longer required, customers still have to commit to using Amazon’s services for a year or more. That’s not the case with Google.
In retrospect, the pressure from Google seems inevitable. Google has spent the past decade reinventing the way internet computing is done. Custom-building its data centers, designing its own servers, even sourcing its own electricity. Many of the company’s successes in this area are closely held secrets, but it’s clear that Google has the infrastructure to offer low-cost computing on a par with Amazon.
When Google first got into the cloud business back in 2008, the company bet that people would want to run cloud applications on its infrastructure in highly specialized ways and not mess around with operating systems and virtual machines. That proved to be a bad bet. Amazon gave developers a fast and cheap way to fire up a Linux or Window server on the cloud, and developers went for that product. But late last year that Google really delivered a competitive offering, called Compute Engine. And now the company is fast catching up.
In late March Google started a price war with Amazon, slashing its cloud computing prices, across the board, by 30 percent. That kind of price slashing is likely to continue, says Michael Crandell, the CEO of RightScale, a cloud management company. “There’s clearly a case of point-counterpoint going on, and it is a competitive market.”
Byrne says that while Google doesn’t offer the wide range of products, it beats out Amazon in many respects. Google’s compute speed and network “is faster than Amazon’s,” he says. “They’re probably the only people where you can say that their infrastructure is really world-leading.”
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