Cloud economics improving for users in wake of price cuts

Microsoft joined Google and Amazon Web Services in cutting the cost of cloud services

Cloud computing price cuts by Google, Amazon and now Microsoft may indicate that businesses are discovering that moving to the cloud doesn't always save costs.

On Friday, Microsoft dropped the price on its Azure Storage Pay-as-you-Go service and lowered the price of its six-month storage plan. The cost to use Azure Extra Small Compute has dropped in half.

Earlier this week, Google cut the price of its Cloud Storage service and Amazon Web Services dropped prices on Elastic Compute Cloud, Relational Database Service, ElastiCache and Elastic Map Reduce. Amazon highlighted how the new price cuts will particularly reduce costs for big businesses.

The price cuts come as the service providers try to convince potential new customers to move to the cloud model, one expert said.

"The myth is that cloud computing is always cost-effective," said David Linthicum, CTO of Blue Mountain Labs, a company that advises businesses on moving to the cloud. "In many instances, it's not."

Service providers like Amazon are likely hearing this from potential customers, he said. "They're losing on deals where people are going to buy hardware and software because it's cheaper than leasing their services," he said. "They're reacting by reducing price to capture market."

Amazon, Microsoft and Google are likely willing to drop prices quite a bit, he said. The cloud services are not a primary business for any of the companies, he noted. Plus, once any of them wins a customer, they have a good chance of holding on to the customer for a long period of time because it's difficult for users to switch cloud service providers. For those reasons, Linthicum expects plenty of additional price drops in the future, he said.

The cuts could point to other issues in the market, another analyst said. "They probably signal a developing overcapacity problem in the market for basic public cloud hosting," said Marc Brien, vice president of research at Domicity, a consulting and analysis company.

The continued price cuts by Amazon -- this is its 19th price reduction -- indicate a strategy of trying to drive away competition. "They likely have the most favorable cost structure of anyone in the public hosting industry and want to force a rationalization of the industry in their favor by putting up prices that make the whole thing unappealing and unprofitable for anyone else," Brien said.

Microsoft, Google and Amazon may also be bracing for the near future when other big companies with deep pockets, like Hewlett-Packard and telecommunications providers, enter the market, he said.

Nancy Gohring covers mobile phones and cloud computing for The IDG News Service. Follow Nancy on Twitter at @idgnancy. Nancy's e-mail address is Nancy_Gohring@idg.com

Join the newsletter!

Error: Please check your email address.
Rocket to Success - Your 10 Tips for Smarter ERP System Selection
Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Nancy Gohring

IDG News Service
Show Comments

Cool Tech

SanDisk MicroSDXC™ for Nintendo® Switch™

Learn more >

Breitling Superocean Heritage Chronographe 44

Learn more >

Toys for Boys

Family Friendly

Panasonic 4K UHD Blu-Ray Player and Full HD Recorder with Netflix - UBT1GL-K

Learn more >

Stocking Stuffer

Razer DeathAdder Expert Ergonomic Gaming Mouse

Learn more >

Christmas Gift Guide

Click for more ›

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Walid Mikhael

Brother QL-820NWB Professional Label Printer

It’s easy to set up, it’s compact and quiet when printing and to top if off, the print quality is excellent. This is hands down the best printer I’ve used for printing labels.

Ben Ramsden

Sharp PN-40TC1 Huddle Board

Brainstorming, innovation, problem solving, and negotiation have all become much more productive and valuable if people can easily collaborate in real time with minimal friction.

Sarah Ieroianni

Brother QL-820NWB Professional Label Printer

The print quality also does not disappoint, it’s clear, bold, doesn’t smudge and the text is perfectly sized.

Ratchada Dunn

Sharp PN-40TC1 Huddle Board

The Huddle Board’s built in program; Sharp Touch Viewing software allows us to easily manipulate and edit our documents (jpegs and PDFs) all at the same time on the dashboard.

George Khoury

Sharp PN-40TC1 Huddle Board

The biggest perks for me would be that it comes with easy to use and comprehensive programs that make the collaboration process a whole lot more intuitive and organic

David Coyle

Brother PocketJet PJ-773 A4 Portable Thermal Printer

I rate the printer as a 5 out of 5 stars as it has been able to fit seamlessly into my busy and mobile lifestyle.

Featured Content

Product Launch Showcase

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?