Is Google Reigniting The Cloud Price Wars?

Google, in its first major push this year to drive down the cost of its cloud, on Monday reduced prices for its Infrastructure-as-a-Service product, Compute Engine, while unveiling a low-cost VM for low-priority batch computing jobs.

Past price reductions from one of the big three commodity cloud providers -- Google, Amazon Web Services and Microsoft -- have triggered reprisals. Cloud-focused solution providers are waiting to see if Google's move will set off another round of cuts reminiscent of the wild days of 2014, when it seemed those cloud providers were slashing prices on a weekly basis.

As of this week, Google cloud customers will see Compute Engine savings of anywhere from 5 percent to 30 percent, depending on use cases. And the newly introduced "preemptible virtual machines" are 70 percent cheaper than comparable VMs for users running short-duration workloads, as long as they're flexible about availability.

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Urs Holzle, senior vice president of technical infrastructure at the Mountain View, Calif.-based Internet services giant, wrote in a blog post announcing the reductions that Google is simply honoring the promise it made last year that its pricing scheme would obey Moore's Law.

"Compared to other public cloud providers, Google Cloud Platform is now 40% less expensive for many workloads," Holzle claimed after referring to high-profile customers Avaya, Snapchat, Ocado and Wix.

Simon Margolis, cloud platform lead at Google partner SADA Systems, based in Los Angeles, told CRN the price cuts are exciting, but the cloud industry doesn't need to brace for a new round of shelling.

"I see no reason to believe this is a reaction to, nor a start of, a price war between the major public cloud vendors," Margolis said. "Rather, I see this as evidence of Google's commitment to Moore's Law and proof that Google is passing on their own cost savings and increased efficiencies to their customers."

But Magnus Jern, president of the mobile application solution division at DMI, a Google partner based in Bethesda, Md., told CRN that he sees Google's move, effectively, as part of a long-running price war.

’With the cost of same CPU capacity of hardware being cut in half every 12 months and software constantly improving, we actually expect price wars to be an annual event," he told CRN.

Google's price reductions will generate further momentum for its cloud offerings in the market, and more business for DMI, Jern said.

The preemptible VMs, intended to pass even greater savings to users who don't need on-demand computing, are ideal for batch jobs that can wait for supply-and-demand conditions to leave resources underutilized, according to Holzle.

Margolis told CRN that SADA Systems hasn't yet seen customer demand for that type of "unpredictable burst of computing power" workload. But because of the low cost of preemptible instances, "we can imagine many scenarios in which that would become essential," he told CRN.

The reductions again lower the barrier to entering the public cloud, Margolis told CRN. That allows a greater range of workloads to migrate to the cloud with less financial risk.

"It lets us get more creative in our solutions and allows our customers to see greater cost savings over other solutions," Margolis told CRN.

The last time Google cut prices for Compute Engine was in October. In November 2014, Google reduced the cost for storage and some other services.

Actual cost savings with the latest reduction depend on configuration. While Google dropped the price of "micro" instances -- a machine type for running small applications with bursting capabilities -- 30 percent, the "high CPU" configurations for computationally intensive workloads come down only 5 percent. Google reduced the "standard" configuration price 20 percent.

Allen Falcon, CEO of Cumulus Global, a Google partner based in Westborough, Mass., told CRN via email that the cuts are simply Google, once again, passing on savings from its increasing operating efficiencies to customers.

As IaaS and cloud platform services continue to be priced like commodities, more businesses will be motivated to move systems from their on-premise hardware to the cloud, he said.

"The economics continue to shift in cloud's favor," Falcon told CRN.

PUBLISHED MAY 18, 2015