Public cloud IaaS providers are competing heavily on price. Watching Google, AWS, and Microsoft play the falling prices game is like watching a ping-pong match. It is just a matter of time before IBM’s SoftLayer matches the prices as well. Adrian Cockcroft wrote a great piece called The Real Story Behind the Cloud Price War, which is a must-read for those trying to understand the impact of the market’s feverish competition to be the lowest-cost provider. Here is an important nugget from Adrian’s article:

Google, in its recent pricing announcement, actually said we should expect Moore’s Law to apply to cloud pricing, which I interpret to mean that we can expect costs to halve about every 18 to 24 months. This isn’t a race to zero: it’s a proportional reduction every year. Over a three-year period, your monthly cost at the end will wind up being a third to a quarter of your cost at the start. It’s a good story for customers.

My conclusion after assessing the current state of the IaaS price wars, with the help of Adrian’s summary, is that all four of these big, public IaaS players (AWS, Google, Microsoft, and IBM) are going to compete at roughly the same costs from this point forward. What that means to me is that cost will not be a differentiator, and instead we should evaluate vendors based on features, performance, reliability, rate of innovation, and customer success stories. Right now, AWS is far in the lead in all of these categories, but the others are making huge investments and are all in for the long haul.

At the time of this post, Google, Microsoft, and IBM would argue that their services around network, disk, and compute are better than AWS’s. Whether that is true or not I’ll leave to the tons of benchmark reports out there that support both sides of the argument. As the others are perfecting the base APIs mentioned above, AWS is dominating by rolling out PaaS-like services that give it a feature set unmatched by anyone in the industry. In fact, I truly believe that the basic IaaS services of compute, network, and disk are essentially a commodity now, and it is the PaaS capabilities that will set these players apart in the long haul. That is also why I am closely watching the PaaS pure players out there to see if companies like IBM, Oracle, HP, and others purchase them and add them to their IaaS offerings so they can catch up to AWS.

The next few years will be very interesting and highly competitive. I have been saying for a while that I believe PaaS is a huge game changer, but its adoption rate is very slow right now. I am starting to believe that these IaaS price wars will commoditize much of the IaaS services and drive up the value of PaaS services. AWS is far along the path to building a PaaS, even though they won’t call it that. Instead of trying to build one themselves, others might be wise to buy a PaaS pure play and close the gap on AWS.

I would love to hear your opinions and predictions on this matter.

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Mike Kavis (42 Posts)

Mike is a VP/Principal Architect for Cloud Technology Partners. Mike has served in numerous technical roles such as CTO, Chief Architect, and VP positions with over 25 years of experience in software development and architecture. A pioneer in cloud computing, Mike led a team that built the world's first high speed transaction network in Amazon's public cloud and won the 2010 AWS Global Startup Challenge. An expert in cloud security, Mike is currently writing a book for Wiley Publishing called "Architecting the Cloud: Design Decisions for Cloud Computing Service Models (IaaS, PaaS, SaaS)" which is expected to be released in late 2013.

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