AWS Responds with Price Cuts: Google vs AWS Pricing Round 2

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UPDATE: Google cut prices on compute resources again on May 18, 2015. We’ve got the latest analysis on Google vs. AWS pricing along with price comparision charts.

UPDATE: On March 28, 2014, AWS published pricing for r3 instance types, which are its next-generation high-memory instances. We’ve updated the pricing comparision charts below to replace the AWS m2 series with the next-generation r3 series.

As we predicted in our blog yesterday, AWS has come back swinging at Google’s cloud price cuts. This is good news for cloud customers as compute resources continue to get cheaper. At this rate, it’s going to get pretty difficult for CIOs and CFOs to justify building their own data centers.

At the AWS Summit in San Francisco today, AWS announced lower prices on on-demand compute resources by 30-40 percent. In fact, AWS matched exactly the new Google prices on standard compute resources. For the high memory instances, Google has a 6-percent lower price, but AWS provides about 16-percent more memory, which is the focus on these types of instances, so these net out to roughly equivalent. AWS also offers twice the memory on the high CPU instances, along with an SSD, that balances Google’s 16-percent lower price. Depending on workload, the highcpu c3 series from AWS could provide a better price/performance option.

AWS also slashed both the upfront and hourly rates on 1-year and 3-year reserved instances (RIs). Now comparing Google 100% sustained-use discounts with AWS 1-year heavy RIs, AWS has 10-20 percent lower prices for standard and high memory compute instances, while Google has a slight price advantage on high CPU instances. AWS has 32-48 percent lower prices on 3-year heavy RIs.

With these changes, the question of lower prices now becomes more nuanced. Although AWS RIs are lower in many cases, they require upfront commitment and upfront payments and they create lock-in.

As we discussed in our previous blog on the subject, buying AWS RIs requires a one-year or three-year commitment for the same instance type series with the same operating system in the same region. If AWS hourly on-demand rates go down during the three years, you typically will not get the lower price: looking at historical precedent, AWS does not always apply price reductions to already-purchased RIs. 

In contrast, Google sustained-use pricing is calculated as a percentage of the on-demand baseline rate. As Google’s baseline rates go down, the sustained-use prices will fall as well. As a result, all future Google price drops are passed on to all customers immediately when they take effect. Given the continual price reductions in cloud pricing, you may find that the ability to take advantage of future Google price drops might bring the price below the AWS heavy RIs.

The new sustained-use pricing from Google offers a simpler and more flexible approach as compared to the complexity of RI pricing from AWS. 

Cloud users will need to take into account their usage profile as part of their decision process:

  • For cloud users who have plenty of cash and can accurately predict their usage, AWS RIs can save money. 
  • For the many cloud users who are still growing their cloud workloads quickly and leveraging a blend of on-demand and reserved instances, the most cost-effective option will depend on the exact type of instances required and the ability to make effective use of RIs.
  • For cloud users who don’t have a lot of predictability in their workloads and are using primarily on-demand, they will likely save money with Google.

In all cases, the ability to accurately forecast cloud usage now becomes critical. If you want to analyze the impact of cloud prices on your own cloud spend, get a free trial of RightScale Cloud Analytics to analyze your past usage and create scenarios to forecast future spend on Google, AWS, and other clouds.

Microsoft had previously announced earlier this year that it would match AWS pricing, so we would expect to see adjusted pricing on Azure shortly. Given the changes over the last few days, it’s probably a safe bet that these three major cloud providers will continue to maintain competitive pricing. Given rough price parity, we believe many customers will benefit from Google’s simpler model for providing volume discounts. As Google and Microsoft continue to build out their services and capabilities, we may be quickly heading for a multi-cloud world where there are several highly competitive public cloud options.