How Cloud-Service Price Wars Increase Sales, Innovation

Despite favorable pricing, most respondents said features and performance still were more important than price in deciding which vendor to engage.

As cloud-service price wars continue to escalate--mainly among the three largest providers: Amazon, Google and Microsoft--the price cuts are, in fact, driving increased investment and innovation in cloud-based projects, a new research survey reported April 30.

The online survey was conducted by Seattle, Wash.-based Web services consultancy 2nd Watch during a two-week period beginning in mid-April. It queried more than 100 IT directors from large and midmarket companies. The intent was to understand the impact of recent cloud infrastructure price reductions on their businesses.

That more cloud business is taking place isn't surprising, because in any business where a sale is involved, upticks in sales tend to happen more frequently. However, despite the increasing price competitiveness among cloud infrastructure providers, about two-thirds of survey respondents said features and performance still were more important than price in deciding which vendor to engage.

The cost of adding cloud infrastructure continues to go down, a trend that is likely to continue. Amazon has cut prices across its cloud offerings 43 times since 2006 and by about 34 percent since October, while Google reduced prices by about 23 percent in March and 19 percent in December.

Price-cutting trend may continue for a while

Microsoft lowered prices on its cloud service by 32 percent during the last four months. Cloud infrastructure is an increasingly competitive market driven mainly by the cost, flexibility, security and convenience benefits of being able to "spin up" new cloud instances on a moment's notice.

"The latest pricing changes from Amazon, Microsoft and Google are moving the cloud infrastructure market in a positive direction," 2nd Watch CEO Kris Bliesner said. "Cloud infrastructure continues to deliver huge economic and scalability benefits. When was the last time your IT infrastructure costs decreased after you installed it? With the cloud this happens all the time and businesses benefit everyday from price cuts."

A majority (80 percent) of IT directors responding to the 2nd Watch survey reported they were aware of the major price reductions occurring in the cloud infrastructure market, and better than 60 percent said Amazon offered the best price. Amazon was also cited by a majority of respondents (70 percent) as having the best price to value, followed by Google (8 percent) and Microsoft (4 percent).

Key findings from the survey
Other notable findings from the 2nd Watch Cloud Infrastructure Price Wars survey included:

--60 percent of IT directors spent at least $10,000 last year on cloud infrastructure and nearly one-quarter spent more than $100,000.

--Almost one-quarter of respondents said they'd spend up to 25 percent more this year on cloud infrastructure while 20 percent said they'd spend 25-50 percent more on cloud infrastructure.

--37 percent of companies will move more applications to the cloud this year than last year and 35 percent will do more experimentation with cloud projects.

--41 percent of respondents said they monitor cloud-pricing changes "all the time," while 42 percent said they look at their cloud infrastructure bills "occasionally."

--Nearly 42 percent of respondents said their cloud infrastructure bill fluctuates 10-20 percent monthly.

--Companies spent the most on cloud infrastructure between October and December last year (nearly 35 percent), with the next busiest time reported as January to March (23 percent).

2nd Watch builds, deploys and manages Amazon Web Services-based IT operations for enterprise customers. The service provider assists users in evaluating the economics of moving IT operations into AWS, designs and builds highly reliable and scalable AWS based enterprise IT platforms, and provides software tools and management services for those purposes.

--Image courtesy

Chris Preimesberger

Chris J. Preimesberger

Chris J. Preimesberger is Editor-in-Chief of eWEEK and responsible for all the publication's coverage. In his 13 years and more than 4,000 articles at eWEEK, he has distinguished himself in reporting...