Cloud computing is fast becoming a commodity, with price wars a natural result of a competitive market. Amazon, the overwhelming leader in the industry, generated an impressive $7.88 billion from its Amazon Web Services (AWS) in 2015 — Q4 even experienced a 69.37% year-on-year increase against Q4 2014, according to a recent earnings call. But early in 2016, Amazon’s competitors, namely the Google Cloud Platform (GCP), announced price cuts as a way to level the playing field.
Let’s be clear: Google is still a long way behind Amazon when it comes to the Cloud. In the first half of 2015, Google had a 3.6% market share compared to Amazon’s 27.2%. In a recent earnings call, however, Google CEO Sundar Pichai made special mention of Cloud services, saying it will be a key focus of 2016. Technology Business Research (TBR) estimates that Google’s Q4 2015 Cloud revenues were $896 million, a 65% year-on-year increase. GCP is now hosting four million applications, and TBR predicts it will earn $4.1 billion in 2016. As competition between two of the nation’s biggest media conglomerates heats up, consumers need to know the differences between the two and the advantages of each.
Global Cloud Infrastructure
When people talk about the Cloud, it can be easy to imagine a server stored in a Mythical Realm, far from the prying eyes of Men. The truth is much less fantastical. The Cloud is merely a global network of large, highly secure, and efficient data centers — basically, many, many computers housed in warehouses around the world.
Most Cloud providers offer one of three different layers of services:
Software as a Service (SaaS)
Platform as a Service (PaaS)
Infrastructure as a Service (IaaS)
Both Google and Amazon offer IaaS services and aim to serve the SaaS market for end-users as well. Both companies have been investing heavily in infrastructure and are aiming for “hyperscale” — a global portfolio of data centers to serve worldwide demand, ensure customers can access the Cloud wherever they are, and stay competitive.
In general, single powerful data centers (along with redundancies and backup centers, in case of failure) serve specific regions. AWS has four regions in the United States, and thanks to its “virtuous cycle” — a reference to the fact that more customers means more servers, resulting in greater economies of scale and enhanced enterprise appeal — has 12 regions total (with five more planned), compared to Google’s four worldwide.
Price wars are nothing new when it comes to Cloud services. One of the benefits of hyperscale global infrastructure investments is that customer acquisition generates cost savings. These savings are passed on, forcing competitors to cut costs or improve services, or both.
In typical Google fashion, the company has forced Amazon to increase innovation and competition.
- Amazon has already announced two price cuts: AWS reserves are now 10% cheaper than last year.
- Google usually stays quiet about competitors, but not this time. They went on the offensive, publishing a comparison table showing they are 15–41% cheaper than AWS.
How to compare Google vs. Amazon
Although Cloud services are often thought of as modern-day utilities (not unlike Wi-Fi and broadband Internet), direct comparisons between providers are difficult to make. Strictly speaking, utilities don’t come with different features. As far as consumers are concerned, the water, gas, and electricity that run into our homes and offices are the same the world over, regardless of who provides it. All that differs when it comes to utilities is the price.
Cloud services, on the other hand, are not comparable — and may never be, given that each Cloud provider is attempting to win over customers with new features and capabilities. To avoid confusion, Cloud providers, journalists, and benchmarking services have been working hard to put together direct comparisons.
Google’s price comparison earlier in 2016 wasn’t the first time they sought to highlight the benefits of their Cloud versus AWS. In 2015, they commissioned the Enterprise Strategy Group (ESG) to compare the two. The study found that GCP’s on-demand pricing was 44% lower than the best-case AWS reserved instance pricing.
VPS Benchmarks, a provider of benchmarking services for IaaS and Virtual Private Server (VPS) platforms, also conducts regular comparisons. Those comparisons show that GCP often demonstrates better performance and faster response times.
Google has also made an effort, mainly to differentiate itself from Amazon, to simplify its pricing. Amazon is often criticized for its confusing buying options, including on-demand prices, spot prices, and reserve fees. One way that Google sought to offer lower prices was to provide preemptible virtual machines, which offer short-lived compute instances with the caveat that Google may shut them down at any time if they need the resources for other tasks. These preemptible VMs are 70% cheaper (they cost around $0.01 per hour) than other GCP services.
Google still has a long way to go to catch up with AWS. At the same time, Amazon may have to reduce and simplify its pricing to avoid losing customers to Google. And both have to be wary of Microsoft. For customers, whether you are a startup or enterprise, this global Cloud war will continue to generate benefits, from cheaper pricing to more innovative services.