Full disclosure: I work for a competitor to both GCE and AWS. tl;dr: Until the fundamental issue of trust is addressed, customers will applaud the price drops

Full disclosure: I work for a competitor to both GCE and AWS. tl;dr: Until the fundamental issue of trust is addressed, customers will applaud the price drops only because they look forward to AWS responding in kind, not because they plan to actually deploy on GCE. In my experience, GCE has not been a factor in the public cloud market to date. They seem to have a fundamental misunderstanding in that they (apparently) believe their problem in the market is price when it's actually something much more basic: trust. After the abrupt deaths of services like Google Reader and Wave and surprises like the GAE repricing nightmare, customers simply don't trust that Google won't wake up one morning and decide that self-driving cars are actually a lot more interesting than running infrastructure-as-a-service -- and announce the death (or repricing) of GCE. AWS, by contrast, generates no such doubts: one can say what one will about Amazon (and there are certainly many reasons why I believe the future is not AWS's alone), but AWS services do not have a trust issue. (Or, to recast it in the aphorism once said of previous giants like IBM and Microsoft, no one gets fired for deploying on AWS.) It will be interesting to watch the GCE announcement unfold, but previous Google announcements have lacked a critical ingredient: IaaS customers. (Amazingly, journalists don't seem to notice or demand this; smaller companies can't get away with this, but the aura of Google seems to give them a free pass.) If Google wants to really compete in this space, they should pull across a marquis commercial AWS IaaS customer -- at any cost. In doing this, they would probably learn both how profound the trust issue is -- and at the same time learn any remaining technical hurdles that they need to clear to really compete with AWS. There are several high profile AWS customers to pick from, but the obvious customer to start with is Netflix: they care about GCE's putative differentiators of price and performance -- and Amazon is a mortal threat to Netflix as a competitor, which should give some boardroom-level urgency to the discussion. Until Google gets Netflix (or an equivalent) on GCE, I don't think that the price drops will move the needle because they don't address the fundamental issue of trust. (Indeed, one could make the argument that they exacerbate it: if GCE is a money loser for Google, the feared slaying of GCE may actually be more likely, not less.) Finally, if GCE can't get a marquis AWS IaaS customer, how about just a marquis Google customer? Knowing that new Google services are being deployed exclusively on GCE (by executive fiat if needed) may itself go a long way to make Google much more competitive in the space by knowing that GCE at least has the trust of Google, even if no one else...