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

72 points by singold 13y ago

lukaszg 13y ago
We waiting on dropbox now
scragg 13y ago
Now can they just lower the compute and storage outbound transfer rates? :)
lukasm 13y ago
Heroku could give startups 20% discount for a year.
- beat 13y ago
  Heroku runs on AWS (as do other competing PaaS offerings). They'll probably pass savings on to their customers, but they have to cover costs.
evan_ 13y ago
I'm surprised this is being cast as Amazon responding to Google's price cuts- the AWS conference was scheduled months in advance so if anything Google heard about the price cuts and announced their own just ahead of the conference as a (successful; apparently) attempt to take the wind out of Amazon's announcement. Interesting that they dropped by the same amount; either it was a lucky guess, Amazon adjusted their adjustment at the last minute, or AWS has a mole.
- pdq 13y ago
  I'll go with Occam's Razor: Amazon just responded to Google's newly announced pricing. To believe they guessed correctly or they have a "mole" is pretty far fetched.
  - dlgeek 13y ago
    Except Amazon also dropped prices at the exact same event last year, when Google hadn't.
    - pdq 13y ago
      I'm referring to the fact that the prices matched, not the timing.
  - awj 13y ago
    So your version of Occam's Razor is "Amazon hurriedly cut prices on a profitable service without much time for evaluation" over "someone at Amazon told Google about upcoming price changes while Google had time to decide they could jump in early on it". I'm not saying that either interpretation is wrong, but I think your use of Occam's Razor here says more about your assumptions than the nature of things.
    - mcintyre1994 13y ago
      Could it be that Amazon had a less significant price drop planned, Google announced theirs and Amazon decided to increase their drop to match? Amazon would have already evaluated what they could drop to, so they'd know as soon as Google announced they could match.
      - awj 13y ago
        Yeah, that could be it too. I'm really just responding to the idea that "a mole" is farfetched. There's a reason that Apple is known for being incredibly paranoid about people leaking business secrets: it happens, often.
    - cmelbye 13y ago
      So in this explanation, Amazon does not proactively investigate how much they can cut prices while remaining profitable? That doesn't make much sense, does it? It would make sense that Amazon knows exactly how much they can cut prices so that they can immediately respond to price cuts from competitors in their highly competitive market.
- outside1234 13y ago
  At the Amazon, Microsoft, and Google level, I'd suspect that everyone is looking at the same costs in a spreadsheet and saying, "Well, I guess its time to drop to X since it costs Y -- and we might as well do that before the other guys".
- nilsbunger 13y ago
  If I were amazon, I would've prepared to do a price cut when Google announces one. Then when they announce it, just push the button. Why give up margin earlier than necessary? * Of course waiting to do a price cut till their competitor does leaves a bad taste in some customers' mouths. But I bet they think they're far enough ahead that it doesn't matter. Would Netflix and similar big AWS customers really leave AWS over something like this? * This strategy even has a name: "follow the follower". Very common strategy in sailing.
  - evan_ 13y ago
    if it had been a random price-drop announcement then this might be applicable, but everyone was pretty sure that Amazon was going to announce a price drop at re:Invent.
- qq66 13y ago
  I've worked in competitive pricing before and have a little knowledge of how this works. At all times, companies in competitive situations have a basic economic model they use for pricing. Individual sales reps are allowed to cut price to X level for orders above Y quantity, and if they want to violate that price floor they need executive approval. Simultaneously, the companies have models that are dependent on competitive pricing -- that take into account some assumptions about price and how it affects market share. When a competitor moves in one direction, the executives consult this model to decide how to respond, but at least in the situation I was in, the final decision of how much to cut price was a seat-of-the-pants decision by the EVP of Sales. By "model" I mean an Excel spreadsheet, but I'm sure Amazon is far more sophisticated.
bowlofpetunias 13y ago
I keep expecting Amazon to change their reserved instance policy. Who's going to commit to reserved instances during an ongoing price-war? Amazon themselves proudly announce it as their 42nd price drop. That's not really a strong selling point for long term contracts.
- bdicasa 13y ago
  Kind of frustrating, really. I just bought 2 reserved instances about 6 weeks ago. Would have saved a nice penny if I waited. It's definitely nice to see the pricing become more affordable over time though. Before this cut I really struggled going with AWS, but wouldn't even need to think about choosing them after this reduction.
  - avalaunch 13y ago
    You should contact support. I hear aws is really nice about offering price reductions in situations like yours.
    - bashcoder 13y ago
      Based on my experience today, I can attest to this. If you purchased recently, they may very well accommodate you.
  - akh 13y ago
    Contact AWS Support, I saw a case of this where a user bought RIs a few days ago and they offered a refund for the RIs, at which point they can decide to buy it again using the new lower price or just stick with on-demand.
- Patrick_Devine 13y ago
  I've been wondering about this too. I'd love to see a price breakdown comparing reserved prices vs. prices with expected price drops. There is still utility in knowing exactly what you're going to be paying, so for some people, that might be more desirable than getting the best deal.
akg_67 13y ago
I am wondering how many and who in enterprises are using Google cloud? I understand few startups, typically associated with Google in some way, are using google cloud. I just can't imagine many enterprises putting up with poor customer service and ego of Google.
- h1karu 13y ago
  Amazon’s Elastic Load Balancer (ELB) is not designed to handle sudden spikes. Customers need to request AWS to pre-warm the ELB to get it ready to handle the expected load. This requires a subscription to AWS support. GCE’s Load Balancer doesn’t require pre-warming. It scales instantly to support spiky traffic. Compute Engine Load Balancing hits 1 million+ requests per second with no pre-warming.
  - jamiesonbecker 13y ago
    You can pre-warm without a support subscription if you want to take the time (and know how) to do it yourself.
    - h1karu 13y ago
      fair enough.. I didn't realize there was a good solution to pre-warm yourself but I suppose it makes sense that it should be possible. My intention with the comment was to point out that we're not comparing apples with apples when it comes to flexibility of the core infrastructure.. and load balancing is about as core as it gets. Both platforms have features that the other doesn't have for example GCE has Persistent Disks that can be connected to multiple VMs. Amazon has ElastiCache and a DNS service, etc
      - jjh42 13y ago
        Btw. Google now has a similar DNS service https://developers.google.com/cloud-dns/what-is-cloud-dns https://developers.google.com/cloud-dns/what-is-cloud-dns
      - akg_67 13y ago
umsm 13y ago
As I look at the pricing wars, I realized something: If you choose to use "cloud" based in your projects or businesses, you will never know the long-term costs associated with operating in the cloud. The cloud provider can raise or lower prices as they see fit. What prevents these for-profit companies to keep lowering prices and not raising them?
- icebraining 13y ago
  Nothing truly prevents them, but competition provides an incentive for doing otherwise. Of course, that only works if you use provider-agnostic services (e.g. raw VMs, services with standard APIs) instead of locking yourself in to some proprietary service/API, otherwise the switching costs might be prohibitive.
- bgray 13y ago
  Competition?
- bduerst 13y ago
  Simple Answer: Competition. The cost per performance ratio is always going down too, which translates into lowered costs for them and ultimately the customer. They also can't collude together (at least not legally) to raise prices.
- ChuckMcM 13y ago
  Nothing really, although on the flip side if you've got machines in a co-location data center that lease comes up for renewal and your prices are going to change. Often they will go up because the data center folks figure its harder for you to move than negotiate. As long as AWS and Google prices are 10x the cost of self running for large deployments that won't be an issue, but when they start getting closer to parity it is going to put the data center guys in a world of hurt.
- Patrick_Devine 13y ago
  It's unlikely that AWS prices would increase because they're already making some healthy profits, and there is (as others have said) more and more competition. For the competition, they don't offer the same services at AWS, and don't have the same market share, so they have to offer at a discount. That said, there can be quite a bit of customer lock-in associated with the "premium" services, such as DBaaS, or DNSaaS which make it really difficult to switch off of a platform. That could be the hook at some point in the future to keep people paying the "AWS tax".
slattery 13y ago
I wonder if Digital Ocean will even lower their rates? For now, I've noticed their Competitor Pricing page is just redirecting to their normal pricing page. https://www.digitalocean.com/competitor-pricing/ https://www.digitalocean.com/competitor-pricing/ (just redirects) Cached copy: http://webcache.googleusercontent.com/search?q=cache:I33lI_PgDJ4J:https://www.digitalocean.com/competitor-pricing+&cd=2&hl=en&ct=clnk&gl=us http://webcache.googleusercontent.com/search?q=cache:I33lI_P...

72 points by singold 13y ago

lukaszg 13y ago

We waiting on dropbox now

scragg 13y ago

Now can they just lower the compute and storage outbound transfer rates? :)

lukasm 13y ago

Heroku could give startups 20% discount for a year.

beat 13y ago
Heroku runs on AWS (as do other competing PaaS offerings). They'll probably pass savings on to their customers, but they have to cover costs.

evan_ 13y ago

I'm surprised this is being cast as Amazon responding to Google's price cuts- the AWS conference was scheduled months in advance so if anything Google heard about the price cuts and announced their own just ahead of the conference as a (successful; apparently) attempt to take the wind out of Amazon's announcement. Interesting that they dropped by the same amount; either it was a lucky guess, Amazon adjusted their adjustment at the last minute, or AWS has a mole.

pdq 13y ago
I'll go with Occam's Razor: Amazon just responded to Google's newly announced pricing. To believe they guessed correctly or they have a "mole" is pretty far fetched.
- dlgeek 13y ago
  Except Amazon also dropped prices at the exact same event last year, when Google hadn't.
  - pdq 13y ago
    I'm referring to the fact that the prices matched, not the timing.
- awj 13y ago
  So your version of Occam's Razor is "Amazon hurriedly cut prices on a profitable service without much time for evaluation" over "someone at Amazon told Google about upcoming price changes while Google had time to decide they could jump in early on it". I'm not saying that either interpretation is wrong, but I think your use of Occam's Razor here says more about your assumptions than the nature of things.
  - mcintyre1994 13y ago
    Could it be that Amazon had a less significant price drop planned, Google announced theirs and Amazon decided to increase their drop to match? Amazon would have already evaluated what they could drop to, so they'd know as soon as Google announced they could match.
    - awj 13y ago
      Yeah, that could be it too. I'm really just responding to the idea that "a mole" is farfetched. There's a reason that Apple is known for being incredibly paranoid about people leaking business secrets: it happens, often.
  - cmelbye 13y ago
    So in this explanation, Amazon does not proactively investigate how much they can cut prices while remaining profitable? That doesn't make much sense, does it? It would make sense that Amazon knows exactly how much they can cut prices so that they can immediately respond to price cuts from competitors in their highly competitive market.
outside1234 13y ago
At the Amazon, Microsoft, and Google level, I'd suspect that everyone is looking at the same costs in a spreadsheet and saying, "Well, I guess its time to drop to X since it costs Y -- and we might as well do that before the other guys".
nilsbunger 13y ago
If I were amazon, I would've prepared to do a price cut when Google announces one. Then when they announce it, just push the button. Why give up margin earlier than necessary? * Of course waiting to do a price cut till their competitor does leaves a bad taste in some customers' mouths. But I bet they think they're far enough ahead that it doesn't matter. Would Netflix and similar big AWS customers really leave AWS over something like this? * This strategy even has a name: "follow the follower". Very common strategy in sailing.
- evan_ 13y ago
  if it had been a random price-drop announcement then this might be applicable, but everyone was pretty sure that Amazon was going to announce a price drop at re:Invent.
qq66 13y ago
I've worked in competitive pricing before and have a little knowledge of how this works. At all times, companies in competitive situations have a basic economic model they use for pricing. Individual sales reps are allowed to cut price to X level for orders above Y quantity, and if they want to violate that price floor they need executive approval. Simultaneously, the companies have models that are dependent on competitive pricing -- that take into account some assumptions about price and how it affects market share. When a competitor moves in one direction, the executives consult this model to decide how to respond, but at least in the situation I was in, the final decision of how much to cut price was a seat-of-the-pants decision by the EVP of Sales. By "model" I mean an Excel spreadsheet, but I'm sure Amazon is far more sophisticated.

bowlofpetunias 13y ago

I keep expecting Amazon to change their reserved instance policy. Who's going to commit to reserved instances during an ongoing price-war? Amazon themselves proudly announce it as their 42nd price drop. That's not really a strong selling point for long term contracts.

bdicasa 13y ago
Kind of frustrating, really. I just bought 2 reserved instances about 6 weeks ago. Would have saved a nice penny if I waited. It's definitely nice to see the pricing become more affordable over time though. Before this cut I really struggled going with AWS, but wouldn't even need to think about choosing them after this reduction.
- avalaunch 13y ago
  You should contact support. I hear aws is really nice about offering price reductions in situations like yours.
  - bashcoder 13y ago
    Based on my experience today, I can attest to this. If you purchased recently, they may very well accommodate you.
- akh 13y ago
  Contact AWS Support, I saw a case of this where a user bought RIs a few days ago and they offered a refund for the RIs, at which point they can decide to buy it again using the new lower price or just stick with on-demand.
Patrick_Devine 13y ago
I've been wondering about this too. I'd love to see a price breakdown comparing reserved prices vs. prices with expected price drops. There is still utility in knowing exactly what you're going to be paying, so for some people, that might be more desirable than getting the best deal.

akg_67 13y ago

I am wondering how many and who in enterprises are using Google cloud? I understand few startups, typically associated with Google in some way, are using google cloud. I just can't imagine many enterprises putting up with poor customer service and ego of Google.

h1karu 13y ago
Amazon’s Elastic Load Balancer (ELB) is not designed to handle sudden spikes. Customers need to request AWS to pre-warm the ELB to get it ready to handle the expected load. This requires a subscription to AWS support. GCE’s Load Balancer doesn’t require pre-warming. It scales instantly to support spiky traffic. Compute Engine Load Balancing hits 1 million+ requests per second with no pre-warming.
- jamiesonbecker 13y ago
  You can pre-warm without a support subscription if you want to take the time (and know how) to do it yourself.
  - h1karu 13y ago
    fair enough.. I didn't realize there was a good solution to pre-warm yourself but I suppose it makes sense that it should be possible. My intention with the comment was to point out that we're not comparing apples with apples when it comes to flexibility of the core infrastructure.. and load balancing is about as core as it gets. Both platforms have features that the other doesn't have for example GCE has Persistent Disks that can be connected to multiple VMs. Amazon has ElastiCache and a DNS service, etc
    - jjh42 13y ago
      Btw. Google now has a similar DNS service https://developers.google.com/cloud-dns/what-is-cloud-dns https://developers.google.com/cloud-dns/what-is-cloud-dns
    - akg_67 13y ago

umsm 13y ago

As I look at the pricing wars, I realized something: If you choose to use "cloud" based in your projects or businesses, you will never know the long-term costs associated with operating in the cloud. The cloud provider can raise or lower prices as they see fit. What prevents these for-profit companies to keep lowering prices and not raising them?

icebraining 13y ago
Nothing truly prevents them, but competition provides an incentive for doing otherwise. Of course, that only works if you use provider-agnostic services (e.g. raw VMs, services with standard APIs) instead of locking yourself in to some proprietary service/API, otherwise the switching costs might be prohibitive.
bgray 13y ago
Competition?
bduerst 13y ago
Simple Answer: Competition. The cost per performance ratio is always going down too, which translates into lowered costs for them and ultimately the customer. They also can't collude together (at least not legally) to raise prices.
ChuckMcM 13y ago
Nothing really, although on the flip side if you've got machines in a co-location data center that lease comes up for renewal and your prices are going to change. Often they will go up because the data center folks figure its harder for you to move than negotiate. As long as AWS and Google prices are 10x the cost of self running for large deployments that won't be an issue, but when they start getting closer to parity it is going to put the data center guys in a world of hurt.
Patrick_Devine 13y ago
It's unlikely that AWS prices would increase because they're already making some healthy profits, and there is (as others have said) more and more competition. For the competition, they don't offer the same services at AWS, and don't have the same market share, so they have to offer at a discount. That said, there can be quite a bit of customer lock-in associated with the "premium" services, such as DBaaS, or DNSaaS which make it really difficult to switch off of a platform. That could be the hook at some point in the future to keep people paying the "AWS tax".

slattery 13y ago

I wonder if Digital Ocean will even lower their rates? For now, I've noticed their Competitor Pricing page is just redirecting to their normal pricing page. https://www.digitalocean.com/competitor-pricing/ https://www.digitalocean.com/competitor-pricing/ (just redirects) Cached copy: http://webcache.googleusercontent.com/search?q=cache:I33lI_PgDJ4J:https://www.digitalocean.com/competitor-pricing+&cd=2&hl=en&ct=clnk&gl=us http://webcache.googleusercontent.com/search?q=cache:I33lI_P...