Cloud Wake-Up Call: Google Takes Aim At Amazon With Price Cuts, Volume Discounts

Google is slashing pricing for many of its cloud services and rolling out a new consumption model in which customers get volume discounts without having to predict how much capacity they'll need beforehand.

In a press conference in San Francisco on Tuesday, Urs Hölzle, senior vice president of technical infrastructure at Google, said the cloud service price cuts -- which range from 32 percent to 85 percent -- are pegged to the dropping price of hardware components.

While public cloud infrastructure pricing has been falling between 6 percent to 8 percent annually for the past five years, hardware component pricing has dropped 20 percent to 30 percent during that time, Hölzle said. Google, which specializes in building large-scale services, is now passing along these savings to customers.

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"The pricing trend of virtualized hardware should follow the trend of real hardware. It should follow Moore's Law," Hölzle said at the event. "We don’t think this gap should exist."

With the price cuts, Google is now officially in the market for computing resources delivered as services over the Internet, a space that Amazon Web Services dominates, in large part because of the multiyear head start it had on competitors. Now Google is sending a message to AWS -- as well as Microsoft and the host of other players in this increasingly crowded market -- that it's ready to compete.

Google is introducing a new consumption model that Hölzle said will make it easier for customers that use lots of cloud resources to get volume pricing. Called "sustained-use discounts," the model doesn't require customers to figure out how much capacity they'll need beforehand, he said.

Once a customer uses a virtual machine on Google's cloud for more than 25 percent of a month, the price they pay starts dropping. And the longer the VM runs, the lower the price the customer will pay, Hölzle said.

To put this in perspective, a customer running a 24/7 database instance will effectively see a 53 percent reduction in price with sustained-use discounts. "We want to reward you automatically for sustained usage without preplanning. We're moving the burden of planning from you to us," said Hölzle.

Google's sustained-use pricing could help large customers to better gauge the costs of their cloud projects, Tony Safoian, president and CEO of SADA Systems, a Los Angeles-based cloud provider and Google partner, told CRN.

"In addition to the cloud price cuts, Google also is giving customers some cost predictability, which has been challenging for larger customers," Safoian said.

NEXT: Google Slashes Cloud Pricing Across The Board

Sustained-use discounts apply to all instances of a certain type in a region, and there's no overage penalty for running larger VMs. "We've taken the guesswork out of pricing," Hölzle said. "Your developers no longer have to double as finance planners."

Amazon offers on-demand pricing as well as reserved instances, for which customers pay up front for a set amount of computing capacity and get discounted hourly rates. Amazon also lets customers sell their unused capacity to other customers in an online marketplace, an option Google doesn't yet offer.

In addition to volume discounts, Google is slashing pricing for its Compute Engine Infrastructure-as-a-Service by 32 percent across the board in all regions. Google's on-demand IaaS pricing is now lower than the three-year reserve pricing of "most other cloud providers," Hölzle said.

Google also is cutting storage pricing by around 68 percent for most users, and is now charging 2.6 cents per GB for both Compute Engine and App Engine, according to Hölzle.

BigQuery, Google's cloud-based tool for doing SQL-like queries on large data sets, is getting an 85 percent price cut. But just as important, Google also is letting customers analyze any amount of data with the level of throughput of their choosing, Hölzle said.

Customers can choose their level of throughput in 5-GB increments, an option that Hölzle said will appeal to large customers that want a predictable amount of throughput for their apps. "You just tell us what throughput you want, and we provision it for you," he said.

With other cloud providers, or in an on-premise private cloud situation, if you wanted 5 GBps of throughput, you'd pay around $80,000 per month. But the same service through Google Compute Engine and BigQuery costs $20,000 per month, or 75 percent less, Hölzle said.