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

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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

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