Unique Proposition: Cloud Price Wars Rage, But The Real Battle Is For Differentiation

In case you haven't heard, the cloud price war everyone has been expecting to happen has finally begun. Google, Amazon Web Services and Microsoft all dramatically cut the cost of cloud-based servers, storage and other services in late March, and they're expected to continue cutting prices over time as they learn how to run cloud data centers with ever-increasing efficiency.

This latest round of price cuts was notable for both the size of the cuts and the narrow time frame in which they took place. First, Google cut pricing for its Compute Engine Infrastructure-as-a-Service by 32 percent and storage by 68 percent for most users. A day later, AWS slashed pricing for its cloud servers by up to 40 percent and cloud storage by up to 65 percent. A few days after that, Microsoft said it's introducing a new entry-level cloud server offering that will be up to 27 percent cheaper than its current lowest service tier.

Across the tech industry, the price cuts are deemed a positive development because they're likely to get more organizations purchasing IT services in the cloud and even putting more of their business operations there. But while partners that work with Google, Amazon and Microsoft agree that pricing is important, many say the real battle in the cloud is for differentiation.

[Related: Who's Steering The Cloud Strategies At Amazon, Google And Microsoft? ]

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"Most companies in the partner community, and their customers, don't care about the pricing changes," said David Powell, vice president of managed services for TekLinks, a Microsoft partner in Birmingham, Ala. "This is a battle between big companies, and customer demand doesn't move from one to another based on these price cuts."

While price cuts and unique pricing models are part of that, they're not the only part. According to partners that work with the three vendors, the cloud game is going to be more about offering features and technologies that competitors can't mimic, and the ability to run cloud services with a minimum of downtime.

CRN spoke to more than a dozen partners working with Google, Microsoft and Amazon to get their take on what makes their vendor partner's cloud unique. Here's what they had to say.

Google's Cloud: Heavy-Duty Tech Plus A New Pricing Model

Google is setting its cloud apart from the competition by digging deep into its well of technical know-how, which isn't surprising considering that Google's lineup of star engineers is the computer science equivalent of the 1927 New York Yankees' "Murderers' Row."

At a cloud event in late March, the very first feature Google demonstrated was "live migration," which allows a running virtual machine to be moved from one physical server to another without shutting it down, which is useful when organizations need to maintain or upgrade servers.

Being able to switch a live system from one data center to another, without the user being aware of any issues, is core to what Google does with its Google Apps instances, Grant McCarthy, principal consultant at Onix Networking, a Google partner in Lakewood, Ohio, told CRN. "It's no surprise they can offer the same thing via their Google Compute Engine to application development efforts," McCarthy said.

NEXT: The Google Advantage

Microsoft also offers live migration, but Amazon doesn't. VMware was first to introduce live migration way back in 2003, so Google was likely aiming to show enterprises that its cloud supports this key feature.

Another advantage is that Google has a number of technologies that turn the infrastructure discussion into one centered on a platform mind-set, Tony Safoian, president and CEO of SADA Systems, a Los Angeles-based cloud provider and Google partner, told CRN.

This includes things such as Prediction APIs, Translation APIs and Big Query, Safoian said. Andromeda, the code name for Google's network virtualization technology, which began rolling out in two of the vendor's four regions in the U.S. and Europe earlier this month, is another example.

"It's hard for anyone to truly match Google's scale when it comes to cloud infrastructure because that's Google's core business, and has been for over a decade," Safoian told CRN.

Another differentiator for Mountain, Calif.-based Google is network speed. Google bought up a bunch of "dark fiber" from telecommunications companies a decade ago and now uses it to provide ultra-speedy network connections between its data centers. Since dark fiber capacity is no longer available, this is a key advantage that Google -- and Microsoft, which also bought up lots of dark fiber -- enjoy over AWS, Randy Bias, CEO of Cloudscaling, said in a blog post in February.

And Google is getting creative with pricing models. Not only does Google charge for its Compute Engine Infrastructure-as-a-Service on a per-minute basis, it now also has "sustained-use discounts." Under this new model, when 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 bigger the discount gets.

"We want to reward you automatically for sustained usage without preplanning. We're moving the burden of planning from you to us," Urs Holzle, senior vice president of technical infrastructure at Google, said at a company event in late March.

One Google drawback is that it is currently only running in four regions worldwide -- two in Europe and two in the U.S. Windows virtual machine support is still in beta. But Google is definitely looking to make cloud the second main pillar of its business, and while it's taken a while for it to get into the game, its vast expertise suggests it'll be able to quickly get up to speed.

NEXT: Microsoft's Azure Cloud: Ace In The Hole For Mobility?

Microsoft's Azure Cloud: Ace In The Hole For Mobility?

At the same time it's engaged in a price war, Microsoft is portraying its cloud as more enterprise-ready than what its rivals offer. Microsoft says 57 percent of Fortune 500 firms are now using Azure either for Platform-as-a-Service or Infrastructure-as-a-Service, and it is adding new features and services to keep the ball rolling.

Microsoft is more focused on developing innovative, high-quality services than it is on keeping up with the latest cloud server and storage price cuts, Steven Martin, Microsoft's general manager for Azure, said in a blog post in late March.

"Vendors will ultimately extol their track records for building and running services far more than their prices and SLAs," Martin said in the blog post.

While Microsoft is still a distant third to Apple and Google in the mobile device space, Azure is emerging as a cloud that can connect to and provide services for all types of mobile devices.

One example is Azure Mobile Services, its cloud back end for mobile apps that can handle storage, authentication and push notifications for iOS and Android apps, which launched last June.

Last month, Microsoft unveiled its Enterprise Mobility Suite, which includes Windows Intune, Microsoft's cloud-based mobile device management service, as well as a new premium version of Azure Active Directory, and Azure Rights Management Services, which administrators use to delegate access to Microsoft cloud apps.

Matt Scherocman, president of Interlink Cloud Advisors, a Cincinnati-based Microsoft partner, described Enterprise Mobility Suite as a "critical" product for Microsoft because it works with iPads, Android devices, Microsoft Surface and Windows 8 tablets from third-party vendors.

"Mobile device management from other vendors has been good, but customers ultimately want the ability to manage and maintain all the devices in their organization, not just mobile ones," Scherocman told CRN. "Microsoft also has the file management and synchronization technologies to be able to truly deliver anywhere productivity."

This year at Build, Microsoft introduced several new features for mobile developers, including single sign-on with Active Directory, offline data sync and remote debugging. Microsoft also released a software development kit for developers to use to integrate Active Directory with iOS and Android apps.

Azure's breadth of supported developer tools, and particularly the ease with which Microsoft developers can make the transition to building apps for the cloud, is another important advantage, according to partners.

"When we are developing a Microsoft-based solution, Azure is by far the easiest platform for that task," Carl Fitch, CEO of Statera, a Denver-based Microsoft partner, told CRN. "Put differently, it makes intuitive sense to use the development environment inherent in Azure if we are using the Microsoft stack of development tools."

So despite Microsoft's late start on the mobile device side, Azure could be its ace in the hole. If Microsoft can get millions of iOS and Android devices and apps using Azure for back-end services, that would put it in the proverbial catbird's seat, according to partners.

When it comes to pricing, Microsoft has yet to do much experimentation. It charges for Azure on a per-hour basis but calculates partial hour charges on a per-minute basis, which means customers only pay for what they use. Microsoft, Redmond, Wash., also has vowed to keep pace with Amazon's price cuts, though it hasn't said whether it intends to do the same with Google's.

Microsoft currently runs Azure in 10 regions worldwide, and has revealed plans to open two new regions in Australia, two in China in conjunction with local partner 21Vianet, and one new region in Brazil, which will give it a total of 16 global regions.

NEXT: Amazon: First Mover Pushing Envelope With New Services

Amazon: First Mover Pushing Envelope With New Services

Amazon Web Services is the top dog in cloud Infrastructure-as-a-Service, having carved out quite the dominant position since opening up shop in 2006. Frankly, it's not even much of a competition at this stage: According to research firm Gartner, AWS customers are using five times the compute capacity of the 14 other cloud vendors in its Magic Quadrant, on a combined basis.

While AWS, Seattle, has been steadily adding new cloud services aimed at disrupting what it likes to call "old guard: enterprise software vendors, it also has been the most aggressive of the three vendors when it comes to pricing.

"We've lowered pricing 42 times in the last seven years. And most of the time when we've done that, it has been in the absence of any competitive pressure to do so," Adam Selipsky, vice president of sales, marketing and product management at AWS, told CRN in an interview at the AWS Summit last month.

That said, AWS charges by the hour and does not currently offer per-minute pricing, which means a customer with 61 minutes of usage time on a VM will pay for two hours. But AWS does offer "spot instances," in which customers can sell their unused capacity to other customers in an online marketplace.

Google's sustained-use discounts could be attractive to customers that don't want to have to predict how much cloud capacity they will use beforehand, which is required for the "reserved instances" that AWS and Microsoft offer.

Craig Atkinson, CTO at JHC Technology, a Waldorf, Md.-based AWS partner, told CRN he wouldn't be surprised to see AWS add a pricing option similar to sustained-use discounts if the model proves popular with customers.

"Sustained-use discounts is a nice approach, and I think that if it is something that is a differentiator to customers, I expect you will soon see AWS' flavor," Atkinson said.

But pricing isn't the only selling point for AWS. Ed Laczynski, senior vice president of cloud strategy at Datapipe, a Jersey City, N.J.-based AWS partner, said AWS has set a "prolific" pace of innovation by rolling out new services at a rapid pace.

With 26 availability zones worldwide, AWS has achieved a level of scale and reliability that competitors will have a tough time matching, Laczynski said. "No public cloud has run so many successful use cases as AWS, and the reliability record is stellar, especially when using cloud best practices," he told CRN.

When Cloud Vendors Fight, Lots Of Winners

Regardless of which vendor dominates the cloud services market, ultimately it is the solution providers, integrators, customers and consumers that will win as a result of the price war, JHC Technology's Atkinson said. "In an age where one's Internet, health care, cable, and electric costs just seem to go up and up, it is nice to see a bill go down," he said.

Andrew Pryfogle, senior vice president of cloud transformation at Intelisys, a Petaluma, Calif.-based telecom master agent, sees the cloud price war between AWS, Google and Microsoft as "a very positive thing." That said, he's seeing plenty of opportunities for partners that lie outside these players' sphere of influence.

Intelisys is seeing cloud vendors such as NaviSite and Savvis gaining market momentum with large, complex deals, and it's also working with several smaller regional vendors to serve its customer base of midsize enterprises, Pryfogle said.

"Our base is customers that have done initial deployments of Google or Amazon, as a platform or moving their apps there. Now they're seeing challenges as they try to do real work in the cloud," Pryfogle told CRN. "We're working with customers that need a more robust platform, secure, hybrid and that need hand-holding and better support than what those companies offer."