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

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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."

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