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Will Google Price Cuts Prompt a Cloud Rival Price War?

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Will Google Price Cuts Prompt a Cloud Rival Price War?

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December 06, 2013
By Ed Silverstein
TMCnet Contributor

Google (News - Alert) has lowered its cloud service prices – leaving business users to wonder if a price war is soon to follow.


The lower prices by Google are a potential threat to Amazon.com’s Amazon Web Services (AWS), IBM (News - Alert) SoftLayer and Microsoft Azure – each a top player in the sector. Yet, AWS is dominant in terms of market share, and the other companies will carefully watch how AWS proceeds.

On Monday, Google announced it will lower prices 10 percent on most cloud services. It will lower prices 60 percent on high-end data storage, as well.

The Google Compute Engine (GCE) service is now generally available, the company announced on Monday. It offers some additional features, too, such as 16-core instances and quicker persistent disks, news reports said, beyond what was offered in 2012 when it was first introduced. Also, the new offering provides “transparent” maintenance while virtual machines are running.

Among recent business customers for Computer Engine are Snapchat, Cooladata, Mendelics, Evite and Wix. SaltStack, Wowza, Rightscale, Qubole, Red Hat (News - Alert), SUSE and Scalr recently joined Google’s Cloud Platform Partner Program, with integrations via Compute Engine, the company said.

Should users and industry watchers take the price cuts seriously?  It appears so.

"Google is positioned to become the next large player in cloud services, with a robust platform of application, platform and infrastructure services, competing for an increasing share of the IT spending pie," Colin Sebastian, an analyst at of R.W. Baird, speculated in a recent statement quoted by Reuters News Service. He also predicts the company will be "embarking on a significant multi-billion infrastructure-as-a-service opportunity.”

The next question is if any of the other top players will respond by lowering their own prices – to block Google’s threat, or offer other incentives for businesses to use their service as opposed to their competitors’.

Google is also offering a service agreement with the GCE which promises that it will be available to users 99.95 percent of the time, VentureBeat reported. The reliability is seen as a draw for business customers.

“We’ve been working to improve the developer experience across our services to meet the standards our own engineers would expect here at Google,” Google vice president Ari Balogh added in a blog post on Monday. “Today, Google Compute Engine is Generally Available (GA), offering virtual machines that are performant, scalable, reliable, and offer industry-leading security features like encryption of data at rest.”

Even without the price cuts, there is interest in the cloud technology offered by Google. "Google Cloud Platform provides the most consistent performance we’ve ever seen,” Sebastian Stadil, CEO of Scalr, said in a statement. “Every VM, every disk, performs exactly as we expect it to and gave us the ability to build fast, low-latency applications."

The price cuts in cloud services is just one move by Google to increase its market share in technology services as it looks for additional revenue sources, according to a report from the Bloomberg News Service. Competitors, watch out!




Edited by Rory J. Thompson

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