News

Study: Cloud Computing Prices Starting to Stabilize

• By David Ramel
• 01/12/2016

The new year has already seen the repeat of a familiar pattern: Cloud Provider A announces price cuts, followed by matching reductions from competitors -- or a denunciation of the price cuts with backing evidence to show that Cloud Provider B's products and services are still cheaper.

This has been going on for years among Amazon Web Services Inc. (AWS), Microsoft and its Azure cloud and Google and its Google Cloud Platform. The latest cycle featured price cuts for EC2 instances by AWS, with an answering retort from Google just this week.

But now comes a new for-pay report indicating that -- after a years-long freefall -- cloud computing prices are starting to stabilize. This information comes from Tariff Consultancy Ltd (TCL), which just published a follow-up report to its original TCL Pricing the Cloud report from 2014. That freefall, TLC said yesterday, saw average entry-level cloud computing pricing decline by about 66 per cent over the two-year period ending in November 2015.

"Into 2016 the cost of the public cloud appears to have reached a price point which is now relatively stable," says the new study from TCL. "For example, both AWS and Microsoft are offering a similar entry level Compute Instance, with other cloud providers following with similar pricing. In the 2014 cloud survey, TCL found that both companies were offering free initial tier Compute Instances, but more recent cloud pricing has become more rational with free pricing limited to a one-month or three-month promotional period."

The continual price reductions -- fueled by intense competition and rapid product innovation -- served to drive the adoption of cloud computing among enterprises, which are turning to cloud platforms across the range of their critical applications, TLC said in a news release yesterday hawking its for-sale report.

So, with pricing stabilizing, how are AWS, Microsoft, Google and so on competing with one another now?

"The emphasis by the cloud computing provider is now increasingly on service innovation, not price," TLC said. "The global cloud platform providers (including AWS, Microsoft and Google) now offer a wide range of Compute Instances suitable for intensive computing, memory, content and fast I/O applications. Cloud providers are introducing analytical services available for cloud computing applications and are now offering cloud for the emerging Internet of Things (IoT)."

Nevertheless, the consultancy sees more price cuts coming, just not at the same torrid pace. "TCL forecasts that average public cloud pricing will fall by some 14 per cent over the four year period from 2016 to 2020," TLC said, "but with less intense price competition over the period."