Recent cut by Amazon of its cloud prices are still not enough to rival Google's cloud storage prices. The slash by amazon comes after Google announced a reduction of its storage costs – Google made a reduction on its pricing by a very high margin compared to those of their competitors such as Microsoft, Rackspace, and HP.
Google newly introduced "sustained use" pricing model has enabled it to pass savings onto users of its cloud. This compares to Amazons model, which guarantee customers saving after they pay upfront.
Amazon`s senior vice president defended its stand on not responding to Google new model. He said that the company lowered their prices on many occasions without any external or competitive pressure.
Amazon and Google seem to be at the same level though their prices on key areas such as storage are still significantly different. Google has a flat rate pricing for storage while Amazon does tiered pricing.
Amazon`s price change indicates an emerging competition among businesses offering cloud computing services. Amazon's strategy, using lower prices, has enabled it to build a successful brand. Google price change is a threat, one that deserves a response, to its cloud business margins. This comes at a time when Google and Microsoft have made continuous investment aimed at grabbing a portion of the revenue streaming into Amazon Web Services.
Both companies have being experiencing problems that affect their core businesses. Google, for instance, has closed some of its business such as Google Reader and Wave and at times made price changes without warning their customers. This has negatively affected their customers who are now skeptical of their innovations.
Microsoft despite having the most successful software business customers are suspicious of their products as they will be difficult to license or be costly.
Amazon`s core business-retail- ensures use of cheap storage, ideal cloud computing, and relatively low margins.
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