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Cloud hosting price war

Tue, 6th August 2013, 19:24

Is the cloud the future of the Internet. Some appear to believe it is and that’s why there are a ton of different companies competing for the business of cloud users. There are two huge companies that are battling for those dollars, along with several smaller companies trying to get their services into the mainstream. The two huge companies are Amazon with their Amazon Web Services (AWS), and Rackspace with their dedicated and Open Cloud services. You also have Google and Microsoft's Windows Azure competing for a spot at the table.

 

Is There a Price War?

There have been many stories on the web talking about this “war” between the giants of cloud computing. ProfitBricks, one of the smaller companies competing for the limelight, has a piece up claiming that the price war is nothing but a sham and a PR play by the bigger players.

“But it’s not a race to the bottom. This isn’t a battle in the clouds, it’s a bit of shadow boxing among giants.”

Of course they say that in a post where they are announcing that they are cutting their own prices by 50%. So even the people saying the cloud price war is a sham are trying to better compete on price.

 

Amazon, Google, and Microsoft Have a Leg Up

Rackspace and ProfitBricks may be players now, but relative to the big three, they are ants just waiting to be squashed. Even Amazon would have problems eventually if Google and Microsoft decided that the cloud was a place where they had to succeed.

That’s the point of this price war. Amazon wants to gain enough business before Google and Microsoft’s offerings become popular choices. If and when that happens, Amazon wants to be as big a player as possible, so that the other companies don’t just run them over with crazy low prices.

 

Market Share

As of right now, the biggest cloud company (storage, infrastructure) is Amazon. Google has a huge infrastructure, but is mostly used by its own services. Microsoft also has the infrastructure, but isn’t as popular as AWS. The reality is that this price war is between Google, Amazon and Microsoft, with Rackspace in the wings competing in a different way.

Comparison of AWS market share  to other players in the cloud hosting business 

The big three keep lowering their server costs in order to draw developers towards their services. Amazon, with the biggest market share, has a head start on the other two, but that could change. Both Google and Microsoft can afford to go to the insane levels when it comes to low costs. Whether they will or not, or whether Amazon will try to beat them to it, still remains to be seen.

 

Benefiting the Customer, Hurting Competition

Do these companies mean to be in a price war? Who knows? They are very interested in gaining new customers, and lowering prices is a great way to do that. The customer benefits when one of these wars is going on because prices go down across the board. The giants who can continue to supplement the lower costs with more profitable ventures push out the smaller competition, which doesn't have a huge war chest of cash to rely on.

From a developer/consumer point of view, this war is a great thing. Cheaper services, means cheaper development costs, and cheaper applications... at least in the short term!

About Matt 

Blogger, writer, and coder. Matt loves writing about technology and sports. he also enjoys coding websites, designing logos, and working with people. He has been published all around the web including on such awesome sites like ProBlogger, SiteSketch101, and Entrepreneurs Unplugged.