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Cloud Hosting Pricing Wars

Posted by QuoteColo on March 30, 2015 - Updated on March 03, 2016

Cloud Hosting Pricing Wars

Today, the cloud is a relatively common term, and you are able to find a number of providers out there with cloud hosting platforms perfect for businesses of any size. However, there has been a war raging amongst many of these providers, particularly those who are in the top tier when it comes to hosting. The main combatants are naturally Amazon, Google, and Microsoft. While there are other providers out there, it’s these three big guns that are making the biggest waves when it comes to pricing as well as features. Let’s look a bit deeper into the history of the price wars between these giants and see how it is affecting the rest of the community both positively and negatively.

The Fast and Furious Battle

When cloud hosting was really starting to become more mainstream a couple of years ago, price was a huge factor. In the beginning, the prices were relatively high. Even though the concept of cloud computing had been around for a long time, it was not something that was practical until recently. The technology at the start was more complex and convoluted, and people were not immediately enamored with the idea of the cloud, simply because they did not understand it. Microsoft, and then Google and Amazon saw the vast potential that it offered, and they dove into creating their cloud hosting platforms. In the beginning, the prices between services were comparable.

Of course, being the businesses that they are, they soon saw the potential to undercut competitors by offering lower prices for their various hosting services, and that is just what they did. This soon became a cycle, and this cycle continues to this day. Over the years, you can see that there is generally a drop in costs of between 6% and 8% annually. Whenever Google decides that they want to lower the price of services, you are sure to see the other big names drop their own pricing structure within a short time. Usually, they will announce price changes within a week or two, but it can happen in as little as a day if they really feel the need to outplay the enemy.

Each of the cloud hosting providers – not just the biggest – is watching one another closely so that they don’t fall behind when it comes to pricing. This is quite similar to any other area of business. When one company’s product goes on sale, the direct competitors tend to offer a sale soon after.

For example, in March of 2014, there was a battle between Google and Amazon for the best pricing. At the time, Amazon was offering the lowest prices for cloud hosting. Google decided to cut their prices significantly. In addition, they introduced “sustained use pricing”, which provided their users with more flexibility and better overall monthly prices. As you use the service more through the course of the month, the pricing would actually drop. Users were actually rewarded for more usage rather than penalized for it. Amazon was requiring that users who used more resources would need to purchase reserved instances to get a lower rate. However, there was no guarantee for those users on Amazon to know if they would actually need the reserved amount in a given month, which sometimes led to companies spending on something that they did not need. One of the other problems was that those using Amazon needed a commitment of one to three years on the same instance type, for the same OS in the same region.

Are Price Cuts Good or Bad?

A company can only drop prices so far before they start to bleed money. They still need to be able to make a profit on their services, and this means that the pricing war will eventually have an end. Amazon, Google, and Microsoft, as well as some of the smaller hosts, will reach a point where they can no longer count on additional users to make up for the lower prices they are charging.

Now, cuts can be a very good thing for the consumers, and we’ve seen that over the past few years. Without the drop in the pricing, there would not be nearly as many companies moving over to the cloud. With lower prices, it is making it possible for smaller businesses and individuals to take full advantage of everything that the cloud is able to offer.

One of the other things about the price war, as the Google and Amazon example above helps to illustrate, is that it can show weaknesses in another company’s structure. It will allow customers to see the flaws in the company, and it can help ensure that the company addresses those issues if they want to retain customers. Do companies always make the right decision that’s in the customer’s best interest? Not at all, but having a competitive price war between these large cloud hosting providers has seemingly been pushing things in the right direction.

Times Are Changing

The price wars do continue, and you will still see the large competitors dropping their prices with some regularity. However, it’s not quite as frequent as it was in the earlier years of competing. As mentioned, they can only reduce their prices to a certain level before they start losing money – and you can’t imagine these companies wanting to take too large of a hit just to gain a few more customers.

The war between the cloud hosting providers is evolving and starting to include other elements, which can actually benefit customers even more. Rather than only thinking about pricing as the number one factor, they are also starting to add more features. While the companies can offer up a wide range of virtual machine instances, and they continue to improve quality and security, the new features they add will be where things really start to make the difference. The top providers are now starting to add more options, along with faster and more powerful machines.

The Wars Will Continue

As long as companies are able to find new ways to reduce their pricing – offering different tiers of service, more cost effective technology, etc. – you can be sure that the price wars will continue. This can be good news for those who are looking for a quality cloud hosting company right now, but always make sure that you take the time to read the contracts and know exactly what you will be getting for the price. This will become even more important as they start to introduce more tiered and specialized services. Keep in mind though that when the companies begin to add premium features and technology to their cloud hosting, you can expect the prices to remain stagnant for a while, or even to increase in cost a bit. Also, keep in mind that even though the big three are the most popular cloud hosting options, they are not your only choices out there. Find the one that works for you.

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