Pricing

As you’ve probably heard, Amazon Web Services reduced their on-demand cloud prices significantly last week. You’d think customers would be happy across the board, but that’s not the case. Here’s why, and what will happen as a result. As discussed previously, AWS customers translate their capacity planning into Reserved Instance purchases, based on the relative savings these RIs provide over on-demand prices. But, when on-demand prices are reduced without a corresponding reduction in the instance-hour price for RIs - as happened last week - the RI breakeven point shifts and upsets the optimal RI coverage calculus. AWS customers who purchased RIs before the price reduction can find themselves stuck with inventory that now costs more per hour, in amortized terms, than the cost if they had not purchased the RI. I have several clients in this situation, and none are very happy about it. ...

Last week both Google Cloud Platform and Amazon Web Services reduced their prices for cloud computing services significantly to comparable levels, and both now offer significant discounts for long-term usage. Yet, though the two cloud services may seem similar, their radically different long-term pricing models reveal just how different these cloud offerings really are. Whose responsibility is capacity planning? The core difference between GCP and AWS is in capacity planning: Whose responsibility is it? In AWS, the customer owns their own capacity planning. If the customer can accurately predict their needs for the long term, they can purchase Reserved Instances and save significantly as compared to the on-demand cost. Whereas in GCE, Google owns the capacity planning. GCE customers are granted a Sustained Use discount at the end of the month for resources that were active for a significant portion of the month. The GCE customer might track their expected vs. actual costs and be pleasantly surprised when their bill at the end of the month is lower than expected, but the GCE customer cannot a priori translate their capacity planning prowess into reduced costs. ...