Rackspace cuts its cloud pricing; Race to bottom is on

Simply put, cloud infrastructure will be a buyer's market as the table stakes will be low pricing largely on AWS' terms.

Rackspace on Friday said it cut its prices by 33 percent for its cloud bandwidth and content delivery network services and installed tiered pricing for its Cloud Files storage.

The pricing changes start Feb. 22.

Cloud bandwidth will now be 12 cents per GB, down from 18 cents per GB.

Rackspace's tiered price plan starts with Cloud Files. The prices range from 10 cents per GB per month for the first 1TB, and fall to 7 cents per GB per month depending on usage. Volume discounts also kick in for larger storage amounts.

Here a look at Rackspace's Cloud Files pricing:

raxpricing

 

On Rackspace's blog, the company made a comparison to Amazon Web Services under certain conditions. Here's AWS's pricing chart for its S3 storage service.

awspricing

 

The upshot here is that all cloud infrastructure providers are going to have to cut prices repeatedly. The good news for the IT buyer is that this race to the bottom is only going to accelerate as more players enter the market.

Simply put, cloud infrastructure will be a buyer's market. For starters, Rackspace and all other enterprise cloud players will have to chase AWS. And Amazon CEO Jeff Bezos is a bit of a madman when it comes to profit margins. After all, Bezos has retail margins just a smidge north of zero. That reality means Bezos will take AWS margins of 2 percent and grin like he won the lottery. Enterprise giants used to much larger margins, however, will just cringe.

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