Rackspace takes aim at AWS' dedicated instances pricing

Rackspace takes aim at AWS' dedicated instances pricing

Summary: Rackspace argues that AWS dedicated instance price cuts aren't what they seem and aims to shift the cloud pricing conversation to support and value. Will cloud buyers bite?

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The cloud pricing wars are well under way as Amazon Web Services continues to cut prices, but Rackspace CTO John Engates is arguing that there are some nuances that negate some of the benefits.

In a blog post, Engates said that AWS' recent price cuts for EC2 dedicated instances aren't what they appear to be. He wrote:

Amazon Web Services recently chopped the price of a product it calls “EC2 dedicated instances.” As part of that move, AWS cut its “dedicated per region fee” — the extra fee charged to a customer for each region in which it runs a dedicated cloud instance — by 80 percent, from $10 an hour to $2. AWS also reduced by lesser amounts the cost of the dedicated instances themselves. But a lower unit price doesn’t always mean lower costs overall. Nor does it always deliver value when one considers an apples-to-apples comparison of performance and support.

Engates' argument aims to shift the conversation from bottom line pricing---a game Amazon and Google can only win---to one based on value and support. Rackspace's hybrid cloud options are more in line with what other enterprise giants such as HP, IBM, Verizon and others are offering or will be. The problem for these enterprise cloud players is competing with Amazon, which isn't going to sweat profit margins all that much.

More: Amazon slashes price of dedicated virtual servers by 80 percent | Cloud customer win chatter escalates: Wooing Workday | Google sets up to challenge Amazon Web Services | Microsoft goes head-to-head with Amazon Web Services on price, cloud VMs

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For these traditional cloud and hosting players, the game plan against AWS is to pitch services, support or security. Rackspace appears to be using the value playbook because it can be squeezed by commodity pricing.

Engates added that EC2 dedicated instances aren't necessarily isolated instances. Naturally, the message is that Rackspace can provide dedicated servers.

EC2 dedicated instances are essentially EC2 cloud instances that run on single-tenant hardware dedicated to a single customer account. They offer certain compliance advantages over standard AWS instances for customers who don’t want to share servers with other customers. But they do not provide the true isolation that customers get on dedicated, bare metal servers. True dedicated servers offer superior performance and customization. And, despite the recent price cuts on EC2 dedicated instances; they still cost more on a total-cost-for-performance basis than do true dedicated servers.

Rackspace's Engates then offered some price comparisons that run against AWS, which charges for regions. Rackspace doesn't charge for regions. You can see Engates' blog post for the specific math, but Rackspace argues that it will come out about $500 a month less for seven dedicated servers over seven AWS dedicated instances in one region.

For IT buyers, the biggest takeaway is that Rackspace is getting more aggressive against AWS, but also aiming to shift the conversation. What's unclear is whether enterprise buyers will note the nuances that Engates outlined. Rackspace's storyline vs. AWS is likely to be emulated by other cloud players. Buyers need to compare their situations and requirements under various scenarios and vendors.

Topics: Cloud, Amazon, CXO, Data Centers

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3 comments
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  • These aren't nuances and we're not stupid.

    We do apples to apples comparison. If Engates doesn't want to compete in a price war with aws then rackspace should exit the business because it won't be long before aws offers pricing on single tenent dedicated servers as well. They'd better have a business model that accounts for them lowering their prices on everything by 20%-50% each year and sometimes twice a year. Google and Microsoft haven't even got serious yet about going after aws. This price war is just getting started
    Johnny Vegas
  • Rackspace is to Amazon as Target is to WalMart

    Where do YOU prefer to shop? ;)

    Tweks
    tweeks2
  • Meanwhile...

    Digital Ocean have taken 1,500 accounts previously served by Rackspace in the last 6 months, according to Netcraft stats. 0-10,000 hosts in 6 months, growing 30% per month. Simplicity obviously does sell; offerings that facilitate the growth in simpler software stacks, like those involving Node.js, MongoDB, Meteor.js, Rails, etc. are prospering at an incredible rate.
    ian.waring