Microsoft, AWS and Google may have just started the next cloud computing price war

Cloud giants have started cutting prices again, but this time in new areas.
Written by Steve Ranger, Global News Director

The giants of cloud computing may have kicked off a new price war, this time over storage.

Until recently, price cuts for cloud computing offerings have been mostly restricted to virtual machines, while other services provided constant or growing margins for providers. But according to analysts, cuts have now moved beyond compute, and into storage and databases.

In an analysis of cloud pricing, 451 Research said the cloud price battlefield has shifted from virtual machines to object storage, and predicted that other services, starting with databases, will see similar downward pressure on pricing over the next 18 months.

The analysts noted that object storage pricing has declined in every region, showing a drop of 14 percent over the past 12 months. Virtual machine prices only dropped five percent in the same period.

Cloud storage price cuts started in the third quarter of last year, said 451 Research, with a reduction in IBM SoftLayer's object storage prices. Google, AWS, and then Microsoft followed suit with storage cuts.

"The big cloud providers appear to be playing an aggressive game of tit-for-tat, cutting object storage prices to avoid standing out as expensive," said Jean Atelsek, digital economics unit analyst at 451 Research.

"This is the first time there has been a big price war outside compute, and it reflects object storage's move into the mainstream. While price cuts are good news for cloud buyers, they are now faced with a new level of complexity when comparing providers," said Atelsek.

Storage has become a focus of price cuts because cloud vendors want to win the big workloads that are moving out of enterprise datacenters and into the cloud.

And there's no sign that cloud computing vendors are running out of room to make cuts. For example, even after a long series of price cuts for virtual machines, vendors are still -- at the very minimum -- making a 30 percent margin on them.

"There is little data suggesting cloud is anywhere near a commodity yet," said 451 Research, who predict that relational databases are likely to be the next price war battleground.

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