Cloud Price Index Falls After Google Price Cuts, Amazon Restructuring

Over the last eight weeks, the 451 Research Cloud Price Index experienced a drop — something the analysis and research firms says was caused by Google (GOOG)’s recent price cuts and the Amazon Web Services (AWS) restructuring.

The December Cloud Price Index shows a drop of 1.32 percent over the last eight weeks. It doesn’t really seem like much of anything to write home about, as it’s a relatively small drop, but the 451 Research analyst behind the index offered some insight into why this is a big deal.

“With all of the hype surrounding Google’s cuts and AWS’ restructuring, you could be fooled into thinking you might save a small fortune, but the CPI figures demonstrate that a typical application will only be cheaper by 1.5 percent compared with two months ago,” said Dr. Owen Rogers, a senior analyst at 451 Research, in a prepared statement. “However, extrapolate those price cuts over a year and we’re looking at a 10 percent drop, certainly not to be sneezed at.”

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According to 451, the recent Google price cuts were driven by the need to prove it can compete against Amazon Web Services and other cloud players. As 451 Research explained, “The annual cost of running the CPI application spec now stands at $22,102.80. For those with longer-term needs from the hyperscalers (AWS, Microsoft Azure and Google Compute Engine), the index drops 5.5 percent to $1.87 per hour, equivalent to $16,381 per year — that’s a savings of 18 percent compared with on-demand pricing, and highlights the benefit of commitment. In fact, AWS has restructured its reserved instance model to make it more attractive to enterprises.”

As far as Amazon is concerned as having an effect on this latest Cloud Price Index, 451 Research indicated that its refactoring of reserved instances is meant to make them more compelling to existing customers through simplifying them while also addressing multiple risk profiles.