Amazon, Google Price Wars Threaten to Commoditize Cloud

Amazon Web Services and Google are caught up in a cloud pricing war, further pushing down prices that already are low, contributing to many channel partners’ fears about the value of selling cloud services.

On Wednesday, Google announced it’s cutting computational services by as much as 32 percent, and storage prices up to 68 percent, Channelnomics reported. Those reductions either matched or beat Amazon and Microsoft’s previously announced price decreases.

Amazon responded right away on Thursday, saying it’s slashing the base price of its infrastructure and computational services by 51 percent, according to Channelnomics.

“The battle for cloud dominance is making the Cold War look like child’s play,” wrote Larry Walsh, who leads Channelnomics and its research arm, The 2112 Group. Indeed, according to The 2112 Group, cloud-service fees continue to drop 6-8 percent each year.

Before too long, cloud services stand to become a commodity just as long-distance service did more than a decade ago, leading to lower margins and commissions for the channel. To be sure, that’s a warning analysts and channel experts have been sounding for months. At a recent industry event, one speaker cautioned partners not to pressure providers to lower their rates for fear of turning cloud into a commodity.

But that’s already happening and partners need to have a bigger strategy in place to overcome the effects of cloud commoditization. Check out tips and advice from these experts: