Commoditization and the Cloud: Bypassing the Race to the Bottom

Amy Larsen DeCarlo

Amy Larsen DeCarlo

Summary Bullets:

  • Last month, Amazon Web Services cut EC2 prices for the 19th time since it launched its flagship service, reflecting the ongoing race to the price floor that so many IaaS providers are pursuing.
  • At what point do these reductions cut into service quality and features, or has that already happened?

In recent weeks, everyone from Amazon Web Services and Microsoft to Rackspace has either slashed pricing for cloud offers or promised to beat their rivals’ prices.  There is no doubt that this competitive pursuit of business customers is sweetening the cloud’s appeal to the point where even the most reluctant of prospects have no choice but to consider their on-demand options.   However, all the battling to win the title of ‘Cloud Price Chopper King’ is also producing an unwanted result: the perception that the cloud is all about price.  This leads many businesses to wonder if there is any differentiation at all between and among mass-market public cloud solutions.

Besides adding to confusion around how to pick a provider, the speed and frequency of the price cuts raise big concerns about the ability of the providers to continue this cycle and be able to maintain stable service delivery, high performance levels, and adequate levels of support.  Over the longer term, the price emphasis also prompts questions about how providers will be able to continue to invest in their infrastructure and increase innovation across their portfolios.

So, in this environment where cost is such a big driver, how can you avoid getting trampled on the race to the price bottom?  While cost is certainly a powerful lure, there are still distinctions between different cloud solutions, though some provider offers deliver more pronounced differentiating characteristics than others.  At a high level, elements such as service elasticity/scalability, integrated security capabilities, manageability, and portal features and usability all stand out as ways to identify a more high-functioning service.  Enterprises can also look for providers that offer standout SLAs, and they can push providers to tailor their guarantees to incorporate elements such as availability over a longer snapshot period than just the one-month cycle most offer standard.  Customers should also look at what kind of support is included, as well as if and how the cloud provider can deliver migration consulting and post-deployment guidance.

So, what are your impressions?  Are your providers succeeding in distinguishing their cloud services from rival offers, or do you think on-demand solutions are becoming too generic?

About Amy Larsen DeCarlo
As Principal Analyst for Security and Data Center Services at Current Analysis, Amy assesses the managed IT services sector, with an emphasis on security and data center solutions delivered through the cloud including on demand application and managed storage offerings.

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