Amazon Sees Further Price Drops in Cloud, Pressuring Microsoft
bloomberg.com
bloomberg.com
Microsoft makes about as much in profit every 12 days as Amazon does in a year. I don't think Microsoft is overly worried about margin at this point. They have a huge incentive to keep the Windows Server environment competitive in the cloud game.
They mention the only way Amazon will lose pricing power is if someone undercuts them in the cloud. I don't think that's accurate at all. Amazon is competing on the bottom side with dedicated hosting providers that give you twice as much for half the price plus bandwidth, and they're getting better constantly. I'd swear that Amazon taking some PR beating recently about how expensive their offerings are, was the primary reason for the EC2 drop. That comparison basis was mostly against dedicated and self/colo hosting.
Bingo. This is why we use them. EC2's performance is not great, and the pricing is only "good" if you reserve instances on a 3-year term. However, their full suite of services are wonderful. We're not really vendor locked in, either, because of how we designed our app.
We're willing to pay a premium in order to not have to administer parts of our stack. For example, Simple Email Service is so cheap and beats the heck out of running a mail server. We have 0 media servers, because S3/CloudFront do it wonderfully. We don't need a front-facing proxy EC2 instance, because ELB works great for our purposes. Background tasks are scheduled with SQS, so we don't need RabbitMQ or ZeroMQ. Auto-scaling shapes our server fleet automagically to our traffic.
Point of all of this is, you spend a ton more on salaries. We've been able to put off hiring because of Amazon's full suite of offerings, which is a huge win for us.
A "medium" instance is 3.75 GB of ram and 2 computer units (equivalent to one dual core processor). If you know you're going to use this constantly (24x7, or close to it- 8760 hours) then you can take advantage of the reserved instance pricing. At 8760 hours a year, $390 for the reserved pricing and $0.032 an hour you get a price for this server of $670.32 (or $55.86 a month).
The downside is that this does not cover bandwidth. Most datacenters are willing to give you a decent chunk as part of the package (like 2000GB or something), knowing that most people won't use it. Even if you don't count that though Amazon is still a bit pricier- Softlayer sells bandwidth at 0.10/GB (in packs of 1000), while Amazon is at 0.12/GB for the first 10TB (after which it becomes cheaper at $0.08/GB).
The point being, there are many situations in which Amazing is already cheaper- let alone within 25%. The new levels of reserved instances have really evened things out a bit.