RackSpace Stays Neutral in Cloud Pricing War

Unless you’ve been living in a bubble, you’ve probably heard about Google, Amazon and now Microsoft’s intentions to reduce the price of their public cloud services. Many analysts questioned if the smaller outfits like RackSpace would attempt to keep up with other cloud providers by cutting their prices as well. Those questions have been answered as RackSpace has publically responded to the cloud price slashing war that was kicked off by Google.

In an interview provided to the The Register, RackSpace’s CTO John Engates mentioned, “We pay close attention to market conditions and make periodic adjustments to ensure that our prices are competitive on a total-cost-of-performance basis.” Engates went on to say that, “We do not base our prices on competitors’ rental rates for raw infrastructure. Rackspace has for 15 years charged premium prices for premium service, expertise, performance and reliability.”

Many analysts are wondering if a “Premium” cloud service is something a consumers will value. A high end virtual machine inside of RackSpace’s cloud costs $.68 per hour when a comparable Google Cloud VM costs $.28 per hour. That being said, RackSpace currently does not intend to cut their prices as indicated by Engates.

Engates further stressed, “Commodity providers of cloud infrastructure frequently cut their unit prices, and we expect that trend to continue. That’s good for end users and also for Rackspace, which is itself a big buyer of cloud hardware and software, and regularly passes savings along to customers.”

What separates RackSpace from the competition? Engates explains, “We don’t just rent out access to raw infrastructure. We provide specialist expertise to manage that infrastructure, as well as the complex applications and tools that run on top of it, so that customers can focus on their core business.

Can RackSpace’s premium cloud play work? Only time will tell. Pure economics say that RackSpace will need to lower their prices at some point in time; it just seems as if the company does plan on doing that anytime soon.