Google Drops IaaS Prices; Will Others Follow Suit?

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Google has reported that they have lowered the prices on their virtual machines by 30%. In addition to the price drop, Google Cloud Platform now offers what it calls Preemptible Virtual Machines, an innovative system that allows organizations to run VMs during non peak hours at a significant discount.
When Google Cloud Platform does hit those peak hours, the Preemptible VMs are terminated and those resources are allocated back to standard VMs. Google mentions thatPreemptible VMs can cost 70% less than standard VMs. Preemptible VMs work similarly to Amazon’s spot price system, in which organizations can buy VMs at a discount during times of lower overall cloud usage.
There’s been plenty of talk about the rapid descension of IaaS prices over the past few years. When one provider drops their prices, others seem to follow suit quickly. This was evidenced last year when it seemed like every few months, cloud IaaS providers would drop the price point of their VMs in order to stay competitive with one another.
Microsoft and Amazon have not put out a response (yet) in regards to the lower Google Cloud Platform VM prices. If history repeats itself, AWS and Microsoft will likely respond by introducing lower prices of their own. Thomas Claburn at InformationWeek says AWS has an operating margin of 17%, therefore AWS seems to have room to further slash their prices in order to stay on par with Google’s pricing.
Google encourages public cloud users to use their Total Cost Ownership tool in order to determine what they will spend will spend on VMs compared with other providers such as AWS. Google allows you to choose between a mature app, a new start up and static enterprise apps in order to get a sense of what each type of organization will spend on VMs when compared to the competition.