Google fights back against Cisco and Telstra by slashing cloud service prices

Google has responded to Cisco and Telstra’s major cloud computing announcement yesterday by announcing across-the-board cuts to its cloud-based service prices, as well as the introduction of new features and services.

At its Google Cloud Platform Live event, the company announced it is cutting the prices for its on-demand pay-as-you-go services by between 30% and 85%.

The discounts include a 32% cut in price for Compute Engine cloud-based processing across all sizes, regions and classes, along with a simplification of App Engine pricing.

The company is also offering consistent US2.6 cents per gigabyte charge for cloud storage, which it claims is a 68% discount for most customers, and an 85% discount in its big data BigQuery service.

In addition, the company is introducing a new “sustained-use discount” pricing structure which is calculated based on the percentage of a month a business uses Google’s Compute Engine cloud computing product.

For the first 25% of a month where a business uses Compute Engine processing power, it is charged the full base rate of US7 cents per hour.

For 25% to 50% of a month, it is charged at 80% of the base rate, 60% of the base rate for 50% to 75% of a month and 40% for the remaining 75% to 100% of a month.

The base rate is determined by the virtual machine configuration used for processing, ranging from US7 cents an hour for one core to $US1.16 for a 16-core virtual machine.

The company claims the new “sustained-use discount” is cheaper than its old flat-rate charges.

In a statement, Google’s senior vice president of technical infrastructure, Urs Hölzle, says the discounts are in line with the falling costs of the underlying servers used to provide cloud-based services.

“The original promise of cloud computing was simple: virtualize hardware, pay only for what you use, with no upfront capital expenditures and lower prices than on-premise solutions. But pricing hasn’t followed Moore’s Law: over the past five years, hardware costs improved by 20-30% annually but public cloud prices fell at just 8% per year.”

Aside from price discounts, Google is introducing a new product called Managed VM that allows for software running in a virtual machine to also form part of an App Engine app, with App Engine automatically managing the virtual machine.

The company also says its Compute Engine virtual machines can now run a limited version of Windows Server 2008 R2, along with Red Hat Enterprise Linux and SUSE Linux Enterprise Server.