Amazon, Google, Microsoft cut cloud storage prices again

Amazon, Google and Microsoft keep cutting cloud storage prices to put data in the cloud to lure customers, but other associated costs remain the same.

For the second time this year, Amazon Simple Storage Service, Google Cloud Storage and Microsoft Windows Azure dropped their cloud storage prices in lock-step over the past few weeks.

Analysts said these drops come as the three providers battle for relevance and to gain as many early cloud adopters as possible with the expectation that customers will not want to move their data after they put it in the cloud.

"It's definitely a race, but it's a land grab," said Terri McClure, a senior analyst at Enterprise Strategy Group (ESG). "The race is to the bottom to get more data into the cloud. They are trying to accelerate adoption because the service is very sticky. Once data is in the cloud, it's hard to switch providers."

All three of the major cloud storage vendors made drastic price cuts for their per-gigabyte rates since late November. Amazon Web Services (AWS) dropped its Simple Storage Service (S3) cloud storage pricing between 24% to 28%, bringing the monthly per-GB price down to 9.5 cents for the first terabyte of data. Previously, it cost 12.5 cents per GB for the first terabyte. The rate cuts extend to all nine of Amazon's U.S. regional data centers.

Google Cloud Storage cut its price by more than 30%, with the first terabyte costing 8.5 cents per GB per month compared to the previous 9.5 cents. Microsoft followed suit last week, slashing the price of Windows Azure to 8.5 cents per GB per month for the first terabyte of data. That was a 12% reduction.

Cloud storage price cuts have become a familiar story. These latest reductions follow a round of price cuts made by the same three back in March. Amazon claimed it has reduced its cloud pricing 24 times.

The price battle among Amazon S3, Google Cloud Storage and Microsoft Azure is similar to disk-drive vendors going for the lowest price per drive, said Steve Zivanic, vice president of marketing at competing cloud storage provider Nirvanix. Zivanic said the three keep competing on price because there is little else to distinguish their services.

"If you have no technology differentiation between clouds, then it's the same as disk-drive vendors waging a war for the lowest price per raw drive," Zivanic said. "The key is to wrap advanced storage services around the physical drive and sell business value of that overall service. The price cuts between Amazon, Google and Azure are basically battles for cheap, raw online disk."

The rate cuts do not extend to other costs tied to the service such as downloads, replication and bandwidth.

Carl Brooks, analyst for IT infrastructure and cloud at 451 Research, said hidden costs for security and compliance, bandwidth and ongoing maintenance are still high. He said that makes the price for cloud storage high compared to on-premises storage.

"Cloud providers are well over the cost of actually provisioning [on-premises storage]," Brooks said. "Hard drives are almost a commodity at this point. We have not seen that in the cloud market. The trend behind the price cuts is more about cloud providers trying to get ahead of the trend. They don't want to be undercut by other vendors.

"Amazon, Azure and Google cut prices to continue to be relevant," Brooks added. "You are going to see price competition for a couple of years, and you will see cloud service providers go out of business."

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