Google: The cost of hardware is falling at a faster rate than the price of cloud

About a year ago there was a big hub-bub about cloud pricing wars. It seemed like every couple of weeks one vendor or another in the public cloud IaaS market was dropping their prices. When one company did it, others seemed to follow suit within days, and sometimes even hours. It’s been a back and forth, cat and mouse game. Who can keep the lowest prices?

Google has hit the road this summer to show off its cloud, and at the company’s recent event in Boston one of the members of the Google cloud platform team, Dan Belcher, made an interesting statement: He said that the price of hardware that powers the cloud is falling at a faster pace than the price of cloud computing services are dropping.

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The idea is that because of Moore’s Law, computing power is increasing as price decreases. Basically vendors are getting more bang for their hardware buck. Some of those savings are being passed along to consumers, but Google says it’s not happening in parallel.

The company would not say what this means for the future. But rest assured cloud users, prices will continue to drop. AWS had made almost 50 price cuts to its various products and services since it introduced them seven years ago. Microsoft has now said it will match any AWS price drop on core cloud services. Google now seems to be saying that it has room to drop its prices even more.

Of course comparing prices among these vendors is not perfect. It is not quite an apples-to-apples comparison, more like apples and oranges. AWS and Google have different virtual machine instances sizes, so comparing the prices between the two is not perfect. There have been efforts by some organizations to create a cloud computing pricing metric, however.

Overall, the point is that the cloud IaaS market is commoditizing. That’s why vendors left and right are trying to add as many services as possible on top of their IaaS. AWS has data warehousing services and enterprise applications and mobile development environments. Microsoft has its whole Office 365 SaaS portfolio. Google is looking to attract Android and other developers and use its custom Hadoop query system to sell as a service.

As that happens, one wonders how low prices will actually go. AWS already offers a free tier of its service. Could that expand one day into an even bigger part of the company’s platform? One has to wonder.