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Summary:

Microsoft Azure Basic and Amazon’s designation of “previous generation” EC2 instances may signal a shift to more tiering of basic cloud infrastructure.

Ladder

When Microsoft  launched Azure Basic a few weeks back, it may have started a trend. Microsoft, while matching Amazon’s previously announced price cuts, also unveiled a set of “basic” general-purpose instances that are 27 percent cheaper than its own “standard” instances. What Basic doesn’t include is the load-balancing or auto-scaling that come as part of standard instances, according to a blog post. 

Fast forward to this week when Amazon roped off older EC2 instances from their newer brethren. When users go to buy EC2, they’ll be steered to the shinier, more muscular instances but if they really want the older stuff, it’ll still be there — if they look for it. At least for now.
aws old instances

Constellation Research analyst Holger Mueller expects we may see two-tier pricing from all IaaS vendors, with Microsoft Azure Basic blazing the trail.  Amazon did not respond to requests for comment.

Others characterize Amazon’s move as a continuation of its tendency to offer the newer stuff at a (slight) price premium and pushing older inventory to the back of the shelf. AWS has been doing “an almost GM-like model year-approach with new models being better value for money,” said Petri Aukia, CEO of Codento, the Finnish cloud computing consulting company. In his view, Amazon continuing to sell aged infrastructure is akin to IBM selling mainframes.

One thing is clear, the entry of Microsoft and Google — companies with huge resources — into public cloud infrastructure will buffet the price models like gale force winds. Google signaled another option with its sustained-use discounts that kick in automatically when workloads hit a certain bar of utilization. That’s a really attractive option even for AWS devotees who love their cloud but are sick and tired or tracking its pricing and utilization.

Power lines against bright sunWould Google consider price tiering? Not likely, according to Navneet Joneja, Google Cloud Platform product manager who said developers building new applications want the latest gear. “We believe they should not have to live with out-of-date technology or limit themselves to less than a full platform just to get lower prices,” ne noted, adding that Google’s sustained-use pricing gives them better value with the latest technology,” he said via email.

I’m inclined to agree with Mueller that most cloud infrastructure players will end up sectioning off different substrates of base infrastructure at different price points based on age and capabilities. How customers want to buy cloud infrastructure — and how vendors will sell it — will be a big topic at the Gigaom Structure event in June, so check it out.

 

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  1. I think the reasons Microsoft and Amazon are doing this are different. Azure started as much more of a platform for hosting apps with all the infrastructure abstracted away. That’s definitely not the case now and they have moved to open up everything so you can pick and choose – you can still just host apps with them but you can also buy the raw compute, storage, etc. If that’s all you want then getting the lowest price makes sense.

    For Amazon, they started the opposite way and their compute product is much more advanced because of this. As a result, they have legacy hardware that people still use but they really want to get rid of over time. Segmenting it is a good way to still keep compatibility but encourage new deployments to use the cheaper, more powerful and efficient instances.

    Google has the luxury of being a very new cloud product, at least for Compute Engine, so they can just put you on their most efficient hardware from the start. They can also live migrate you to newer underlying hardware, which is really just abstracted out to what you buy – memory and CPUs.

  2. I also agree that most cloud providers will end up with different tiers based heavily on age or generation of infrastructure. For now it is easy for Google to say “customers should not have to live with out of date technology.” They are very late to the game and don’t have any yet. Just stay tuned.

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