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NEW YORK -- Enterprise customers are generally thrilled with the cost savings they get from Amazon Web Services, even if they could get cloud services for far less from a different cloud services provider.
We have a relentless focus on cost reduction.
CTO, Amazon Web Services
Lucky for them, public cloud pricing continues to fall. But customers shouldn't let that seemingly kind gesture sway their judgment: Cloud providers could cut prices for years and still make money hand over fist.
Compared with an on-premises system, using Amazon Web Services (AWS) is a financial windfall, said Russell Towell, senior solutions specialist at pharmaceutical giant Bristol-Myers Squibb. Providing pharmacokinetics scientists with AWS workspaces has sped up the drug discovery process dramatically, at negligible cost. For example, running 2,000 jobs on-premises took 60 hours, but only 1.2 hours on AWS (or 98% faster), and cost a mere $336, with no capital expenditure required.
That has downstream implications as well, Towell said. Scientists don't have to contend with one another for scarce internal compute resources, and they can reduce the number of subjects in a clinical trial, as well as its length, further reducing costs.
Cloud pricing continues downward trend
AWS has cut prices 31 times since its inception in 2006, but has still managed to grow to an estimated $2 billion business in 2012. One financial firm, Bernstein Research, said during the AWS Summit here last week that Amazon will have $20 billion in revenue by the end of the decade.
Amazon promised continued price cuts across the swath of services. "We have a relentless focus on cost reduction," said Werner Vogels, chief technology officer at AWS. "All the benefits that we reap back from [our economies of scale] we will hand back to you; that is a commitment to you."
Most recently, AWS dropped prices for Windows On-Demand EC2 instances by as much as 27%, depending on instance type and region.
At the Boston summit, the company also promoted a variety of tools and techniques that customers can use to keep AWS costs in check.
In a breakout session on optimizing AWS costs, Stephen Elliott, AWS Elastic Compute Cloud product manager, described how users can leverage different storage and EC2 instance types, different payment mechanisms, and such tools as billing alerts and AWS Trusted Advisor to avoid paying more than they need to.
Microsoft, meanwhile, has pledged to match AWS for its Windows Azure Infrastructure Services for compute, storage and bandwidth.
But small virtual-private-server-cum-cloud-providers show us that the true value of a server in the cloud is a small fraction of what tier-one cloud providers currently charge, said Carl Brooks, analyst for infrastructure services at 451 Research. A medium-sized cloud server from such vendors as Linode LLC or Liquid Web Inc. runs $10 to $15 per month, compared with $60 to $90 per month for a comparable server from an AWS or an Azure, he said.* "They could go down to 1 or 2 cents [per server] per hour without really suffering," he added.
At press time, a medium-sized AWS On-Demand instance running Linux costs 12 cents an hour.
Where IT shops should be careful is growing too dependent on the cloud provider's proprietary services, Brooks said. "The pure-play providers really count on being sticky," he said. "Once you're in there, you're not going anywhere."
* Editor’s note: In comparing Linode's 4 GB server to an Amazon EC2 m1.medium instance, Linode charges $80 per month for this server, while Amazon EC2's one- and three-year Heavy RIs cost $48.66 and $31.11 per month, according to Amazon.