Public cloud computing is supposed to simplify the process of deploying, maintaining and paying for IT infrastructure. But the pricing schemes offered by the public cloud vendors are anything but simple.
Cloud prices vary depending on a wide variety of factors. Those factors include the specs of the server instances you are running, the location of the cloud data center you are using, the operating system and software you are running, whether you are paying by the hour or by the month (or on some other schedule), whether you have signed a long-term contract, whether you are eligible for free tier services, the level of support you need, the amount of data you need to store and transfer, and whether you qualify for any discounts.
But that’s just the beginning.
The leading vendors offer dozens to hundreds of different services. Each of those services has its own price schedule with multiple options available. In some cases, cloud services can be configured in thousands of different ways — each of which results in a different price.
And making things worse, the leading vendors all lower their prices on a regular basis. Just when you’ve figured out which vendor offers the best deal, one (or all) off them will issue a price drop, and you’ll have to do all the calculations over again.
Making sense of all this cloud cost complexity is challenging, to say the least. But it is possible to make some generalizations.
Cloud Pricing Overview
This analysis focuses on the three leading public infrastructure as a service (IaaS) and platform as a service (PaaS) vendors: Amazon Web Services (AWS), Microsoft Azure and Google Cloud Platform (GCP). A good first place to start a cloud pricing comparison is with the vendors’ respective websites. Here’s a quick overview of each vendor’s pricing philosophy and primary discounting schemes:
Amazon offers four basic pricing arrangements:
- On-Demand pricing is the standard list price that you pay if you sign up for AWS and start using it without any discounts. You can think of it as roughly analogous to the MSRP for a car or a major appliance.
- Spot Instances are discounts available if you don’t care when your workloads run. If you have a batch job without a specific deadline, AWS will run it when it has spare capacity, and you will get a discount of up to 90 percent off the on-demand price.
- Reserved Instances are for organizations that know they will need a lot of cloud computing. Companies can commit to a one-year or three-year contract for a discount up to 75 percent lower than the on-demand price.
- Dedicated Hosts are for organizations that have already paid expensive software licensing fees. Depending on their software contracts, companies can sometimes reduce their software costs if they run on a dedicated host as opposed to on-demand servers. AWS’s prices for dedicated hosts are the same as for on-demand cloud computing, unless you reserve instances.
AWS also offers a free tier with minimal services that are available at no charge, usually for a set limit of time.
Microsoft Azure Pricing
Like Amazon, Microsoft has published prices but also offers a variety of cloud pricing discounts to different kinds of customers.
- Anyone can save money by signing up for a one- or three-year commitment for reserved VM instances. Unlike some of its other discounts, Microsoft publishes these reserved VM prices.
- Organizations that run Microsoft software on-premises in their own data centers, may be able to save through the Azure Hybrid Benefit. Discounts can be up to 40 percent, but they depend on which software you run in your own data centers and which software you run in the cloud.
- Developers can get special prices for Azure instances they use for dev/test purposes. These discounts are available for individual Visual Studio users or for larger teams.
- Large organizations that have a Microsoft Enterprise Agreement (EA) can negotiate discounts on cloud computing services. However, these discounts are not published, so it is difficult to determine what exactly large enterprises are paying for Azure.
Like AWS, Azure also offers a free tier with minimal services that are available at no charge, usually for a set limit of time.
Google Cloud Platform promises “customer-friendly pricing” and actively competes against AWS and Azure on price.
GCP offers three different types of discounts off its list prices:
- Sustained Use Discounts kick in automatically if you keep using the same instances for most of a given month. These can be up to 30 percent off the list price.
- Preemptible VM Instances are similar to AWS’s Spot Instances. These are for batch jobs that can be interrupted and resumed at a later time, and they come with discounts of up to 80 percent off list prices.
- Committed Use Discounts are similar to AWS Reserved Instances or Azure Reserved VMs. Customers can save up to 57 percent if they make a long-term commitment to use GCP.
GCP also offers a free tier that includes some services that are free for a year and some that are always free.
Published Cloud Computing Prices
Microsoft’s unpublished discounts and hybrid licensing variables make it difficult to get a completely accurate picture of what a given company will pay for cloud computing services. However, cloud benchmarking vendor Cloud Spectator published an overview of the published prices for IaaS services.
This report compares a host of different cloud vendors, including the top three. It groups similar instances together and compares the average prices for the various services, including any relevant discounts for long-term commitments.
The report comes from September 2017, so do check on prices as they change. However, this report provide a good overview of the market that allows some generalizations related to this particular moment in time.
The charts below show how AWS, Azure and GCP stack up for Linux and Windows instances of various sizes and commitment contracts. And to make the charts a little easier to read, the lowest cost in each category is green, the second lowest is yellow, and the most expensive is pink.
Data Source: Cloud Spectator IaaS Industry Pricing Comparison
Data Source: Cloud Spectator IaaS Industry Pricing Comparison
First, a caveat: the report warns that the instances used for the comparison are not exactly identical. If you need a particular performance level, you’ll need to make sure that the instances you are comparing all fall within an acceptable range for your applications. As the report advises, “When purchasing cloud services, customers should evaluate offerings on both pricing and performance to determine a cloud product that best meets their needs.”
Having said that, a few generalizations emerge from the charts above:
Prices vary widely, especially with long-term commitments: Some enterprises have the mindset that because the cloud vendors are in a price war, their prices are all pretty much the same. Clearly, this isn’t true. For example, with a three-year commitment on a 2X large Linux instance, Microsoft’s published price is more than double that of AWS or GCP.
Of the top three, Google is almost always the lowest-cost provider: It is also never the most expensive option. Google states explicitly on its website that it plans to compete on price. GCP’s cloud computing offerings aren’t as broad as either Amazon’s or Microsoft’s, so this approach probably makes sense.
Microsoft Azure is never the cheapest: There’s a lot of pink in the Azure column. And where Azure is the second least expensive, its prices are usually close to Amazon’s. While it’s possible that Microsoft is much more competitive when you factor in unpublished discounts, it seems more likely that customers that are choosing Azure are doing so for reasons other than price.
Amazon’s long-term discounts are especially good: If you are paying by the hour or by the month, Amazon’s prices look a lot like Microsoft’s. But if you are signing up for one year or three, Amazon’s prices are closer to Google’s (and in some cases are even lower).
The big takeaway is that you won’t know which vendor is the least expensive unless you know exactly what you need.
Other Options for Saving Money on the Cloud
If price is a key concern, the top three cloud vendors might not be the right choice for you. The Cloud Spectator report noted that Amazon and Microsoft are generally among the most expensive vendors, and even Google generally isn’t the very least expensive.
Instead, that honor goes to vendors like 1&1, Internap and OVH. These less popular cloud vendors offer fewer cloud computing services than the big three, but if they have what you need, you might be able to get a great deal.
Another option is to use software or services that help with cloud cost optimization and/or management. These tools and services will cost a bit of money upfront, but they often save money in the long run while simplifying the task of making sense out of complicated cloud pricing.