Google was late to the cloud computing race, but ever since it threw its hat into the ring by appointing Diane Greene to head Google Cloud, Alphabet has steadily been expanding its cloud services as its fights to carve out its own niche position in the cloud computing industry the way Amazon, Microsoft and IBM have.
The only problem is, when you’re up against companies like them, things are not going to be a walk in the park. These are all companies with years of experience, huge talent pools and pockets that run deeper than the Mariana Trench.
If you look at any highly mature and highly competitive industry, you will find that there is very little that differentiates the top competitors from each other. The auto industry in the US is a good example of this, with Ford and GM shadowing each other on every move, including pricing, strategy, technology, international markets and several other areas.
The cloud computing industry is nowhere near as mature as automobiles, but the competition is just as fierce. The only difference is that a retail company like Amazon was able to bulldoze its way past all the tech majors because it moved first, thought out of the box and was ready to take a risk.
In terms of competition, services and so on, however, it’s no different from the rivalry that Ford and GM exhibit. Innovation can only buy you that much time before everyone else catches up. One look at Samsung catching up to Apple in the premium smartphone business should convince you of this.
Of course, not every smartphone maker could have caught up to Apple the way Samsung did, but Microsoft, Google and IBM aren’t your run-of-the-mill competitors, and they’re extremely capable of catching up to Amazon – something that Microsoft might have already done over the past quarter.
In an interview with CNBC, Tariq Shaukat, president of customers at Google Cloud, said: “We don’t need to compete on price to be honest. We definitely compete on value more than price … but if you look at the products, (they) are hard to compare side by side.”
But in the very next statement he says something that sounds the exact opposite, touting how there is a significant price advantage if you pick Google Cloud:
“We believe that our pricing models are much more friendly. So just simply by adopting the more flexible pricing models we have, things like billing by the minute rather than the hour, we think we can save a typical company 20 to 30 percent without having a unit price different to the competition.”
Companies in the cloud computing industry do know that pricing will only take you so far. If you don’t offer real value for whatever you charge, customers aren’t going to hesitate to migrate to another provider – especially in the early days, as their workloads are being migrated to the provider’s cloud infrastructure.
Tariq Shaukat is absolutely right in saying that if you don’t keep adding value, you will fall lower and lower in the eyes of the customer. But at the same time, there isn’t much room for play when it comes to pricing: you will have to stay as close as you can to the competition. And given a choice, go even lower if it’ll help generate more business volume.
And that’s exactly what Amazon and Microsoft have been doing for the past several years. Google Cloud is only now joining the price fight.
The real formula is this: Keep adding value to the services and products, but keep pushing prices as low as possible. Because if you don’t, someone else will.
The good news for cloud computing as a whole is that none of these companies are being allowed to play the premium card. And that’s thanks to the competition and the industry’s inherent need to grow fast and expand as quickly as possible. With a massive amount of IT infrastructure still sitting outside cloud, pricing across the board will only get even more attractive in the future.
The Google Cloud strategy on pricing may differentiate its services just a smidgen, but it has to come from true value more than what can only be called “creative billing.” Even if you’re only talking from a price perspective, no matter which way you look at it, lower is better.
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