Amazon’s Vogels: Thank Data Center Efficiency for Cloud Price Cuts

Since Amazon launched its cloud infrastructure services, the company has cut the amount of money it charges for them more than 40 times. The most recent one came just yesterday, when Amazon Web Services’ Provisioned IOPS (solid state storage in the cloud) went down in price by 35 percent.

Speaking at today’s GigaOm Structure conference, Amazon CTO Werner Vogels said it was the company’s focus on data center efficiency that enabled the company to make such drastic price cuts continuously. “Efficiency of data centers is really important for us because it helps us drive the overall cost of the operation down, which benefits our customers.”

Until recently, Amazon has been providing Infrastructure-as-a-Service for years without any substantial challenger. Now, however, giants like Google and Microsoft are going after this market. Because of their scale and substantial in-house data center engineering capabilities they are able to compete with Amazon on price, performance and features.

In May, for example, Google reduced the rates of its on-demand virtual server business called Compute Engine by about 32 percent.

Amazon followed almost immediately by announcing IaaS price cuts that ranged from 10 percent to 40 percent, depending on the type of service. Speaking at the AWS summit in San Francisco, Andy Jassy, senior vice president of the cloud business, said that was its 42^nd consecutive rate reduction.

About one week later Microsoft slashed the rates for rentable virtual compute and storage infrastructure on its Azure cloud by up to 35 percent.

Commenting on this entirely new competitive landscape, Vogels said it was a good thing for Amazon. More players means more customer using cloud services, which means a “bigger pie” for everybody.

Few people outside Amazon’s infrastructure team actually know how the company designs and runs its data centers and the hardware they house. It has been extremely tight-lipped about that aspect of the operation. Understandably so, given the competitive advantage of being able to constantly reduce the price of its services.

Google and Microsoft have been more open. Google data center execs regularly present at industry conferences and talk about data center best practices at the company.

Microsoft has done the same. The company has been very public about its ITPAC data center modules, for example. Earlier this year Microsoft open sourced the newest server design that will underpin all of its cloud services through the Open Compute Project, a Facebook-led open source hardware and data center design initiative.