Amazon Cloud Prices Cuts Misleading, Says Cloud Startup ProfitBricks
Amazon Cloud Prices Cuts Misleading, Says Cloud Startup ProfitBricks by UCStrategies Staff
ProfitBricks recently lowered costs (by 50 percent) for its infrastructure-as-a-service portfolio. The Co-Founder and CMO of the company, Andreas Gauger, also noted that Amazon has been downplaying the margins it has generated selling cloud services and gives the impression that it is getting by on thin margins.
Gauger noted that cloud services are more profitable than Amazon might suggest they are. He said: “Unlike the big players, we do not talk about a fake price war and fake low margins. We just act. Our price drop is on what customers actually buy every day, not some small service or derivative of cloud instances that have limited appeal.”
It is difficult to compare cloud prices, but a side-by-side comparison between Amazon and ProfitBricks was offered by the latter, as evidence for Gauger’s claims.
The Amazon EC2 M1 Medium instance with 1 core, 3.75 GB of RAM and 250 GB of block storage is $0.155 per hour or $111.40 per month, but ProfitBricks suggests that its comparable offering costs $0.0856 per hour or $61.65 per month.
Cambridge, Massachusetts-based ProfitBricks commented that based on this cloud pricing, its costs are “at least 45 percent cheaper” than Amazon and Rackspace for similar instances.
ProfitBricks was founded in 2010 and has fewer than 500 customers. Gauger says that cloud services are very profitable, and adds that this is the reason the company is doing well on this front. ProfitBricks’ margins would be greater than the 60 to 80 percent which Amazon states is a “high margin,” if the company sold its services at similar prices to Amazon and Rackspace.
Gauger noted: “Amazon always makes the impression that it's lowering prices. But in reality, its gross margin is around 80 percent. That's why it's not difficult to undercut Amazon on pricing.”
The IaaS market is dominated by Amazon, and the company operates its cloud business with much secrecy.
Compared to its established competitors, ProfitBricks has a great performance advantage. Gauger added that once processor, disk and network speeds are taken into account, the company’s cloud servers are double the speed of Amazon and Rackspace.
Infiniband is a supercomputing technology which enables networking connections between virtual machines to be speeded up, and also helps to make VM sizes more flexible.
The “scale-up” approach allows customers to choose from a menu of set server configurations, and lets them choose the number of CPU cores, RAM and storage this is used by ProfitBricks. Gauger commented: “If you want more RAM, you're not forced to buy more CPU, too. With us, you can configure your VMs any way you want.” (CY) Link