Cloud Pricing Comparison 2018

Compiling a cloud pricing comparison in 2018 is not easy. The three major cloud providers reduce their prices on a regular basis, and they also each offer unique pricing models and differing discount options, making it hard to find an “apples-for-apples” cloud pricing comparison.

In addition to fluid prices, pricing models and discount options, the three major cloud providers are constantly releasing new availability zones (each with their own price ranges), new products and “New Generation” upgrades to existing products which offer improved performance and their own prices. Add the growth of containerization and FaaS services, and it all gets very confusing.

Consequently, for the purposes of this cloud pricing comparison, we are going to focus on just the comparative costs of deploying virtual machines (or “instances”) on AWS, Azure and Google. Instance deployment on IaaS services is still the most popular form of cloud computing, so we believe this is the area of a cloud pricing comparison that will most interest readers.

AWS is Perceived to be the Cheapest Option

AWS is often perceived to be the cheapest option, but that is not always the case. Although AWS remains at the head of the cloud computing market in terms of dollar turnover, Microsoft Azure and Google Cloud Platform (GCP) have matched the market-leader´s price reductions like-for-like in recent years. Indeed, Google has initiated many rounds of price reductions by being the first to cut its prices.

The reason why AWS is perceived to be the cheapest option is because of its alleged “virtuous cycle” – a concept in which the more business a cloud provider attracts, the more servers it can afford to add. The more servers the provider has, the better it can take advantage of economies of scale and offer lower prices. The lower the prices, the more business the provider attracts – and the cycle goes on.

Because AWS was first-to-market, many believe its “virtuous cycle” gives it a head-start in any cloud pricing comparison. However, as the table below demonstrates, there are remarkably few occasions when AWS can genuinely claim to be the market leader in price (the prices quoted in the table are per instance per hour, based on pay-as-you-go “On Demand” pricing).

AWS vs Azure vs GCP On Demand Cloud Pricing Comparison
Type vCPU Mem. AWS Azure GCP
General Purpose 2 8GB $0.0928 $0.0850 $0.1070
4 16GB $0.1856 $0.1700 $0.2140
8 32GB $0.3712 $0.3390 $0.4280
Compute Optimized 2 4GB $0.0850 $0.0850 $0.0813
4 8GB $0.1700 $0.1690 $0.1626
8 16GB $0.3400 $0.3380 $0.3253
Memory Optimized 2 16GB $0.1330 $0.1330 $0.1348
4 32GB $0.2660 $0.2660 $0.2696
8 64GB $0.5320 $0.5320 $0.5393

Notes: Prices are for Linux VMs/Instances located in East Virginia (US East) and are correct as of May 1, 2018. Memory sizes may vary. Google´s VMs generally have less memory than AWS or Azure VMs.

What´s Wrong with this Cloud Pricing Comparison?

There would be nothing wrong with this cloud pricing comparison if all cloud service providers charged all customers by the hour for like-for-like services without applying discounts, but they don´t. AWS and GCP both bill by the second, with AWS applying a 60-second minimum charge and GCP a 10-minute minimum charge. Azure bills by the minute, with a one hour minimum charge. Although these charging structures do not make much of a difference for a single VM instance, they do when you have thousands deployed.

GCP also throws a spanner into the calculations by allowing customers to create customized VM instances and by automatically applying a discount for “sustained use”[KS1] (minimum 25% of a month). Customers of AWS and GCP can save money by running their VM instances during periods of low demand and taking advantage of Spot Instances (AWS) or Preemptible VMs (GCP); while customers of Microsoft may be eligible for a general discount if they have an existing Enterprise Agreement in place.

For customers prepared to commit to a predetermined level of use, all three cloud service providers offer further discounts. AWS and Azure offer “Reserved Instances” programs – saving customers up to 72% and 75% respectively – while GCP customers can save up to 55% via a “Committed Use Discount” program. In each case, the value of the discount depends on how long the customer is prepared to commit to a level of use, and how much of that commitment they are prepared to pay in advance.

Why Prepayment Discounts May Not be so Beneficial

Back in 1965, Intel´s co-founder Gordon Moore identified the number of transistors per square inch on integrated circuits had doubled every year since their invention. He predicted the trend would continue into the future; and, although the rate of multiplication has decreased to around 1.5 each year, his prediction – which came to be known as Moore´s Law – has a relevance in our cloud pricing comparison in relation to locking yourself into a committed use program in order to achieve the maximum discounts.

Cloud service providers frequently update their services and call them “New Generation” VM instances. These have a better performance than their comparative predecessors and are usually available at a lower cost. Cloud service providers also frequently reduce their costs for VM instances and other services as the benefits of the “virtuous circle” are realized. The consequences for customers locked into committed use programs is that they are still paying for the old level of performance at the old price.

Historically, cloud computing prices have come down by around 25% each year. Therefore, if you were to lock yourself into a committed use program for three years, the actual savings you would achieve could be closer to half of what you expect due to compound price reductions. The following table illustrates this using a four-core AWS instance (t2.xlarge) over the duration of a three year standard Reserved Instances contract.

AWS t2.xlarge Standard Three Year Reserved Instances Contract
Payment Option Upfront Monthly Effective Hourly Advertised Discount
No Upfront $0 $58.55 $0.080 57%
Partial Upfront $976 $27.08 $0.074 60%
All Upfront $1,834 $0 $0.070 62%
  On Demand Cost (2018) Adjusted Cost (3x 25% cuts) Amount Paid Actual Discount
No Upfront $4,810.75 $2,781.17 $2,107.80 24%
Partial Upfront $4,810.75 $2,781.17 $1,950.88 30%
All Upfront $4,810.75 $2,781.17 $1,834.00 34%

To address this issue, AWS now offers “Convertible” Reserved Instances at a lower discount rate, while Azure allows you to cancel prepaid Reserved Instance contract for an adjusted refund or exchange your unused credits for another service. GCP does not have an upfront payment option, but will hold you to a monthly committed use payment structure for the duration of the term. Nonetheless there are better ways of saving money on VM instances deployed on AWS, Azure and GCP.

Saving Money on VM Instances on AWS, Azure and GCP

Due to the number of variables involved in calculating a cloud pricing comparison in 2018, no general comparison of cloud pricing is likely to go into sufficient depth to answer every question each customer may have with information relevant to their specific circumstances. Where a cloud pricing comparison can be helpful is in comparing what you are paying compared to what you could be paying if you were to adopt a series of cloud management best practices.

It has been estimated businesses waste on average around 30% of their cloud spend each year due to being charged for services they do not use. This is not an oversight by cloud service providers, but attributable to overprovisioned and orphaned resources, assigning resources the wrong pricing structure, and leaving non-production resources running when they are not being used – typically those used for development, staging and testing.

Correcting these issues – and implementing measures to ensure they do not reoccur – can be a time-consuming affair depending on how many resources your business has deployed in the cloud and whether they exist on a single cloud or in a multicloud environment. In the latter scenario, it can be advantageous to employ software giving you a single-pane view of your resources across multiple clouds to accelerate the optimization process and enhance governance of your accounts.

ParkMyCloud: A Versatile Way to Cut Cloud Waste

ParkMyCloud is a lightweight SaaS platform that can be used to identify and eliminate cloud waste[KS2] . It is also a versatile solution for scheduling on/off times for non-production resources – based on their actual usage patterns. Furthermore, as well as helping businesses cut cloud waste, ParkMyCloud ensures costs stay optimized via integration with CloudHealth´s policy-driven automation software.

Additional benefits of ParkMyCloud include:

  • A single-pane view of resources across multiple clouds/cloud accounts.
  • Governed user access to groups of resources.
  • Can schedule logical groups of resources to start/stop simultaneously.
  • Tells you in advance how much each parking schedule will save and provides detailed savings reports.
  • Identifies under-provisioned resources to enhance performance.
  • Increases accountability and enforces cloud management policies.
  • Typical payback time within two months with option for free use.

To find out more about how you could prevent up to 65% of your cloud spend being wasted, you are invited to take advantage of a free trial of ParkMyCloud. Simply click on the “Try it Free” button and you can start saving money on VM instances on AWS, Azure and GCP today. If you have any questions about ParkMyCloud before starting your free trial – or comments about our cloud pricing comparison you would like to share – do not hesitate to contact us and speak with our team.