War between the Clouds

Everyone should have expected this cloud price war (“Microsoft joins Amazon and Google in cloud price war” ), after all Moore’s  Law ( Or more generally the learning curve for manufactured logic  ) has recorded logic costs falling  50% every 18 months, on average, for many decades.  Therefore, anytime cloud compute prices fall slower than logic prices, the cloud vendor is likely taking additional profit or is inefficient.  A friend of mine in the automobile fuel business ( he owned a dozen gas stations) told me once that, "I don’t make money when prices go up, I make money when they go down, because we all linger at a price even though our raw costs have fallen. It benefits all stations to do so.  What causes it to fall is when one provider knows they have access to more supply than another does. That's when you can win new customers."

The difference between gas and cloud compute, is humanity has not yet created easy mobility across providers, yet.   I can gas at any station. I choose differently on a daily basis, but for me to move my compute, well that takes effort, for now.   Compute hour prices are really more like cost-per-mile numbers.  So cloud prices contain  the energy cost equivalent to the gallon of gas, along with all the other ingredients, software, buildings, labor, insurance, Bezo’s clock, I mean stock ;-) .  So computing is more like taking a trip, but even when taking a trip, you do not have work hard at deciding which station to stop at or even which car to take.

Cloud computing is creating its own learning curve cost reduction rate.  This rate could be drawn from a provider’s price announcements, just as Moore drew his long ago (Vogels law?)  .   Once you have that rate, then you have to look at your own compute costs and hold your organization to the same rate of reduction.  If you are slower then you have to realize someone is inefficient or taking additional profits because they control access to supply.

Now think about what will happen when you can move compute easily from AWS, to Azure, to AppEngine ( why do these all start with A?  Alpha order in a broker table? Is Acme compute soon to be? AAAA Compute?)   Prices should then fall a bit faster, but remember all are benefited by a slower reduction, unless, one knows it has more access to ingredients than the others…….