Public cloud competition prompts 66% drop in prices since 2013, research reveals

Entry-level pricing for cloud computing services is now 66% lower than it was two years ago, as competition between providers forces more of them to cut their prices.

According to Tariff Consulting's (TCL)'s Pricing the Cloud 2 -- 2016 to 2020 report, the average entry-level cloud computing instance now costs around $0.12 per hour.

That's based on the market watcher's analysis of the published cloud pricing of more than 20 public cloud providers across the globe during the two years to November 2015.

"The decline in cloud pricing reflects, in part, the intense competition between public cloud computing providers, and the rapid product innovation that is taking place among the key worldwide platform providers," said TCL.

As result, the company said the gap between what different providers charge has shrunk over the past two years, and is now at a point of relative stability, TCL's research suggests.

"The range of pricing available has narrowed over the past two year period, as cloud computing providers such as Rackspace Hosting have reduced their rates towards the levels charged by the global cloud providers, such as Amazon Web Services (AWS), Microsoft Azure and Google," TCL continued.

"Both AWS and Microsoft are offering a similar entry-level compute instance, with other cloud providers following with similar pricing."

That said, the company predicts public cloud pricing will fall by a further 14% between now and 2020, but -- as the difference between what providers charge continually narrows -- service cost will shrink in significance when users come to decide who to buy off.

"The emphasis by the cloud computing provider is now increasingly on service innovation, not price. The global cloud platform providers, including AWS, Microsoft and Google, now offer a wide range of compute instances suitable for intensive computing, memory, content and fast I/O applications," added TCL.  

"Cloud providers are introducing analytical services available for cloud computing applications and are now offering cloud for the emerging internet of things [IoT]. New cloud services are being introduced to cater for specialised customer requirements as a means of avoiding price commoditisation."

When it comes to combining low cost and service innovation, TCL said AWS -- as the dominant player in the public cloud market -- has the edge.

"The market share and computing power of AWS gives the company a considerable advantage in providing economies of scale which are passed on to the user," it said.

"AWS has a record of consistent product innovation with more than 500 product features launched since 2008, and continues to provide new services, including a recently announced cloud service to support the IoT," TCL continued.