Amazon Battles New Pricing Models In The Cloud Computing Market

Grazed from NASDAQ. Author: Editorial Staff.

Amazon ( AMZN ) is widely believed to be the market leader in cloud computing market and competes directly with Google ( GOOG ), Microsoft ( MSFT ), IBM ( IBM ) and HP ( HPQ ). Amazon’s pricing model of charging by the hour has been challenged by a new service ProfitBricks, which bills by the minute. The per minute service would be particularly attractive to companies or applications with constantly fluctuating computing/traffic requirements. Recently, the company announced an online marketplace where users of its cloud computing services can sell their reserved server instances to other companies. We expect the marketplace to help the company somewhat offset the threat posed by the bill by minute model.

Amazon Web Services (AWS) offers its users reserved instances, which allow them to lower their cloud costs by making a one-time payment to reserve computing capacity for a specified time period and receive a discount on the hourly rates. The online marketplace would allow users to move their instances across AWS Regions, change it to a new type or sell capacity for projects that ended before the completion of their term. The AWS management console will be the gateway for these transactions…

We expect the marketplace to generate substantial revenues for Amazon, which will earn a 12 percent service fee on every transaction. As there are no significant investments required in rolling out or operating this service, the twelve percent fee should translate into substantial profits. The Infrastructure as a Service (Iaas) market is expected to grow to $5 billion by 2020…

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