An interesting article in today’s FT (see here) highlighted the pressures that cloud-based infrastructure providers such as Amazon and Google are putting on traditional ‘earthbound’ IT suppliers. The article alluded to Google slashing the monthly cost of a gigabyte of cloud storage from 10 cents to 4 cents; apparently Amazon charges 9.5 cents – but I guess not for long.
For both players, ‘infrastructure as a service’ is just a tiny part of their overall business, so slashing prices on what is probably already a loss-making activity is not likely to visibly move the needle on the bottom line (which is slightly negative anyway for Amazon and hugely positive for Google).
The issue is whether earthbound players feel compelled to follow suit. This is, as ever, a case of choosing where you pitch your tent and deciding which battles you wish to fight.
If you have the mighty cash flows of an Amazon or a Google, or the unquestioning love of your investors, then what the heck, go for it! But for everybody else, pause a moment to reflect on business basics: as I so frequently have to remind executives when I preach on this subject, if you spend more than you earn, you will run out of cash.
