VMware’s cloud will be priced at a “premium” over AWS’s, CEO Gelsinger says

VMware will not be competing in a cloud pricing “race to the bottom”

Much anticipation surrounds VMware’s launch into the public cloud marketplace with its vCloud Hybrid Service and one of the biggest questions is how it will compete with Amazon Web Services's offerings.

AWS, Microsoft and Google seem to be battling it out in a price war for the lowest costs for cloud resources. But in an exclusive interview with Network World, VMware CEO Pat Gelsinger told me that VMware will not be playing the “race to the bottom” pricing game. VMware’s cloud service offers unique capabilities around supporting hybrid environments that combine customers’ on-premises VMware use with its new public cloud. Because of that, the company will price its public cloud offering at a premium over Amazon’s.

Here’s exactly what Gelsinger said:

“Generally, our pricing policy is to say it’s a value service. We believe that the value that we’re bringing, because of compatibility, governance, SLAs, etc., that we truly can have a premium over just commodity services in the marketplace. That said, we are also aggressively using SDDC technologies as part of the offering, which allows us to be very cost competitive as well. We’re not chasing the race to the bottom, as some of the other cloud vendors believe they have to. We think here it’s much more about enterprise value. But we do know that customers will look at the Amazon rate cards, and we believe we have to be competitive with them. We think we’ve hit a great compromise that really is highly cost effective for customers.”

[Read the full interview here]

Since VMware’s pricing is already publicly available, let’s take a closer look. As with many cloud comparisons, it’s not quite apples-to-apples. VMware offers a dedicated 120 GB vRAM, 30 GHz vCPU for $0.10 to $0.13/GB/hour, or $73.94/month for an annual term. It also has a Virtual Private Cloud which comes with 20 GB of vRAM, 5GHz vCPU, with the ability to burst to 10 GHz, starting at $0.04/GB/hr. VMware pricing is here.

Amazon’s Elastic Compute Cloud (EC2) m1.small instance comes with 1.7 GiB of memory, 160GB of instant storage for $0.06/hr for a Linux OS; a medium sized instance with 410 GB of instant storage is $0.12/hr. AWS EC2 pricing is here. AWS also comes with 750 hours of free micro instance usage per month.

So, VMware’s pricing for its basic package is slightly more expensive, as Gelsinger notes. It’s an interesting strategy for VMware and one that others in the market are taking as well. Rackspace, for example, does not claim to be in a price war with Amazon, Microsoft and Google. Instead, the company says its “fanatical support” is a premium service over those commodity offerings.

Meanwhile Microsoft and Google seem to be playing the cloud pricing game with Microsoft announcing earlier this year that it would match any price reduction made by Amazon on core services. New entrants like ProfitBricks are getting into the market and attempting to undercut these players on pricing as well.

Senior Writer Brandon Butler covers cloud computing for Network World and NetworkWorld.com. He can be reached at BButler@nww.com and found on Twitter at @BButlerNWW.  

[NOTE: The original version of this story was changed to correct an error. Amazon’s Elastic Compute Cloud is priced per hour, not GB per hour.] 

Join the Network World communities on Facebook and LinkedIn to comment on topics that are top of mind.
Must read: Hidden Cause of Slow Internet and how to fix it
Notice to our Readers
We're now using social media to take your comments and feedback. Learn more about this here.