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Cloud upstarts: Too cheap to trust?

Brandon Butler | Dec. 5, 2014
New Amazon competitors offer some compelling deals in the cloud, but at what price?

James Staten, an analyst with Forrester, says efforts by some of these small and mid-size vendors could likely end up being futile. "These are all typical tactics by smaller players who have little R&D to innovate and little opportunity for true differentiation - they fall back on price or performance," Staten wrote in an email. "Both of these tactics are fleeting as they are easily counteracted by the big players and thus are short-term differentiators at best."

There's a better way for competitors to approach this market. Big vendors by their nature offer general-purpose, hyper-scale clouds. Smaller vendors could focus on specific workloads and industries, like retail, government, health care or finance, Staten says. GoGrid, for example, has successfully developed a specialty in the big-data workloads hosting market. "The better tact for these players is to focus on their customers, understand what kinds of workloads they want to run, what vertical market differences they face and specialize on complementary capabilities," Staten says. "These are more sustainable differentiators against the big guys."

Puranki, founder of (the $0.99 server folks), said he's not looking to take business from Amazon. He's merely offering a significantly less expensive service for people looking to test out a cloud service. There will be room for multiple vendors in what IDC expects could be a $127 billion cloud industry. "There's not one company that can provide services to the whole market," he says.

Despite these providers lacking the name brand recognition of larger vendors, some companies like PlaceWise Media are happily using them. "We collect a lot of data," says Roger Heaston, CTO of PlaceWise, which handles digital services for shopping centers, such as by hosting websites, manages social media outreach, etc. A cloud-based platform that can scale up and down based on capacity needs is ideal for PlaceWise, he says.

A couple of years ago Heaston evaluated AWS but wanted to compare it to another vendor before signing up. That's when he found ProfitBricks, a provider that offered clear and competitive pricing and what Heaston found to be ample performance. The CTO hasn't looked back since signing up with ProfitBricks.

Executives at smaller vendors are right: There will be room in the hosting market for a variety of providers. For enterprise customers, going with one of the big brand names like Amazon, Microsoft or Google is usually a no-brainer, but for certain workloads or price considerations, smaller providers could be an adequate fit.


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