Google just took the lead in the dangerous game called ‘Race To Zero’
When Google announced that its new Photos app would be free and come with unlimited cloud storage it crossed a line that many in the tech industry had been watching with fear. All the profits came in the pockets of Google.
While the competition was started by amazon and matched by Microsoft, google took up with zeal the market share.
This race refers to charging nothing absolutely free for cloud services, called “the race to zero”!!
It was a dangerous game for the tech companies because only the companies with big pockets and investments will be able to make their share in the cloud market!!
Why are cloud companies racing to zero?
There are many reasons for the same. For one, the computer hard drive started getting cheaper – it costs a mere 4 cents in 2013 where it was more than $9000 in 1993. The same is happening for the computer processing power. In 1969, a $3 million IBM mainframe that helped send mankind to the Moon had 64 kilobytes of memory and operated at 0.043MHz. Today, a $200 iPhone 6 has 16GB of memory and a processor that operates at 2.6GHz.
Amazon made sure that cloud computing companies actually pass those savings along to customers. As its costs drop, Amazon cuts its prices for its cloud. By the end of 2014, Amazon Web Services (AWS) had 47 price cuts in six years. Amazon attributes these drops to a culture of “frugality.”
Amazon is able to make more money as its customers were increasing. By keeping a check in the environment, it offered the services for which consumers will be willing to pay, including the expensive services.
Amazon treated its computer services as a retail store. You are more likely to accumulate more if you feel like you are getting a bargain on every item you buy.
Google vows to pull the market share!!
Instead of matching the prices of Amazon, Google lowers its prices even more. Google Photos is available on Android and iPhone. That’s more than 90% of new smartphones sold. which is impossible to beat!
It offers unlimited storage to anyone who subscribes to its Office 365 products. But that’s not exactly free, because Office 365 comes with an annual fee starting at $70/year.
Amazon also participated in the race to zero but the free, unlimited price was only available to those who had Amazon Prime or a Kindle Fire device.
As for the unlimited storage of things other than photos, you have to pay at Amazon, Google, and Microsoft, as well as smaller companies like Dropbox and Box. But the race to zero is still going on!
Though the cost of storage and computing has a downturn, the overall costs of running data centers are still huge. As the companies gain more users of their cloud services, they obviously have to pay for building data centers and paying for their upkeep, energy usage, and for other things.
Microsoft vowed to spend $750 million to its data center in Wyoming over four years, and $1.1 billion to a data center in Iowa. IBM committed to spending $1.2 billion building the new data centers.
These companies spend billions on their data centers offering their services at increasingly lower prices and trying to find a service that is unique and awesome so that their users and non-users are willing to pay for them!
So the price race is on! It is the “race to zero” accompanied by offering more competitive services to the market!!
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