I’m part of a small SaaS outfit where I’m the finance guy. I’m not a techie. But our head of engineering is, and he, who never really gets excited about anything, alerted the Exco today that he believes there is disruption coming to AWS egress pricing.
This is important because we have worked together for years and this is the first time he posted anything about our infrastructure costs (we’re an AWS and Google shop) to the Exco.
So I had a look at what he was excited about.
He posted two links. The first is the blog post dated yesterday outlining what Cloudflare are doing in the storage space. However it’s not yet generally available, you can sign up to a waiting list for access. The heading is "Announcing Cloudflare R2 Storage: Rapid and Reliable Object Storage, minus the egress fees”. I recommend reading the whole thing; below are some snippets:
“We’re excited to announce Cloudflare R2 Storage! By giving developers the ability to store large amounts of unstructured data, we’re expanding what’s possible with Cloudflare while slashing the egress bandwidth fees associated with typical cloud storage services to zero. Cloudflare R2 Storage includes full S3 API compatibility, working with existing tools and applications as built.”
→ So R2 is built to take on AWS specifically. The tools included are specifically targeted at S3, AWS’s product, and intended to make it seamless to switch to the customer.
“Egress bandwidth is often the largest charge for developers utilizing object storage and is also the hardest charge to predict. Eliminating it is a huge win for open-access to data stored in the cloud.”
→ So they are targeting the biggest piece of revenue to AWS (biggest cost to devs) for object storage.
“Our object storage will be extremely inexpensive for infrequent access and yet capable of and cheaper than major incumbent providers at scale.”
→ They will compete on price. They are making the same thing much, much cheaper and offering the same, or better, functionality.
The second link is a comparative calc of AWS pricing vs the new Cloudflare pricing:
→ Here the bottom line from the thread, and without having redone the calcs - is that something that would typically have cost $59,247 on AWS will now cost $0.13 on Cloudflare.
I did a double-take when I read that. Not half price, not 80% off, no. They basically take something that has a significant price tag on AWS and then all but give it away for free.
I like this way of doing things about Cloudflare as a consumer. They are truly innovative and put out a lot of new products and services which techies seem to be increasingly breathless about.
However I dislike that they are not increasing either their top line or their bottom line to the same extent as an investor. Which is why I sold out completely a couple of months back.
This move exemplifies this dynamic for me. They are not capturing the $59k which is currently going to AWS, they are replacing that $59k with $0.13c. So in stead of capturing some of the value they are passing all of that value directly to the consumer. And in doing so they are crossing a pretty important line by openly crossing swords with AWS.
Perhaps I’m overblowing the extent or the relevance of this new price competition, or perhaps it is not as significant to AWS, or perhaps it does not have as big an impact or uptake.
But regardless of how this plays out, this is exactly why I love the company Cloudflare, but do not like the investment Cloudflare.
They are not, to my mind at least, running this company with a focus on being a profitable machine. They are making losses head over fist, and seem quite content to continue doing so. If there is value to be captured, they would rather pass most of it on to consumers than capture too much of it for themselves and us shareholders.
Perhaps others who are closer to this can also weigh in here, but taking the calcs in the twitter feed on face value means going on a price war with AWS. And however that’s dressed up just does not seem like a smart move to me.
(No position in NET, but it’s on my watchlist)