Written By Jon Bryant, Principle Financial Solution Architect

Google Cloud Platform (GCP), unlike other cloud vendors, has the concept of a sustained usage discount. This automatically provides a tiered reduction over the month, so that the N1 machine type automatically attracts a 30% discount from the on-demand price if run continuously throughout the month.

This is great for customers as they get a large discount without any long term commitment. GCP also provides a one year and three years commitment price, which provides 37% and 55% discount from on-demand pricing respectively. From our experience and conversations with our customers, we have found that the three-year commitment is too long for most people and the one-year commitment only provides a 7% advantage over sustained discount and is therefore not seen as a good value proposition. Assuming this is replicated across-the-board, we suspect that the amount of GCP committed resource is very low, and therefore GCP has a relatively high-risk situation with a huge amount of cloud resource but very limited capacity planning data.

GCP has recently launched the N2 (beta) machine type in Iowa, Netherlands, and Singapore. This is the first time GCP have changed the machine generation, after many years and many different processor types. The N2 is based on the latest Intel Cascade Lake processor and, as standard, provides 4GB of RAM per vCPU rather than 3.75GB for the N1 series.

Currently, the on-demand pricing for the N1 is the same as the N2 family, but for the N2 family, the sustained discount has been reduced to 20%. Therefore the running cost for N2 is currently higher than for an N1 server, which provides no incentive to update or upgrade the machine instance. From a GCP point of view, this makes perfect sense as the one year committed resource is now 17% better price than the sustained discount, which should provide a real incentive for customers to make the commitment.

Once the N2 has completed its roll-out around the world and is working at full scale we assume that GCP will make some changes to the price to encourage migration to the latest instances. Here are the options that we think GCP could carry out:

  1. Reduce the on-demand price
  2. Increase sustained discount back to 30%
  3. Both of the above

Our current assumption is that GCP will choose (a) and that the on-demand price will fall slightly, making the monthly sustained discount price for N1 and N2 equivalent. This will mean that the reason to convert will be for the additional RAM and slightly faster processor speeds, coupled with the capability to gain further discounts through committed discount, which will provide GCP with better capacity planning data.

We are looking forward to seeing if our predictions come true. Watch this space!