Cloud upstarts: Too cheap to trust?

New Amazon competitors offer some compelling deals in the cloud, but at what price?

Hosting provider launched a $0.99 per month cloud server this fall, which is significantly less expensive than the $0.013 per hour starting price for market-leader Amazon Web Services' on-demand Elastic Compute Cloud (EC2) virtual machines.

SherWeb, another mid-size hosting provider that is pivoting into the Infrastructure-as-a-Service (IaaS) market, launched a Hyper-V/SSD-flash/InfiniBand-fabric/Intel-powered cloud offering that it says beats AWS on a variety of input/output capability benchmark tests. Providers like Digital Ocean, ProfitBricks and Concerto are among others attempting to differentiate their services from AWS, Microsoft and Google on price, performance and usability.

It's a story of David vs. Goliath in the cloud. As the public IaaS cloud computing market matures, incumbents are facing pressure left and right. Smaller and mid-size providers are aiming to steal workloads away, and some offer compelling value, at least on paper.

All of which has cloud users wondering: Are these smaller providers too cheap to trust?

+ MORE AT NETWORK WORLD: How to get more out of your virtualized and cloud-based environments +

The cloud computing market in recent years has been rife with horror stories of service providers going dark with little or no warning. Nirvanix, the cloud storage company that suddenly went belly up in the fall of 2013 was perhaps the most notorious case. Code Spaces was another example - after getting hacked the company, lost all its data. Cloud storage provider MegaCloud inexplicably went dark in 2013, too.

So at least one worry for customers who use small or mid-size cloud providers is whether you can trust them to be around for the long haul. There are precautions any customer should take, no matter what cloud provider is used. But backers at some of these lesser-known IaaS vendors say it's unfair to compare them to failed businesses. "We've been in business 20 years," says Manoj "Marty" Puranik, president and CEO of

Apples to Oranges

Gartner IaaS analyst Lydia Leong says there's a fundamental difference (other than brand awareness) between big-name vendors Amazon, Microsoft and Google, and the new breed of providers entering the cloud market. Some of these new entrants are more appropriately categorized as virtual private server (VPS) vendors. falls into this realm. Many of these companies have a hosting heritage and now they're rolling out self-provisioned cloud services.

The use cases are different though, Leong says. VPS hosters tend to be ideal for small-use workloads one or two VMs at a time. Some vendors overprovision their servers, allowing them to offer bottom-of-the-market costs. "It's different from enterprise-class IaaS," Leong says.

(SherWeb Product Marketing Manager Guillaume Boisvert says the company limits overprovisioning for its IaaS offering.)

The bigger issue is that these vendors don't have nearly the product portfolio, nor the breadth and depth of features compared to bigger-name vendors. AWS is the market-leader for a reason: The company has the widest set of cloud-based tools and a network of third-party tools integrated on top of it. It's an apples-to-oranges comparison between AWS and these other vendors. Even Microsoft, which is spending enormous money in the cloud, is still just beginning to turn heads in the IaaS market.

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.