Moore’s Law states that computer system performance/price ratio will double every two years. And that was very much my expectation when Good Data started using Amazon Web Services almost 2 years ago. But I had to wait until today to see Moore’s Law at work: Amazon announced 15% drop of EC2 prices. The price of the small Linux instance was constant at $0.10 per hour for the last two years – now it will be $0.085.

15% in 2 years – not exactly the exponential growth in the performance/price curve that I expected. And I started to wonder why. Here are my two explanations – I believe the second one is more likely:

1. AWS prices were set way too low to attract developers two years ago. Moore’s Law helped the price to catch up with the real cost of running the cloud.
2. AWS is a monopoly and Moore’s Law does not apply.

What? Cloud and monopoly? Isn’t utility computing a perfect example of fiercely competitive commodity where the price curve is shaped only by demand/supply? What would Nick Carr say? Unfortunately not. As much as we read about different cloud providers, AWS is the only real provider of “infrastructure as a service” in town. If you don’t want to be locked-in to proprietary Python or .Net libraries there is not that much choice.

Until we will see performance/price of AWS double every two years, we should still wonder about monopolistic pricing.