Prices are dropping, but IaaS isn’t a commodity yet

There’s a long-running debate in the cloud computing world about whether standard Infrastructure-as-a-Service resources have become true commodities, but it doesn’t look like they’re there yet. Even as prices drop ever closer to zero across the cloud-provider landscape, there are still plenty of points of differentiation.

On Wednesday, for example, cloud provider Storm On Demand announced a new bandwidth pricing plan that shows that Amazon Web Services (s amzn) isn’t the only one that can keep pushing down cloud computing prices. Now Storm On Demand users pay nothing for incoming bandwidth and only 5 cents per hour gigabyte for outgoing bandwidth, regardless how much they send.

As it turns out, you don’t need Amazon-like economies of scale in order to compete on price: Across the board, Storm On Demand servers costs less than comparable AWS images, and its bandwidth costs are lower than AWS’ until the latter’s 350 TB–plus tier. Looking across the growing collection of IaaS providers, one finds — save for some wild variations in bandwidth pricing (from no charge up to 20 TB from Joyent to a flat 18 cents per gigabyte from Rackspace (s rax)) — prices for comparable server images are all about the same.

If cost were all that matters, though, IaaS would be a very different market right now. Storm On Demand would be the household name, not AWS, and it’s difficult to imagine that everyone wouldn’t be doing everything in their power to match its prices and remain competitive.

The reality, of course, is that AWS is the cloud kingpin, and everyone else is playing catch-up. Aside from its first-mover advantage, that’s because features and complementary services matter, and AWS has them in spades, from its S3 object storage to advanced virtual networks to Elastic MapReduce. But different things matter to different customers, which is why so many cloud providers are in business and appear to be doing well.

Everyone is trying to distinguish themselves with something. You want low cost and high performance? Storm On Demand is probably the best bet. Want fine-grained control over RAM and CPU levels? Give CloudSigma a try. “Fanatical support”? Rackspace. You get the point.

IaaS may have fallen off the front pages as higher-level cloud models such as PaaS and SaaS garner more attention, but there is still unique value to be had in making a strategic choice at that layer. Assuming the difference is just a few dollars here or there as prices keep stabilizing, cost alone probably shouldn’t be the deciding factor.

Image courtesy of Flickr user antaean