DigitalOcean tries to take sting out of price hike with $4 VM

Cloud biz says it is reacting to customer mix largely shifting from lone devs to SMBs


DigitalOcean attempted to lessen the sting of higher prices this week by announcing a cut-rate instance aimed at developers and hobbyists.

The $4-a-month droplet — what the infrastructure-as-a-service outfit calls its virtual machines — pairs a single virtual CPU with 512 MB of memory, 10 GB of SSD storage, and 500 GB a month in network bandwidth.

The launch comes as DigitalOcean plans a sweeping price hike across much of its product portfolio, effective July 1. On the low-end, most instances will see pricing increase between $1 and $16 a month, but on the high-end, some products will see increases of as much as $120 in the case of DigitalOceans’ top-tier storage-optimized virtual machines.

A full breakdown of the new pricing scale can be found here.

We’re a very different company than we were 10 years ago

The price increase was motivated in large part in recent years by a shift in customer type, which has trended toward a larger mix of small to mid-sized businesses, as opposed to individual developers, DigitalOcean Chief Product Officer Gabe Monroy told The Register.

“We’re a very different company than we were 10 years ago,” he said. “We serve developers now at all stages of the journey. Before, DigitalOcean was really synonymous with developers in the earliest parts of the journey.”

Pressed on what’s actually changed to justify higher pricing, Monroy blamed several factors including rising operating costs and inflation, though slightly walked back the latter, claiming “this is not purely an inflation-driven exercise.”

Monroy argued DigitalOcean hasn’t forgotten about developers, and touted the new, lower-cost virtual machine as being ideal for small projects and hobbies “who are the most price sensitive.”

While the $4-a-month VM comes in at a dollar less than the previous least expensive option — $2 less starting in July — it also offers half the memory, storage, and bandwidth.

What’s more, at this price/performance tier, DigitalOcean's cheapest option is drifting into larger cloud providers' free tiers. Google Cloud Platform’s E2-micro instance, for example, offers up to twice the CPU for short bursts of time (0.25 vCPU cores normally), twice the memory resources, and three times the storage capacity at no cost (once you've negotiated GCP's billing system) for up to 730 hours a month, which makes it effectively free.

“There's no doubt that if developers wants to find a cheaper solution on another hosting provider, they could find a cheaper solution,” Monroy said.

“Price, though, isn't the only reason customers come to DigitalOcean. Customers really value our simplicity. They really value our developer community. There's a whole lot of other factors that have resulted in DigitalOcean’s growth.”

“Our goal is to be priced at a discount to hyperscalers and at a premium to more commodity-hosting providers,” Monroy added.

To this end, the pricing changes put many of DigitalOcean’s products at a premium over rival Linode, which was acquired by content-delivering network and DNS security vendor Akamai earlier this year. ®


Other stories you might like

  • Having trouble finding power supplies or server racks? You're not the only one
    Hyperscalers hog the good stuff

    Power and thermal management equipment essential to building datacenters is in short supply, with delays of months on shipments – a situation that's likely to persist well into 2023, Dell'Oro Group reports.

    The analyst firm's latest datacenter physical infrastructure report – which tracks an array of basic but essential components such as uninterruptible power supplies (UPS), thermal management systems, IT racks, and power distribution units – found that manufacturers' shipments accounted for just one to two percent of datacenter physical infrastructure revenue growth during the first quarter.

    "Unit shipments, for the most part, were flat to low single-digit growth," Dell'Oro analyst Lucas Beran told The Register.

    Continue reading
  • Will cloud giants really drive colos off a financial cliff?
    The dude who predicted the Enron collapse bets they will

    Analysis Jim Chanos, the infamous short-seller who predicted Enron's downfall, has said he plans to short datacenter real-estate investment trusts (REIT).

    "This is our big short right now," Chanos told the Financial Times. "The story is that, although the cloud is growing, the cloud is their enemy, not their business. Value is accrued to the cloud companies, not the bricks-and-mortar legacy datacenters."

    However, Chanos's premise that these datacenter REITs are overvalued and at risk of being eaten alive by their biggest customers appears to overlook several important factors. For one, we're coming out of a pandemic-fueled supply chain crisis in which customers were willing to pay just about anything to get the gear they needed, even if it meant waiting six months to a year to get it.

    Continue reading
  • Price hikes, cloud expansion drive record datacenter spending
    High unit costs and fixed capex budgets propelling enterprises cloudwards

    The major hyperscalers and cloud providers are forecast to spend 25 percent more on datacenter infrastructure this year to $18 billion following record investments in the opening three months of 2022.

    This is according to Dell’Oro Group research, which found new cloud deployments and higher per-unit infrastructure costs underpinned capex spending in Q1, which grew at its fastest pace in nearly three years, the report found.

    Datacenter spending is expected to receive an additional boost later this year as the top four cloud providers expand their services to as many as 30 new regions and memory prices trend upward ahead of Intel and AMD’s next-gen processor families, Dell’Oro analyst Baron Fung told The Register

    Continue reading
  • FedEx signals 'zero mainframe, zero datacenter' operations by 2024
    Going completely cloud-native will save it $400m a year, CIO estimates

    The datacenter is dead – at least according to FedEx, which announced plans to close its server farms and transition completely to the cloud, where it hopes to save an estimated $400 million annually.

    At FedEx's investor relations day held last week, CIO Rob Carter said FedEx had long been a leader in technology, claiming the company was first to introduce tracking, handheld computers and automated package sorting. The next big movement in tech, Carter went on to say, is migrating all of its systems to the cloud.

    "We've been working across this decade to simplify and streamline our technology and systems to create value all along the way by improving productivity, security and reliability," Carter said on the call.

    Continue reading
  • Datacenter networks: You'll manage them from the cloud, eventually, claims Cisco
    Nexus portfolio undergoes cloudy Software-as-a-Service revamp

    Cisco's Nexus Cloud will eventually allow customers to manage their datacenter networks entirely from the cloud, says the networking giant.

    The company unveiled the latest addition to its datacenter-focused Nexus portfolio at Cisco Live this week, where the product set got a software-as-a-service (SaaS) revamp.

    "It's targeted at network operations teams that need to manage, or want to manage, their Nexus infrastructure as well as their public-cloud network infrastructure in one spot," Cisco's Thomas Scheibe – VP product management, cloud networking for Nexus & ACI product lines – told The Register.

    Continue reading
  • Google recasts Anthos with hitch to AWS Outposts
    If at first you don't succeed, change names and try again

    Google Cloud's Anthos on-prem platform is getting a new home under the search giant’s recently announced Google Distributed Cloud (GDC) portfolio, where it will live on as a software-based competitor to AWS Outposts and Microsoft Azure Stack.

    Introduced last fall, GDC enables customers to deploy managed servers and software in private datacenters and at communication service provider or on the edge.

    Its latest update sees Google reposition Anthos on-prem, introduced back in 2020, as the bring-your-own-server edition of GDC. Using the service, customers can extend Google Cloud-style management and services to applications running on-prem.

    Continue reading
  • Datacenter operator Switch hit with claims it misled investors over $11b buyout
    Complainants say financial projections were not disclosed, rendering SEC filing false and misleading

    Datacenter operator Switch Inc is being sued by investors over claims that it did not disclose key financial details when pursuing an $11 billion deal with DigitalBridge Group and IFM Investors that will see the company taken into private ownership if it goes ahead.

    Two separate cases have been filed this week by shareholders Marc Waterman and Denise Redfield in the Federal Court in New York. The filings contain very similar claims that a proxy statement filed by Switch with the US Securities and Exchange Commission (SEC) in regard to the proposed deal omitted material information regarding Switch's financial projections.

    Both Redfield and Waterman have asked the Federal Court to put the deal on hold, or to undo it in the event that Switch manages in the meantime to close the transaction, and to order Switch to issue a new proxy statement that sets out all the relevant material information.

    Continue reading

Biting the hand that feeds IT © 1998–2022