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. ®

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