[nostrademons]

For Google's purposes, this is immaterial. They already have core competencies in power, land, maintenance, staffing, R&D, etc that are sunk costs. Their point is that Amazon is enjoying 80-90% profit margins, and so this is a lucrative business for them to enter. Moreover, they're pointing out that they can offer you large cost savings sustainably to entice you to switch.

For a small business's perspective, the cost of overhead is absolutely material - but then, most of them probably wouldn't switch to bare metal anyway, but rather Dockerize their app and shop it around to whoever the lowest-cost IaaS provider is.

[ceejayoz]

> They already have core competencies in power, land, maintenance, staffing, R&D, etc that are sunk costs.

Their cloud offerings expanding mean more power use, more land use, more maintenance, more staffing, more R&D. It's not all sunk cost.

[nostrademons]

But the point of the graph is that these together << the price they can charge for the service. That's what profit is.

[ceejayoz]

Of course they're making money off it.

Claiming that a 20-30% reduction in raw hardware costs means you should see the entire service's cost go down 20-30% ignores those non-hardware costs, though.