A week ago, Google make its Compute Engine generally available. The service offers virtual machine instances as a cloud service, at prices from $0.114 per hour for a single-core VM with 3.75 GB RAM. In addition, you pay for outgoing network traffic and persistent storage. Reflecting the shortage of IP addresses, a static IP costs $0.01 per hour – but only if it is not in use. Linux is the only available operating system.

The service seems similar to Amazon’s Elastic Compute Cloud (EC2), but there are a couple of reasons why Google has the potential to take on Amazon. One is that it has the scale: just as Amazon, prior to the launch of EC2, had datacenters already in place to run its ecommerce business, Google has them to run its search and advertising business, as well as services like the Android Play Store, Google Mail, Docs and other cloud services.

Second, Google can afford Amazon-like commodity pricing. It could even afford to lose money on cloud hosting for an extended period, thanks to its dominance in web advertising, if it needed to do so in order to win market share (though I am not suggesting that it is in that position).

Why though would anyone use Google rather than Amazon? A post on Quora highlights some of the reasons, including sub-hour billing, live migration of VMs (no downtime), persistent disks that can be mounted read-only by multiple VMs, more integrated virtual networking, and better network throughput. This last point is interesting: the suggestion is that Google can use its own private connections between datacenters, where Amazon is more dependent on the public internet.

Amazon also has advantages, including a larger portfolio of cloud computing infrastructure services thanks to its greater maturity. Unlike Google Compute Engine, Amazon supports Windows VMs, for example.

Some large customers will want to spread VMs across multiple cloud providers for resilience, and it will not surprise me if Amazon plus Google becomes a popular combination.