Somehow... with the Google product price changes (price hikes!) in maps and app engine, I am not sure if they have enough credibility left to pull this off.
I believe there was a decision that each Google product should be priced at least at cost. So, products that were under-priced had to raise their prices. I'm more comfortable knowing that these products aren't loss leaders.
That said, it was definitely painful, particularly for people that had optimized specifically for the pricing quirks of the old AppEngine pricing model and really got hurt by the new model.
The problem is that you don't know if this cloud offering is priced at-cost, or it has promotional pricing to kill the competition (AWS) and a pending increase is coming once they get scale.
People assume cloud servers are a commodity, but at $150'000+ company cost per software engineer, there's a lot of API and development that is happening to support the initial roll-out of cloud infrastructure, and we're not yet at the stage where such development costs are negligible compared to the total costs (Amazon is getting there, Google is just starting out...).
Probably best to stick to design/services that allow relatively painless movement to competitors. The competition alone would likely keep prices down so that movement isn't needed.
The Compute Engine is hitting a much different segment of the market to Amazon AWS. There are no 256MB RAM instances available. This product is aimed higher in the market: http://cloud.google.com/pricing/compute-engine.html
They have newer metal (Sandy bridge), that's all I see right now. I think seeing smaller instance slices may appear later, they probably just want to ensure it's stable right now.
I initially thought this was a competitor to The Elastic Beanstalk, I would have been much happier with that kind of service then another Cloud hosting service.
The Elastic Beanstalk is really more of an AppEngine competitive product/response. More customizable and only Java focused but automated instances the way AppEngine is. Now Google Compute equals EC2 somewhat (more focused, less options right now) but similar. Google Cloud Storage = S3.
I'll add the silly comment that given their costing, what is the price per mined bitcoin? Granted using a botnet will be cheaper but I'm wondering about 'floors' in that space. What is the cost of a 3DES key? what is the cost of an MD5 collision? etc.
