Microsoft has fired the latest salvo in the pricing war between cloud services providers, with an announcement this week that it is significantly reducing the cost of its Azure service. In some cases, Microsoft is cutting the price by as much as 61 percent.
"We believe in providing a comprehensive cloud platform that not only enables customers to innovate rapidly, but to also do so at the best possible prices," Venkat Gattamneni, director of product marketing at Microsoft Azure, wrote in a blog post earlier this week. "To that end, today we are happy to announce significant price reductions on several Azure Virtual Machine families and storage types. We hope this will further lower the barrier to entry for our customers and accelerate cloud transformation."
Ongoing Price Cuts
Microsoft said it has cut prices for its compute optimized instances-F Series and its general purpose instances-A1 Basic by up to 24 percent and 61 percent, respectively. The company said it also plans to reduce prices for its D series general purpose instances in the near future. Microsoft has also slashed the prices of its Azure Blob Storage services -- for its customers with Azure Blob Storage accounts -- by up to 38 percent.
These price cuts are just the most recent in a sector that has seen providers make massive price cuts for more than a decade, as they strive to attract more enterprise clients to their services. One of Microsoft Azure’s largest competitors, Amazon Web Services (AWS), announced its latest price cut in November, and has cut its prices more than 50 times since it first debuted in 2006.
Microsoft and Amazon are two of the giants of the sector, with AWS generating some $14.1 billion in annual sales, compared with $3 billion by Microsoft Azure.
However, Alphabet's Google Cloud Platform continues to make a strong third-place showing, recently announcing a five-year, $2 billion deal with messaging service Snapchat as part of the latter’s plan to go public. The deal adds Snapchat to a stable of clients that includes major businesses such as Spotify, Evernote and Zulily.
More Cuts Ahead
Nonetheless, it is Amazon and Microsoft that have been duking it out most aggressively, and AWS is unlikely to let Microsoft’s latest move go unanswered.
According to equity analysts, Amazon will probably respond with additional price cuts of its own this year. Even without the competition from Microsoft, Amazon has found a way to continue cutting the cost of its Web service while still maintaining profitability by continually adding new services to its offering.
But Microsoft is far from an also-ran. The company maintains a robust presence in the software-as-a-service sector, and will likely continue to dominate in that area for years to come because of its decades of experience as a software developer.
In other areas, the Web services sector still remains very much anybody's game. The burgeoning Internet-of-Things industry, for example, will provide an enticing new market for both companies. Amazon may even have the leg up here because of the popularity of its new Alexa platform and Echo devices.