Scott Guthrie, a cloud expert from Microsoft, stated that Microsoft Azure will match any Amazon Web Services Inc. price cuts.
Over the past few years, the two cloud service rivals have exchanged price reductions at a rapid pace.
Guthrie stated that cloud prices are determined by both the enterprise market demand and Microsoft’s own practice of matching AWS pricing, which is usually done within a few days.
“If you want enterprises to pursue you must be in the infrastructure business. You need to be able offer these types of services. These prices will be commodity-driven, although they may not always be so. Guthrie stated that this doesn’t mean that they aren’t important or sophisticated, but the market will set the price. “And we have made a decision with Azure that we will match Amazon’s commodity prices. We will match Amazon’s commodity prices with Azure if they lower the price, which is usually within 48 hours.
Guthrie says that Microsoft has the lowest-priced cloud service in certain areas due to price cuts.
He stated that “for some things like storage, especially, we’re probably below the price of what anybody else on the market can offer,”
Managing profitability in the face of falling cloud prices was another topic that was raised during the talk. Amazon reported lower-than expected earnings in its second quarter 2014 financials. Although AWS usage grew by 90 per cent year-over-year, Amazon’s CFO Tom Szkutak admitted that repeated price cuts may have contributed to the disappointing quarter.
Although we aren’t able to quantify the impact of price changes on our Q2 or Q3, it is fair that it did have an impact on our Q2 results in a significant way. “And that’s reflected the results that you are seeing,” Szkutak stated during the July earnings conference (transcript here).
Guthrie suggested that Microsoft’s software licensing business with Azure will be complementary to help it sustain its profits.
Guthrie stated that “Versus Amazon, Google, on the infrastructure, we’re in a slightly different position in that we do not just monetize raw compute, storage, but also license software running in that VM [virtual machines],” Guthrie said. “So every time Amazon sells a Windows VM we make a decent amount from it. Similar to Azure, we also make a decent amount when you sell a Windows VM running on Azure.
Guthrie also spoke about how Azure’s scale has helped Microsoft to charge its cloud services at a competitive price. Guthrie repeated a few statistics from the Microsoft Worldwide Partner Conference this summer, stating that Azure currently has 17 regions around the world, each with 16 datacenters capable of hosting 600,000 servers and each region can house up to 16 more.
Guthrie stated that this is more than twice the number AWS has opened in the world, and more than five times as many regions as the Google cloud.
He said that the Azure global footprint allows for significant economies of scale due to its sheer size. “We can cut our prices for customers, and run an operation that’s cheaper than almost everyone else on this planet.
You can listen to Guthrie’s talk here.
