Lately, it seems like the cloud market has become a game of seeing who can more efficiently undercut the competition. The latest in the trend is Microsoft.
On Thursday, Microsoft announced price reductions of up to 17% on the Azure Dv2 Virtual Machines, the latest iteration of the platform’s D-series VMs.
Microsoft shared an example of the reductions that will affect their US East 2 region (Virginia). For the D1-D5 v2 VM, Windows Server instances get a 10% price reduction and Linux instances get a 14% price reduction. For D11-14 v2 VMs, Windows Server instances will drop 13%, while Linus instances will drop 17%. However, the full price reductions for Dv2 will take place in February and, at that time, information will be shared here.
In the original blog post announcing the reductions, Azure’s Nicole Herskowitz said that the reason for the price drops was to remain competitive to AWS in offering commodity services. The post went on to note Microsoft’s perceived competitive advantages of Azure over AWS, including free load balancing and auto-scaling for Dv2 instances, billing per minute instead of per hour, developer credits, and multiple purchasing options.
Of course, Microsoft’s announcement comes on the heels of Amazon announcing price cuts for some of its AWS services earlier in the month. It’s par for the course for Microsoft who, back in 2013, announced a commitment to match AWS prices for “commodity services such as compute, storage, and bandwidth.”
Actually, these types of price cuts are common for AWS as well. The most recent drop marked the company’s 51st price cut since the beginning of its cloud offering in 2006.
“In my view, AWS keeps dropping prices to generate interest in newer instance types, maintain a ‘low cost’ brand, and, yes, to keep competitors on their toes,” said Forrester’s Dave Bartoletti. “The cloud price war is really more of a series of mild skirmishes now.”
Not to be left out of the conversation, Google responded to the AWS cuts not with a price reduction of its own, but by releasing a price comparison that claims prices 15-41% lower than AWS in many instances.
The thing is the cloud market keeps growing. Data from IDC suggests that the global SaaS market could reach $67 billion by 2018, and that cloud apps will make up 90% of all mobile data traffic by the following year. However, the public cloud market continues to be dominated by these three players: AWS, Azure, and Google–in that order.
Research firm Gartner continually pegs these three as the “market leaders,” with Amazon the clear front runner, Microsoft in second place, and Google a distant third. The continual price cuts are indicative that, for AWS and Azure at least, price is one of the only ways they can truly differentiate themselves, as they tend to offer so many of the same tools and services.
AWS is the dominant leader in the space, with some putting their overall market share at nearly 37% and other research claiming that AWS has been adopted among 57% of IT professionals. However, YoY growth data released at the beginning of 2015 seems to suggest that Microsoft is growing at a rate almost double that of AWS and Google isn’t far behind in growth either. If these trends continue, it could mean a much tighter race in the market by the end of 2016.