With Microsoft finally releasing the Windows Azure cloud operating system to the public earlier this week, Amazon Web Services (AWS) took just one day to offer new pricing reductions to re-establish the market price for cloud services.
Effective February 1, AWS is reducing prices by 2 cents per gigabyte based on the tiers of usage offer. Amazon also lowered rates for data transferred out of its Amazon CloudFront content delivery network, cutting rates by 2 cents per gigabyte. And while 2 cents may not sound like much, at the highest usage levels of 1,000 terabytes, that takes the cost down by 40 percent per gigabyte.
The cloud game is by no means over. And while Amazon certainly has a huge lead over the rest of the pack--including large enterprise players like HP and Dell--what AWS continues to do is set the pricing and consumption models that others will be forced to follow if they want to compete.
I've wondered what will happen to all of the start-ups that are working to develop new offerings when Amazon enters their fray. Cloud services are so new and nascent that Amazon seems unlikely to declare war on any specific company or product, but the time will come when Amazon feels threatened, or when they are coincidentally working on a similar product offering.
By raising the barrier to entry on pricing, Amazon can continue to use its scale and sophisticated technology to keep the competition at bay. The upside is that pricing pressure bodes well for users and the consumers of cloud services.
The best-case scenario for users is for Microsoft to drop their Azure pricing to zero--giving it away at a loss (which I have to believe is minimal) for the first few years until they have enough of a community of users that would be interested in paying.
And while I'm sure Microsoft will be unlikely to give anything away, I have no doubt that Microsoft would quickly and quietly take market share from Amazon, while figuring out other ways to monetize Azure users and avoiding the pay-per-usage fees entirely.