Microsoft Azure to undercut Amazon Web Services pricing

Microsoft has told big customers that its Azure cloud-based services will cost 10% less than comparable Amazon Web Services.

If Microsoft Azure services cost 10% less than comparable Amazon Web Services, the company could win converts to its camp despite its late start.

Microsoft has told some big customers that the 10% differential is part of a broad pricing plan for the services. Another source said Microsoft used both AWS and services like Go Daddy as reference points for price comparisons on the business and consumer side. "They talked about coming in at 5% or 10% below what's already out there," he said.

According to one corporate IT manager, Microsoft, for purposes of the price comparison, used the less expensive AWS Linux compute and storage services as the baseline.

Amazon AWS pricing:
Amazon's Elastic Compute Cloud (EC2) compute services running on Windows infrastructure (Windows 2003, SQL Server Express, Microsoft IIS and ASP.NET) list for 12.5 cents to $1.00 per hour of on-demand instances for basic workloads or 30 cents to $1.20 per hour for CPU intensive on demand instances.

Linux/Unix standard-demand instances cost less from 10 cents to 80 cents per hour on Linux/Unix and from 20 cents to 60 cents per hour for high CPU on-demand instances. Or, companies can make a a one or three-year commitment to reserve a computing instance. Those prices range from $325 to $2,600 per year depending on capacity and compute power required. There are also data transfer charges per gigabyte flowing in and out of EC2.

"AWS uses Xen virtualization as the base, so you are only paying for the guest OS instance when you use it. It's my understanding that Microsoft will adjust [its] model to match this, with guests running on Hyper-V on a base 2008 R2 OS that you won't be paying for," he said.

Another source who's been talking with Microsoft about Azure's SQL Data Services (the newly renamed Microsoft SQL Azure Database) said Microsoft will charge per 10 gigabyte database units, with other fees based on bandwidth and query activity. The company is also expected to offer a discounted rate for customers that prepay, something Amazon refers to as Reserved Instances.

Microsoft is expected to highlight the simplicity of its pricing versus Amazon AWS which involves numerous variables and add-ons (see sidebar).

Microsoft has been mum on Azure price specifics, other than to say that some services will be free or ad-supported; others will use a utility or subscription model and still others may incur a per user price. More pricing details are expected to be disclosed by Bob Muglia, president of Microsoft's server and tools business, at the Microsoft Worldwide Partner Conference which kicks off in New Orleans next week.

Given that Microsoft is playing catch-up in this space, it makes sense for it to come in low. But it treads a fine line. It needs to offer services that will be cost competitive for end users but also offer its partners and developers a chance to ride those services and make their own margin off them.

AWS can claim some big customers, including Netflix, Sears Canada, Target and others. Microsoft, on the other hand, is late to the party, with many Azure services either in very early form or missing altogether.

Just this week, developers who had been using Azure Workflow Services found that they were no longer available: Microsoft pulled them so they will support the yet-to-be-shipped .NET 4.0 framework.

Some in the Microsoft camp say this is a fact of life for a company with a huge installed base to protect.

Related Azure services resources:
Microsoft discusses Azure cloud strategy

With Azure, Microsoft clarifies cloud computing plans

"AWS has the luxury of [being] an all-cloud platform, with few interdependencies other than between EC2 and S3, whereas Microsoft is trying to integrate the on-premise platform with the cloud, and that's more complex," said Andrew Brust, chief of new technology for IT consultancy twentysix New York. "It is a pain, but that's what betas are like, and the potential reward is great because Azure will help companies leverage their .NET expertise in the cloud rather than force an entirely new platform."

Microsoft touts its ability to deliver analogous services across on-premises, partner-hosted and Microsoft-hosted models as a huge advantage compared to Amazon and Google's offerings.

Brust said if Microsoft pricing indeed comes in at 10% less than AWS, a lot of businesses will take a look.

Brian Boruff, VP of cloud computing at CSC, said Microsoft is banking on its widespread use as a development platform to convince people it will be easier and cheaper to use Azure than AWS.

"Amazon is great for people getting started, small operations, like Animoto...I think the further up market you get, the more people will consider Microsoft" and Azure as the most cost-effective way to consume compute services.

Microsoft's legacy

Others said Microsoft is behind the eight ball. Amazon and Google have mind share and credibility in cloud services where Microsoft is seen as a legacy player.

"I think Microsoft can pull this off, but [it's] way behind," said John Landry, a former IBM executive who is now principal with Lead Dog Ventures, a Wayland, Mass.-based hedge fund and a former industry CTO.

In his view, Microsoft, Google and Amazon are racing to build massive data centers. "That's the price of admission and it's steep and other alleged players like IBM, EMC are seemingly sitting on their thumbs," he said. Data centers lead to scale which will determine price and in this model price matters. Amazon is in the best position but Google is adding significant new cloud apps like Google Voice and Google Wave which could be big.

Still many enterprises who are using cloud services in test situations, are wary of trusting their precious data and applications to the cloud.

"We have shifted some of our research and sandbox platform to AWS with excellent results. We will probably shift some development to them later this year and if that goes well, we have a production capability that could be deployed in 2010," said the CIO of a large financial services company.

His company does not use any Microsoft technology in its core production environment and so is not interested in Azure with the exception of SQL Data Services.

Technology Writer Carl Brooks and Executive Editor Jo Maitland provided additional reporting for this story.

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