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Will Azure price cuts lure more on-prem users to the cloud?

The latest Azure price cuts may not mean much to those using higher-level services, but they're an incentive for on-premises users Microsoft wants to entice to the cloud.

Talk of price wars may be passé for those well-versed in public cloud, but costs can still sway those on the fence about leaving their own data center -- and Microsoft is banking on it.

Microsoft has dropped prices for certain instances by as much as 50% in the past week, and customers can lower the cost of running Windows Server by up to 41% by running those VMs in Azure, the company said in a blog post. The move is less about luring customers away from other platforms or appeasing existing customers, and more about lowering the bar for the company's massive noncloud installed base to move to the cloud.

Microsoft is still catching up to Amazon Web Services (AWS), but it's getting much closer -- and since cost is always an issue, Azure price cuts could make a difference for Microsoft shops still unsure about the maturity of the platform and the parity with AWS, said Guy Baroan, founder and president of Baroan Technologies, an IT consultancy in Elmwood Park, N.J.

"They're Microsoft -- so, at some point, they're going to get it. But are they ready right now, and do they push clients there right now?" Baroan said. "You need a compelling reason, and price is a great reason to do it."

The cost of Azure A1 and A2 instances -- part of the intro-level A-series VMs -- have been lowered by up to 50%, and a new Av2 instance will be available in November, with 36% lower cost than the standard A-series VM.

Dv2 VMs tailored for faster CPUs, local disk performance and higher memory are being cut by up to 15%, while the compute-centric F-series price is also being reduced by 11%.

Cost versus value in the cloud

The timing of the Azure price cuts is curious. Just two weeks ago, Scott Guthrie, executive vice president of Microsoft's cloud and enterprise group, told a crowd at a tech conference that Microsoft and AWS were competing more on value, rather than price.

A year or two ago, much of the talk around public cloud was about price and the back-and-forth cuts among providers -- vendors preached about Moore's law, while upstarts tried to undercut market leader AWS. Since then, the reductions have become less frequent, as attention moves to appeasing the enterprise market with a breadth of services.

Microsoft -- and Google, for that matter -- has committed to follow Amazon's pricing, but a straight comparison across providers isn't always easy because of the different sales metrics and performance results. Overall, though, the cost of VMs across public cloud providers has come down 14% over the past two years, according to 451 Research's Cloud Price Index.

"That's not a trivial amount," said Owen Rogers, research director for digital economics at 451. "Virtual machines are almost the battleground for the so-called price wars, and if providers want to get attention and say something has great value, virtual machines are the natural place to do it."

Still, while CIOs don't want to get ripped off, Rogers agreed with Guthrie that the market is headed away from battles over pricing and toward offering more valuable services.

"End users and enterprises want more than just cheap resources, and they're willing to pay for things like performance, geography, compliance, support -- a whole raft of things," he said.

Some cloud services are becoming commoditized, so when providers start cutting prices for capabilities such as object storage or databases, it will be an indication that customers are getting savvier about deciding between cloud providers, Rogers said.

AvePoint Inc., a Jersey City, N.J., Microsoft independent software vendor (ISV) that sells and uses Azure, moved from AWS to Azure several years ago, in part, because the total cost of ownership was lower, as well as better connectivity to other Microsoft services.

We're not just getting value from a price perspective ... we're also getting value in the way the technology is shaping the operational side of the business.
John Hodgesvice president of product strategy, AvePoint

This latest round of Azure price cuts won't directly reduce costs for AvePoint, as it no longer relies on any of these instance types internally -- it has followed the path taken by many cloud users as they get more familiar with the platform, moving beyond the basic VM offerings and into areas such as microservices and containers.

"From a VM and storage perspective, we were all about cost early on, and now it's down to the nitty-gritty with the architecture," said John Hodges, vice president of product strategy at AvePoint.

AvePoint works with Microsoft now to optimize its code, instead of focusing on price per compute. The company is already hooked on microservices through Azure, so even if Amazon came back with a lower price, it wouldn't be enough to sway the ISV to port its workloads to AWS.

"At this point, we're not just getting value from a price perspective," Hodges said. "We're also getting value in the way the technology is shaping the operational side of the business."

Still, AvePoint has customers looking to run its server-based application that does use VMs, and those could be bought through the Azure marketplace, rather than on premises, Hodges said. To date, the price of running it internally was fairly low, but this price drop could convince some customers to make the move to Azure-based VMs instead, he said.

Trevor Jones is a news writer with TechTarget's Data Center and Virtualization Media Group. Contact him at [email protected].

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