Cloud Price Cutting Isn’t Dead Yet

January 15, 2016, 2:08 PM UTC

The whirlwind of cloud computing price cuts may have slowed a bit, as reported just this week, but it ain’t over.

On Thursday, Microsoft unveiled new discounts to select Azure virtual machines (VMs), fulfilling its pledge to remain price competitive with other major public cloud suppliers. The other major supplier in this case would be Amazon (AMZN) Web Services, which announced discounts of up to 5% on select Amazon cloud computing instances a week ago.

In a return volley, Microsoft (MSFT) is cutting prices up to 17% on its newest D-series VMs, based on the latest Intel (INTC) processors.

In Azureland, VM is the term used to describe a unit of computing power. For AWS, the roughly analogous term is a computing instance. Microsoft’s Nicole Herskovitz, director of product marketing, helpfully pointed out that Microsoft VMs include load balancing and auto-scaling, which is not the case with Amazon’s Elastic Compute Cloud (EC2) instances.

Microsoft’s cuts were expected, given that Executive Vice President Scott Guthrie, the company’s cloud chief, has promised that Microsoft will meet or beat price cuts from big competitors going forward.

It sort of has to. Microsoft is a distant No. 2 in public cloud computing, in which the provider aggregates a massive pool of computing, storage, and networking which is then rented to customers by the hour, by the gigabyte, by the amount of bandwidth used.

Microsoft’s investment in cloud is helping its image:

Customers who don’t want to build out their own data centers like this model, even though some worry about trusting key data and applications to resources they do not own. Amazon is the market leader here, although Microsoft Azure is making headway.

As the industry matures, it’s unlikely that Amazon, Microsoft, and Google (GOOG)—the big three in public cloud computing—will keep trading price cuts by the day as has happened in the past.

The industry, after all, is getting more mature. And these providers must weigh continuous changes with customers already bewildered by the range of options—pricing and otherwise—they face.

Business customers want flexibility but they don’t want to have to parse through page upon page of computing options and run calculations to figure out which is best for a given application—and then go through that process again and again as new price options pop up.

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Google, which is trying to make Google Compute Platform a business-friendly option, bypassed some complexity when it announced automatic discounts that kick in once a given instance reaches 25% utilization in a given month. In that case, Google automatically cuts the user’s bill. No need for a lot of spreadsheets there.


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