Microsoft Throws Gauntlet At Amazon: Your Cloud Will Never Be Cheaper Than Ours

MicrosoftMicrosoft CEO Steve Ballmer

Earlier this week, Amazon announced that it was cutting prices for two of its key cloud-computing services. That's not unusual. Amazon's cloud, known as Amazon Web Services, routinely cuts prices. In fact this marked the 40th price drop by AWS since its start in 2006, Amazon's PR folks told us.

But Microsoft is determined to best Amazon in all things cloud, particularly price, and that's fairly hard to do. By most accounts, Amazon is the biggest cloud player around. And, unlike other forms of IT, cloud computing gets cheaper as it grows.

With cloud computing, all companies share the same big data center, paying only for the tech they use. The more customers using a cloud, the more the cloud provider can spread costs across them. In Amazon's case, it passes those savings onto customers with price cuts. More customers also allows the cloud provider to pay less for the computers and network equipment it buys, because it buys so much of that stuff.

In April, Microsoft promised that its cloud, named Azure, would always match Amazon's prices for routine cloud-computing services like basic computers, computer storage and networking.

So on Friday, Microsoft announced that it would not only match Amazon's new lower costs, but in some cases beat them. In a blog post it said:

We're also making the new prices effective worldwide, which means that Azure storage will be less expensive than AWS in many regions.

There's a caveat: Microsoft's price cuts don't take affect until March 13.

But just to give you an idea of how ridiculously low these prices already are, Amazon charges as little as about 1 cent per hour ($0.113) to use a medium-size computer. Both companies charge as low as 9.5 cents per gigabyte of storage per month.

To match Amazon's prices, Microsoft says it's cutting fees by 20% to 50%.

Microsoft is making strides in selling its cloud, it says. When it reported earnings on Thursday, it said that Azure revenue was up 107% over last year, though it didn't disclose the actual revenue number. Amazon doesn't disclose its AWS revenue, either, by the way.

In April, Microsoft said it had achieved annual revenues of $1 billion for its cloud, which included Azure and other cloud services.

Disclosure: Jeff Bezos is an investor in Business Insider through his personal investment company Bezos Expeditions.