UPDATE: Microsoft Announces Aggressive Cloud Computing Prices
July 14 2009 - 4:13PM
Dow Jones News
Microsoft Corp. (MSFT) on Tuesday unveiled pricing for its cloud
computing platform, Windows Azure, the latest signal the software
company intends to compete aggressively in the emerging market to
provide enterprise computer services over the Internet.
Azure, which Microsoft announced eight months ago, is the
central plank of the company's strategy to grab a share of cloud
computing market, which allows customers to access computer
services over the Web and pay for them on a metered basis.
"Microsoft is throwing down the gauntlet and saying it's going
toe to toe with cloud providers," said Dana Gardner, a principal
analyst at Interarbor Solutions.
In becoming a cloud computing provider, Redmond, Wash.-based
Microsoft must balance the prospect of creating a new revenue
stream against the potential loss of sales from its key software
franchises, like the Windows operating system and server tools that
could be supplanted by the new services.
Azure will compete with a host of other cloud computing
pioneers, like online retailer Amazon.com Inc. (AMZN). Other
contenders include archrival Google Inc. (GOOG), which offers some
Web-based programs, and software-as-a-service provider
Salesforce.com Inc. (CRM)
Azure will provide the platform on which independent software
developers and corporate customers can create Microsoft-compatible
cloud applications. On Monday, Microsoft also announced it will
offer Web-based versions of its popular Office suite of
applications to consumers.
Microsoft shares were down 0.5% Tuesday at $23.11.
Microsoft's initial payment plans are targeted at the
independent software developers who build applications designed to
run on Microsoft's platform, though it will later attempt to sell
the services to its corporate end users. The plans include fees for
the computing and storage capabilities that are used.
Developers are being offered the option of paying on a
per-consumption basis, or signing up for a subscription lasting six
months or more.
Bob Muglia, who heads Microsoft's servers business, said the key
appeal of Windows Azure would be that to help customers to minimize
labor costs associated with maintaining data centers. Customers
will be able to run applications based either at Microsoft's or
their own data centers, built on Azure.
Muglia said the market for cloud computing services is still
very undeveloped, so Microsoft has a good opportunity to build
market share quickly.
"The cloud environment is still so nascent," he said.
Analysts note that the large existing base of Microsoft
developers should help Azure gain traction.
Muglia acknowledged that Microsoft's profitability from the
tools it sells to provide cloud services will likely be lower than
for on-premise software, but said he expects this to be offset by
the number of customers choosing to host services on Azure.
Microsoft will offer a 15% to 30% discount to developers and
resellers who sign on for six months or more. It plans to unveil
pricing for corporate customers in the second half of its fiscal
year, which began in July.
On the pay-per-use model, Microsoft will charge 12 cents per
hour for computing, 15 cents per gigabyte for storage and 10 cents
per 10,000 storage transactions.
Although its pricing model offers different tiers so a direct
comparison is difficult, Amazon.com charges 12.5 cents per hour and
15 cents per gigabyte for storage in two of its pricing models.
Gardner said Microsoft had priced its Azure service
"aggressively," suggesting the company is serious about
establishing itself as a cloud computing provider, despite qualms
about the impact the move could have on its own business model.
But while Microsoft appears to be willing to practically give
away the computing access in the development phase, Gardner
suggested it might be expected to raise prices once cloud computing
applications moved into the mainstream.
- By Jessica Hodgson, Dow Jones Newswires; 415-439-6455;
jessica.hodgson@dowjones.com
- By Scott Morrison, Dow Jones Newswires; 415-765-6118;
scott.morrison@dowjones.com