Amazon Web Services enacts 'significant' price cut

Reserved Instances of EC2 will cost up to 42 percent less

Amazon Web Services has cut its prices for the 19th time in six years in a bid to fend off competition from the likes of Microsoft Azure and Rackspace.

"AWS works hard to lower our costs so that we can pass those savings back to our customers," the company said in a blog post late Monday. "We look to reduce hardware costs, improve operational efficiencies, lower power consumption and innovate in many other areas of our business so we can be more efficient."

This has resulted in a "significant price decrease" for Amazon's Elastic Compute Cloud (EC2), Relational Database Service (RDS), ElastiCache and Elastic Map Reduce, the blog added.

While Amazon, like other cloud infrastructure service providers, allows users to purchase computing power by the hour, it also offers Reserved Instances, where in exchange for paying for a longer fixed term, customers get lower pricing. The new price cuts announced Monday will vary according to geographic region, with costs for EC2 Reserved Instances falling up to 37%, according to the blog. On-demand pricing will see a more modest cut of up to 10%.

Meanwhile, costs of new reserved Instances of Amazon RDS, which provides a scalable relational database powered by either MySQL or Oracle, will drop up to 42%, while on-demand pricing will be lowered by up to 10%, according to the blog. AWS has posted a list of all the new prices on its website.

Amazon made a concurrent announcement on Monday aimed at large enterprises.

"One misperception we sometimes hear is that while EC2 is a phenomenal deal for smaller businesses, the cost benefit may diminish for large customers who achieve scale," the blog states. In fact, "those who take the time to rigorously run the numbers see significant cost advantages in using EC2 regardless of the size of their operations."

To this end, AWS is rolling out an option called Reserved Instance volume tiers. "In order to determine what tier you qualify for, you add up all of the upfront Reserved Instance payments for any Reserved Instances that you own," the blog states. If you own more than $250,000 of Reserved Instances, you qualify for a 10% discount on any additional Reserved Instances you buy (that discount applies to both the upfront and the usage prices). If you own more than $2 Million of Reserved Instances, you qualify for a 20% discount on any new Reserved Instances you buy."

Those who spend more than $5 million on Reserved Instances can contact AWS and discuss how prices could be further reduced, according to the blog.

Chris Kanaracus covers enterprise software and general technology breaking news for The IDG News Service. Chris's e-mail address is

Copyright © 2012 IDG Communications, Inc.

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