Amazon cuts cloud prices up to 80% (your move, Google & Microsoft)

A very definite price war is going on in cloud services right now.

Today, Amazon announced massive price cuts of up to 80 percent on dedicated servers in its Elastic Cloud (EC2) virtual private cloud offering, dropping fees for each geographical region an Amazon cloud customer is using from $10/hour to $2/hour, while on-demand dedicated instance prices will drop up to 37 percent.

“This is a huge win for AWS users, especially for larger enterprises that need an on-demand solutions to better manage burst workloads,” Cameron Peron of cloud services company Newvem told me.

It was only little more than a month ago that Google, which is getting significantly serious about its cloud offerings for other companies, reduced App Engine storage and operations prices by up to 25 percent. Rackspace recently cut prices, and Microsoft, which seems like a cloud newbie to some but already has a billion-dollar business in Azure, recently chopped prices as well.

Amazon Dedicated Instances are specific servers that are only used for a specific customer, giving you additional protection from other Amazon clients who experience runaway growth. The tradeoff is simple: You pay Amazon a guaranteed monthly fee, but if you utilize it well, it’s cheaper than relying only on communal, on-demand resources.

“They are ideal for workloads where corporate policies or industry regulations require that your EC2 instances be isolated from instances that belong to other customers at the host hardware level,” Amazon said in the pricing announcement.

Interestingly, according to a recent third-party study, 57 percent of companies can save money by switching to reserved instances.

One advantage that Microsoft and Google have is that their cloud offerings — especially Microsoft’s — tied very easily and heavily into their development tools, for instance cloud-enabling mobile apps right inside your IDE in just a few lines of Javascript. Amazon, on the other hand, has more history in offering public cloud services.

The question is becoming, however, how long these price cuts are sustainable, and at what point will service quality levels start to deteriorate. Amazon has had its share of outages over the years, affecting customers like Netflix, Instagram, and Pinterest, but also affecting its own e-commerce capability.

Everyone likes low prices, but at what cost to reliability?

Amazon said the changes would be effective July 1 and would be automatically applied to customers’ bills.