News

Microsoft Doles Out Tier-Based Discounts for Windows Azure

• By Kurt Mackie
• September 29, 2012

Windows Azure subscribers will now receive discounts based on their monthly financial commitments, Microsoft announced on Thursday.

The discounts, relative to pay-as-you-go pricing, are:

• 20 percent for organizations that make monthly payments of $500 to $14,999
• 23 percent for monthly payments of $15,000 to $39,999
• 27 percent for monthly payments of $40,000 and higher

To be eligible for the discounts, an organization has to commit to six months or 12 months of service, but there are no refunds for unused time should the service be canceled. Organizations committing to 12 months of service get an additional 2.5 percent discount, plus, if they pay the full amount up front, Microsoft allows another 2.5 percent discount on top.

The monthly discounts apparently go away if an organization's Window Azure resource use exceeds what was committed to financially. Here's how Microsoft explains it in a blog post:

"If your resource usage exceeds the level provided in your commitment plan, there’s no penalty, you just pay the Pay As You Go rate as you would normally for the extra usage." 

Microsoft described this discount plan as "new," with the aim of giving application developers greater flexibility.

"The announcement regarding Monetary Commitments was a result of feedback we received from customers that they rarely know what types of services they're going to need when they start developing an application, so we wanted to provide them with an offering that allowed them the flexibility to use their commitment across multiple services, versus committing to a single service or instance type," a Microsoft spokesperson explained via e-mail.

However, Microsoft apparently had similar programs in place.

"I think these latest offerings are tweaks and extensions to a pricing model that was already available (the Development Accelerator)," explained Rob Sanfilippo, an analyst at the Directions on Microsoft independent consulting firm, via e-mail. "Microsoft has continually tuned Azure pricing since it was launched, mostly resulting in simplifications and price reductions that benefit customers (for example, all inbound data transfers are now free and the Access Control service has been offered free as a promotion for a while now). The billing process has also been improved with more detailed reporting on the resources consumed."

While the discount plan sounds somewhat simple, Windows Azure users have to keep track their account balances before the end of each month to ensure that they get the discounts. But that's probably the simplest part of assessing Windows Azure billing. The monthly rate that organizations pay is based on their use of multiple components within Windows Azure. Essentially, organizations using Windows Azure have to pay for the compute time, data storage and data access, plus the bandwidth of the data transferred out of the cloud. Those various cloud computing elements get priced at specific rates, usually per GB. There's also a monthly fee rolled into the overall cost if an organization uses SQL Azure.

Microsoft provides a Windows Azure Pricing Calculator to help organizations make an estimate of the monthly costs, which can be accessed here. Sanfilippo described using the calculator as just a "starting point."

"Customers should be diligent in observing trends of resource usage as they deploy to Azure, keeping in mind peak periods while not keeping too many resources active when they're not being used (for example, Microsoft charges for deployed but inactive compute instances, so customers shouldn't always keep these active when extra scaling isn't required)," he explained. "Observations of the first few months of costs for a deployment are probably the best way to accurately measure what the ongoing costs will be."

Sanfilippo suggested that Microsoft has been motivated to keep up with Amazon by its pricing changes. Amazon Web Services also offers discounts based on one-year and three-year terms, which are described as "reserved instance volume discounts."

If an organization's total reserved instances range from $250,000 to $2,000,000, then Amazon allows a 10 percent discount on upfront fees and a 10 percent discount on hourly rates. Those discounts go up to 20 percent each if the total reserved instances range from $2,000,000 to $5,000,000.