Price Wars Reaches the Clouds
If you are a startup or one that uses cloud infrastructure, now is the time to squeeze that service provider for renegotiated contracts and discounts
Amidst the economic slowdown and the resultant fundcrunch, startups are finding ways to cut down their cloud spends by renegotiating contracts with the service providers. Expenses have been reduced by up to 30% as the major players in the cloud infrastructure business seem to be getting the drift.
Not that they had much choice as keeping their costs high would result in a faster cash burn at some of these enterprises, especially the ones that are in the digital retail market, that is now witnessing some turnaround. All of this has resulted in top cloud service providers facing reduced profitability with Amazon, for the first time, even laying off staff from AWS.
In fact, a report published in ET says companies such as Meesho and Dealshare have reduced their cloud infrastructure costs by a whopping 50% as part of their cash flow management. Of course, this brings us to the question of how the key service providers led by Amazon Web Services, Microsoft Azure and Google Cloud Platform are coping with this trend.
What options do service providers have?
Looks like they’ve no other option but to indulge in price wars to keep the startups within their fold while luring away a few from competition. Given that the cost is perceived as the only differentiator between these service providers, players like AWS are trying to reiterate overall efficiencies and agility as their strength.
While Amazon seems to be sticking to its guns, both Microsoft Azure and Google Cloud are seeking to lure some of its customers away with discounts though some of the startups we spoke to didn’t budge. Not because they found AWS irreplaceable but because the entire shift to a new provider itself is costly and time consuming.
Of course, even the startups have to think through
And the more you are into your journey as a startup, the tougher it may prove as several of their internal systems could be deeply integrated with the offerings of the cloud service provider that they went with initially. Of course, there is also the factor of which industry vertical the startup operates in and what sort of data usage and follow ups are required.
Companies that use real-time data exchange require agility as do those with customer-facing deployments. These segments have traditionally gone with AWS which offers close to 250-plus managed services, which is something that its rivals wouldn’t be in a position to offer. And even if they do, there could always be the risk of service metrics expectations.
Some smart options are coming through
Of course, there have been some startups that have gone back to AWS and requested them to extend credits by a year as a sop for staying on. Meanwhile, Microsoft Azure has been making a concerted effort to pick up tech stacks of digital natives by bundling its Microsoft 365 productivity suite as well as the recently launched Co-pilot.
We can already see the shift on the ground as AWS reported a revenue slowdown of 20% year on year for the quarter ended December 2022 while Microsoft Azure and Google reported growth rates of 7% and 32% for the same period as against 19% and 45% a year ago.
This resulted in job cuts with Amazon reducing 9000 positions, including some from AWS operations. Meanwhile, Google’s parent Alphabet shed 12,000 jobs or six per cent of its workforce recently, which also included several from the cloud division. On its part, Microsoft executed three rounds of layoffs thus far.
There’s a bloodbath happening in the clouds and for once the startup industry is smiling!