Amazon Leads Price War: Drops AWS Pricing Again, Leans Heavy on Reserved Instances

According to Amazon’s blog today, the company is now on their 19th price cut since AWS debuted, but who’s counting? Well, they are, apparently. The company is lowering pricing on EC2 instances, ElastiCache, Amazon Relational Database Service (RDS) and Amazon Elastic Map Reduce are all dropping significantly. Significantly, Amazon is heavily emphasizing its price cuts on Reserved Instances.

The EC2 pricing is dropping by up to 10% for on-demand instances. If you’re consuming Reserved Instances, Amazon is dropping prices up to 37%.

Amazon is also appealing to heavy users with its price cuts, offering volume discounts of 10% for customers that own more than $250,000 of Reserved Instances for additional Reserved Instances. After the $2 million mark, Amazon is offering a 20% discount, and Amazon is asking customers to call if they pass the $5 million threshold.

The prices for RDS are dropping by similar amounts. If you’re using on-demand RDS, pricing drops by up to 10%. Amazon has shaved pricing as much as 42% for Reserved Instances of RDS. Likewise, ElastiCache is dropping by up to 10% if you use on-demand instances. (ElastiCache doesn’t have reserved pricing on its pricing page.)

What’s interesting, aside from the actual price drop, is the emphasis Amazon is putting on the Reserved Instances. By moving more customers to Reserved Instances, Amazon can better plan its capacity needs for the next few years and
helps lock customers into using AWS. Companies could switch to RackSpace, Google or another provider – but they’d be losing some significant chunks of change in doing so.

This seems like a pretty smart move on Amazon’s part, and I’m wondering how long it’s going to take for other providers to introduce something similar. As far as I know, Amazon is the only major player offering this kind of pricing scheme and seems to be handily undercutting the other players.