Amazon Web Services Slashes Storage Prices

Amazon, at its first developer conference Re:Invent, announced plans for significant price reductions. Amazon Web Services Senior VP Andy Jassy said the cloud supplier will cut storage prices 24% to 27% on Dec. 1.

Soon after making that announcement, Jassy welcomed Netflix CEO Reed Hastings, who had a big smile, to the auditorium stage in Las Vegas. Netflix is a heavy user of Amazon servers to stream video to customers. Hastings said his firm in 2008 used a million hours of streaming time a month. It now uses a billion hours, he said, along with heavy use of Amazon's Simple Storage Service. The S3 price cut was welcome news for his balance sheet, he told Jassy.

Jassy said the price cuts would be implemented throughout Amazon's all nine regional data centers. He said Amazon has frequently cut prices because it intends to be a high volume, low margin business. That's unlike software suppliers used to 60% to 80% gross margins that are now "inserting the word 'cloud' into their old product lines," he said. A traditional software supplier can't convert to cloud supplier overnight because it doesn't understand the high volume, low margin business model, he claimed.

"You have to be careful who is telling you what. If you look at what they're actually offering, it doesn't have any of the characteristics that should be associated with cloud" computing, he said. They include low upfront or capital expense cost, elasticity and an ability to flexibly provision servers as needed, without increasing your own manpower.

AWS announced a major round of prices cuts on core services last March that ranged between 5% to 20%. Some EC2 Reserved Instance usage, where customers make a down payment on long term use of a virtual server, was cut 37%. At the time, VP Adam Selipsky said price cutting is part of the company's DNA. Since then, it's announced several other individual cuts to relational database services (14%) and Elasticache (16%).

AWS will also have a new, low-cost, petabyte-scale data warehouse service, Redshift, available sometime in 2013, he noted. The service is available to select customers now in preview stage.

[ Want to learn more about Amazon's upcoming Redshift Data Warehouse service? See Amazon Debuts Low Cost, Big Data Warehousing. ]

Hastings provided insight into something that Amazon working on. VMware has been able to move a running virtual machine around the data center for several years, he noted. "That's extremely demanding to do at scale. But once you can move a running, live instance, you can search for the best compute server offering. There would be tremendous efficiency gains. Good luck on that and hopefully you can come up with it in the next couple years," he told Jassy as he shook hands to depart. The Amazon exec made no effort to deny such a service is part of Amazon's long term roadmap.

Ted Myerson, senior VP of global access services for NASDAQ, was another Amazon customer pulled into the spotlight. He said NASDAQ is building a regulatory-compliant environment that runs on Amazon's EC2 and will be offered as FinCloud to financial services firms and exchanges.

Financial services companies constantly "retool and rework their legacy system to keep them in compliance. Amazon is offering an alternative, building financial services business logic atop an already compliant environment, where data is captured and stored and where transactions are subject to audit.

"Why did we do this on Amazon?" Myerson asked rhetorically. "Very simply, Amazon Web Services has the experience."

In 2003, Amazon.com, AWS parent company, was a $5.2 billion Web business. Each day Amazon adds enough server capacity to power such a business, Jassy said. Amazon Simple Storage Service, or S3, has 1.3 trillion objects stored on it and routinely processes 800,000 concurrent requests, Jassy said.

AWS operates a data center complex in northern Virginia, a U.S. government-specialized service, and two data centers on the West Coast, with one in Washington and one in northern California. Outside the U.S., it operates data centers in Tokyo, Singapore, Sydney, Australia, and Dublin, Ireland. It also operates one in Brazil. Most data centers have more than one availability zone, or independent sub-data center with its own power supply and communications. It offers 25 availability zones in all.

The multiple and widespread AWS data centers constitutes an advantage to a global business that decides to adopt its infrastructure as a service. It can place applications in locations around the world close to concentrations of its customers, Jassy noted.

CA Technologies and BMC were two partners named as adding virtual machine management capabilities to their systems management tools to encompass both internal and external IaaS workloads. Amazon is working with such partners to make it easier for customers to implement hybrid cloud computing, where related workloads may be running both on-premises and in the external, public cloud, as demand dictates.