Amazon.com Lures Businesses to the Cloud With Rate Cut
February 7, 2012
Amazon.com Inc. lowered rates on computer storage it rents over the Internet, as the company applies its strategy of aggressive pricing to cloud computing.
The Seattle-based company cut its price plans by more than 10% for the first 500 terabytes of data that customers store in Amazon’s Internet-based S3 service, which is used for hosting media, backing up files and storing data for businesses to analyze. A terabyte is double the amount of space on a typical laptop computer’s hard drive.
“High volume/low margin businesses are in our DNA,” an Amazon spokeswoman said in an email. “Driving cost efficiencies is an area we’re going to continue to focus on.”…
Amazon’s Internet-services business–which offers Internet-based storage, processing power and other computing infrastructure to businesses–has lowered prices 17 times over the past five years, including five price cuts for S3, the spokeswoman said.
The move came amid questions about the online-marketplace operator’s ability to make money as fast as it spends it. Last week, Amazon reported its fourth-quarter profit plunged 57% as it continued to spend on warehouses, technology and its Kindle electronic devices. Revenue rose 35%.
Amazon’s Internet-services division represents a small part of the company’s overall sales and profits, but the division is seen as having long-term strategic value as it gives the company a foothold in cloud computing.
The price cuts are about “Amazon showing that, part of its differentiation, part of its strength, is continually improving on features, capability and price,” Forrester Research Principal Analyst Frank Gillett said.
The approach has paid off in at least one aspect. Though specific data on Amazon’s market share in cloud-based infrastructure services aren’t available, the company is widely regarded as the leader in the space, Gillett said.
The company has indicated its cloud business is accelerating. The number of items stored in Amazon’s S3 service nearly tripled last year, the fastest growth since the product launched in 2006, Amazon said.
Amazon’s Internet-services division, which serves businesses’ technology needs, is separate from the company’s digital media locker for consumers, dubbed Amazon Cloud Drive.