December 3, 2023

Amazon Web Services, the leader in cloud computing, wants its customers to save money.

Or, at least, roll back its reputation for allowing customers to charge high cloud bills and charge “artificially high” fees, which ClientCompetitors and investors called on AWS to do so.

“When the pandemic started, we started working with a lot of customers on how to reduce their cloud costs,” said Mark Schwartz, enterprise strategist at AWS. “But this isn’t just about an epidemic.”

Cloud giant, which contains a file 38.9% market share, According to analyst firm Gartner, he became the poster child for surprise cloud bill Which customers fear now. But an in-house team of former CIOs, who speak to more than 1,000 companies each year, help customers save on AWS costs, according to Schwartz.

The advisory team has been around since 2016, but it has revitalized its mission to cut costs in response to the pandemic. With the recent downturn in the market, these costs have become even more pressing. Schwartz said the team has been in talks with clients like Airbnb — which has a multi-year contract with AWS worth at least $1.2 billion — and car rental giant Avis about reducing cloud costs during the pandemic.

The idea is that if they save more now, they will become more loyal and spender customers in the future.

“We saw that if we could make customers more successful in the cloud, that would define the future of the cloud,” Schwartz told Insider. “I’m going to client executives and saying, ‘How can I help you be more successful?'” “This is a really long game for us.”

However, the idea of ​​Amazon encouraging its customers to spend less money seems inappropriate. Amazon’s cloud business is a major revenue driver for the company, bringing $18.44 billion In the previous quarter alone.

It is also a fierce competitor, particularly in order to compete with its allies, and it is unlikely to deliberately cede customer dollars to a cloud competitor. One such competitor, Oracle, aims to exploit the frustration with Amazon’s cloud costs to its advantage by lowering its core prices to compete.

And while cloud experts generally agree that it’s hard to compare prices between cloud vendors because of the discount and variety in their services, they also say that AWS is more cost-effective due to its widespread use.

Either way, helping customers save money now is a smart business move, said Neil Lomax, head of sales at AWS IT partner SoftwareONE. He said that customers spend more in the long run once they start using a particular cloud platform and see that they are saving money.

“They are very happy to see customer cloud consumption down more than two or three quarters,” Lomax said. “They know that if they do that, the customer will come back stronger because they gain more confidence in this cloud environment.”

AWS and other cloud providers keep costs down through discounts and FinOps

To help increase confidence in its services, Schwartz said that AWS offers customers discounts on their cloud contracts and ways to track cloud costs within the enterprise.

It offers volume-based deals like booked copies and savings plans, which give the customer a bargain on the sticker price for committing a certain amount of cloud usage. Microsoft and Google also offer discounts for an upfront commitment, but their plans can be considered more flexible than Amazon’s, Cory Quinn, chief economist at cost management firm The Duckbill Group, previously told Insider.

AWS also provides tools to “get transparency” into cloud spending, Schwartz said, although these products have been criticized for not being sophisticated enough to help customers see where they’re actually spending the most.

“Cloud vendors don’t make it easy to spot,” said Joe Duffy, CEO of Pulumi, a cloud startup that primarily uses AWS. “My bill just went from $10,000 to $100,000 this month. Why? “

But there are other methods of cloud savings companies can deploy, no matter which vendor you use.

FinOps, or the Cloud Finance Department, encourages developers to take responsibility for what they spend on the cloud. CEO of Supported by Google The nonprofit FinOps Foundation, which was set up to certify professionals in such management skills, told Insider last year that all major cloud providers were in talks to join the group.

While AWS is not an official member yet, Schwartz says he recommends customers the FinOps method. There is also a growing market for third-party software meant to help rein in cloud costs.

“If you don’t deal with it, everyone starts to lose faith in the bill that comes in every month,” Lomax said.

Cloud spending under scrutiny again amid market downturn

AWS is criticized not only for what it charges per gigabyte or second of computing use — it also charges for moving data from one place to another, which can prevent customers from switching to other cloud providers.

The recent downturn in the market has escalated those criticisms. Companies are under increasing pressure to reconsider where they spend their money, and that has put the cost of the cloud under greater scrutiny, said Martin Casado, general partner at venture capital giant Andreessen Horowitz.

“This is an oligopoly, it’s three companies that control everything and have been able to maintain margins for a decade,” he said, referring to AWS, Microsoft and Google.

Regardless of any cost savings, Casado argues that the total cost of cloud computing is still too high due to the margins that cloud giants place on their cloud services.

But Schwartz says the resilience of the cloud, which can be curtailed when business is slower, is a value proposition that wins regardless of any economic environment.

“We often advise clients, which I know sounds odd, on how to reduce their cloud costs,” he said. “We want part of the value proposition for the cloud to be cost optimization.”

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