Cloud-computing leader Amazon Web Services wants its customers to save money.
Or, at least, undo its reputation for allowing customers to rack up high cloud bills and charging “artificially high” fees, which customers, competitors, and investors have called out AWS for doing.
“When the pandemic started, we started to work with a lot of customers on how they can reduce their cloud costs,” said Mark Schwartz, an enterprise strategist at AWS. “But that’s not just special for the pandemic.”
The cloud giant, which has a 38.9% share of the market, according to analyst firm Gartner, has become a poster child for the surprise cloud bill that customers now dread. But an in-house team of former chief information and technology officers, who talk to over 1,000 companies each year, are helping customers save on their AWS costs, according to Schwartz.
The advisory team has been around since 2016, but reupped its mission to cut costs in response to the pandemic. With the recent market downturn, those costs have become even more pressing. The team has had conversations with customers like Airbnb — which has a multiyear contract with AWS worth at least $1.2 billion — and car-rental giant Avis about reducing cloud costs during the pandemic, Schwartz said.
The idea is that if they save more now, they’ll become more loyal, bigger-spending customers in the future.
“Our view is that if we can make customers more successful in the cloud, that is going to determine the future of the cloud,” Schwartz told Insider. “I’m going to customer executives and saying, ‘How can I help you be more successful?’ And that’s really the long game for us.”
Still, the idea of Amazon encouraging its own customers to spend less money seems incongruous. Amazon’s cloud business is a major revenue driver for the company, bringing in $18.44 billion in the previous quarter alone.
It’s also a fierce competitor, notably for competing against its own allies, and unlikely to willingly cede customer dollars to a cloud rival. One of those rivals, Oracle, has aimed to use frustration with Amazon’s cloud costs to its advantage by slashing its own base prices to compete.
And while cloud experts generally agree it’s hard to compare pricing between cloud vendors because of discounting and variability in their services, they also say AWS stands out for its cost because it’s so widely used.
Either way, helping customers save money now is a savvy business move, Neil Lomax, the president of sales at AWS IT partner SoftwareONE, said. Customers spend more in the long term once they start using a certain cloud platform and see they’re saving money, he said.
“They’re very happy to see a customer’s cloud consumption go down over two or three quarters,” Lomax said. “They know that if they do that, the customer will come back stronger because they get way more confidence in that cloud environment.”
To help grow confidence in its services, Schwartz said AWS offers customers discounts on their cloud contracts and ways to track cloud costs within an organization.
It offers volume-based deals such as reserved instances and savings plans, which gives the customer a deal on the sticker price for committing to 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, Corey Quinn, the chief economist at cost-management firm The Duckbill Group, previously told Insider.
AWS also provides tools for “getting transparency” into cloud spending, Schwartz said, though those products have been criticized for not being sophisticated enough to help customers figure out where they’re actually spending too much.
“The cloud vendors do not make it easy to figure out, ‘My bill just skyrocketed from $10,000 to $100,000 this month. Why?'” said Joe Duffy, the CEO of Pulumi, a cloud startup that primarily uses AWS.
But there are other approaches to cloud savings that companies can deploy, no matter which vendor they use.
FinOps, or cloud finance management, encourages developers to take accountability for what they spend on cloud. The executive director of the Google-backed nonprofit FinOps Foundation, which was established to certify professionals in such management skills, told Insider last year that all the major cloud providers are in talks to join the group.
While AWS isn’t an official member yet, Schwartz says he recommends the FinOps method to customers. There’s also a growing market of third-party software that aims to help rein in cloud costs.
“If you don’t get your hands around it, then everybody starts to lose confidence in the bill that comes through every month,” Lomax said.
The criticism of AWS isn’t just for what it charges per gigabyte or second of computing usage — it also charges fees for moving data from place to place, which can deter customers from switching to other cloud providers.
The recent market downturn has ratcheted up that criticism. Companies are under growing pressure to reexamine where they’re spending their cash, and that has put the cost of cloud under greater scrutiny, said Martin Casado, a general partner at venture-capital giant Andreessen Horowitz.
“This is an oligopoly, it’s three companies that control everything and they’ve been able to maintain margins for a decade,” he said, referring to AWS, Microsoft, and Google.
Any cost savings aside, Casado argues that the overall cost of cloud is still too high because of the margins those cloud giants put on top of their cloud services.
But Schwartz says that the flexibility of cloud, which can be dialed down when business is slower, is a value proposition that wins out regardless of any economic environment.
“We’re often advising customers, I know it 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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