Amazon, Microsoft offer little relief to small cloud clients
By MYBRANDBOOK
The ability to rent computing power online has revolutionized the internet economy and turned a trio of companies - Amazon, Microsoft Corp. and Alphabet Inc.’s Google - into the indispensable utilities of the web.
With the economic devastation of Covid-19, entrepreneurs like John Lyotier feel the fate of their businesses rests on the benevolence of their cloud provider. While Amazon Web Services, or AWS, and Microsoft are restructuring some large contracts on a case-by-case basis, according to people familiar with the decisions, smaller companies aren’t receiving the same flexibility. Half a dozen startup executives said recent appeals to these cloud companies have gone unanswered.
While older technology providers, such as Cisco Systems Inc., are offering credits to customers, the major cloud companies haven’t made any public announcements about deferring or cutting bills for clients.
“They’ve been pretty radio silent,” said Jason Kim, co-founder Taloflow, which advises businesses on managing AWS bills.
Cloud providers attracted so many companies over the past decade, in part, with the flexibility of the model. Businesses can start with a credit card, often on a pay-for-what-you-use basis, rather than pay for a back-room server or mainframe computer. Demand drops, and, typically, so does cloud usage and the bill.
But the sales strategy for the big cloud companies has been to ink long-term deals. Customers typically receive discounts on list prices in exchange for minimum spending thresholds. As of the end of December, AWS recorded $29.8 billion, Google recorded $11.4 billion in cloud sales while, Microsoft sells cloud services, as well as much of its on-premise software, via multiyear agreements.
Startups and other companies locked into these contracts feel particularity hurt. “Their revenues have sunk 50% or 60%, but their costs have remained static,” said Kim.
“We treat payment terms with our customers or partners as confidential and we’re not able to disclose details,” a Google Cloud spokesperson said in a statement.
An AWS spokesman said customers can turn off cloud services in a way that wouldn’t be possible with corporate-owned data centers. The company published a blog earlier this month with tips on how to reduce AWS costs during the pandemic. “This is a very difficult time for some of our customers, and we are actively working across a number of dimensions to help them manage costs,” the spokesman said.
Microsoft, like other vendors, generally increases the price when existing customers sign up for another multiyear contract. The company is cutting those mark-ups in response to the pandemic. Microsoft also is giving some clients a discount on money owed for using more services than paid for upfront.
Before the pandemic, Google had been offering a year or 18 months of free productivity tools in an effort to capture Microsoft clients. Google has bolstered those efforts recently.
Microsoft and Google have recently given some customers more time to pay bills, the Information reported earlier.
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