UPDATED 00:20 EDT / JULY 07 2015

NEWS

Microsoft to INCREASE Azure prices, blames currency movements

Microsoft is planning to buck the trend of incessant price cut after price cut in the public cloud with a sudden increase in the costs of using its Azure cloud.

The mildly surprising announcement came by way of The Register, which was told by Microsoft that it “… continues to evaluate the market conditions in the countries in which we operate. As a result, we will be adjusting the prices for the company’s enterprise cloud services in Australia, starting 1 August, 2015.”

Australian media first picked up on the story over a week ago, when Microsoft sent out an official email to all existing Azure customers in the country stating that prices would rise by a whopping 26 percent effective from August 1. The email stated:

“Microsoft periodically assesses the impact of its local pricing to ensure there is a reasonable alignment with the needs of customers, partners, and the marketplace, and may make changes in response to its assessment and feedback. Effective August 1, 2015, local prices for Azure and Azure Marketplace in Australian dollars will increase by 26 per cent to more closely align with prices in most markets.”

But while Australia looks set to be hit the hardest, it won’t be the only affected region. Blogger Aidan Finn has since obtained a similar email sent out to customers in the Eurozone, which tells them to expect an 11 percent price hike in the near future.

Microsoft has confirmed this to The Register, saying: “Cloud prices are being revised for new and renewing contracts billed in euro, Danish krone, Norwegian krone, Swedish krona, Canadian dollar and Australian dollar. Until July 31 2015 customers can continue to acquire Microsoft cloud products at current prices, as well as renew licensing agreements at current prices before the adjustment.”

Currency pressure

According to The Register, Microsoft is justifying the price hikes based on exchange rates. Many currencies around the world have seen their fortunes decline against the U.S. dollar, and that includes the Aussie dollar, which was worth US$0.94 when Microsoft first opened its Australian Azure regions, but has since declined to just $0.74. The Euro also has its problems, as anyone familiar with the Greek debt crisis will be keenly aware of. For its part, Microsoft sets regional prices taking into consideration both local operating costs and the exchange rate, and has apparently come to the conclusion that customers will need to cough up a little more to keep its business in good shape.

As surprising as cloud price increases are, they probably shouldn’t be. All throughout the year a steady stream of tech firms have been bemoaning their poor financial results due to the “strength of the U.S. dollar”, so it’s little wonder that cloud providers are also being affected.

Microsoft’s move means that Amazon Web Services and Google will now be in the spotlight, with the industry waiting to see if they follow Microsoft’s lead. In the past it’s usually been the case that as soon as one of the “big three” vendors adjusts their prices, the other two quickly follow suit. This time it could be different though, as both AWS and Google have been at the forefront of the “cloud wars”, fighting hard to keep customer’s costs to a minimum.

No doubt both companies will be feeling the heat of currency movements just as much as Microsoft is, and a second factor that could increase the pressure is upcoming legislation which could make it hard to make use of tax loopholes for non-domestic sales.


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