This week Amazon introduced new price reductions for Reserved Instances that run Unix, Red Hat Enterprise Linux or SUSE Linux Enterprise Server.  Jeff Bar, the Chief Evangelist for Amazon Web Services, announced the good news in one of his latest posts on the company’s blog.

The size of the discount varies per region: it goes up to 27.7 percent for High-Memory (m2) Reversed Instances hosted at Amazon’s Ireland location, and drops to 0 for South American customers that rent High-CPU(c1) instances.

Reversed Instances differ from the more widely used on-demand instances in that customers commit a substantial fee upfront in exchange for a massive price cut. This service caters primarily to corporate users with fixed budgets whose main priority is long-term ROI.

Thanks to the fast pace of innovation (and Moore’s Law), cloud providers – which operate their data centers far more efficiently than their clients- can afford to make drastic cost cuts every now and then. Amazon has been doing this for years.

This latest announcement stands out because it can be seen as a response to equally significant news from the competition.

Last month Rackspace slashed the price of its Content Delivery Network service by 30 percent from $0.18 per GB to $0.12. The move was interpreted as an attempt to target Amazon’s Achilles’ heel: high bandwidth costs and complicated pricing plans.

VMware, which competes with Amazon over enterprise customers, also had some big news that concerns the public cloud provider At a recent partner event CEO Pat Gelsinger and COO Carl Eschenbach recognized the threat that AWS poses to their company and disclosed new channel initiatives that will give clients more incentive to spend their IT budgets on licenses instead of public cloud services.