AWS reveals the secret behind its plummeting prices
Tech giant has slashed prices eight times in April 2014
Amazon Web Services (AWS) has said its unique "flywheel" model and its massive global scale are behind the regular price cuts which helps keep the company competitive.
AWS, VMware, Google and Microsoft have been locked in a cloud price war for more than a year, and on AWS' earnings call back in October, it said it has slashed its prices eight times since April 2014.
Speaking to CRN, AWS' UK tech evangelist Ian Massingham revealed how AWS manages to continually cut prices in this way.
He described the Amazon "flywheel" model, which was initially put in place for its online retail business.
"We [cut prices] on a proactive basis - it is not responding to the competitors," he said. "There's a very well-known flywheel in retail - how do we drive customers to want to use Amazon.com? We're starting off with selection - we try to have a broad range of different products. That selection encourages customers to come to the site to buy things. When you've got customers on the site, it encourages other merchants to come to the site to sell products. Once you've got other merchants, they bring more selection [and so on]. You're spinning this wheel."
He said the philosophy worked so well for Amazon, the company tweaked it especially for the AWS unit.
"We start off with innovation, which is led by customers," he said. "Within our development process, [we say] ‘what can we do for you which will make your life easier? What do you currently focus on which you don't want to have to focus on?
"That leads us to launch new services, and those services lead to consumption. That consumption leads us to be able to optimise the platform, and once we have optimised the platform - that enables us to lower prices. Once we lower prices - that leads to more adoption, which leads to more ideas for innovation. And so we spin the wheel.
"One of the things which is unique to AWS is the important scale factor that is in play. The virtue of our scale globally is a really important attribute that means we're able to lower prices in a way which is really difficult for other competitors because they don't operate at the same scale we do."
London calling
Earlier on this year, AWS announced the UK would be the home of its next "region".
Massingham explained what makes a "region" different to a single datacentre.
"[A region is] at least two customer-facing availability zones that they can use and, in practice, we have other infrastructure in place we can deploy that's invisible to customers but is part of our service platform if you like.
"When we talk about a region, we're talking about multiple physical datacentres customers can then choose to make use of to deliver the availability and price point they want. It's a model where you can build very, very high availability, or you can choose not to. You can optimise your costs against the availability you want to deliver."
He said AWS already offers European data sovereignty through its regions in Ireland and Germany, but said for some British customers - particularly in the public sector - setting one up locally will be a bonus.