Deciphering Microsoft Azure’s New Pricing and Strategic Shifts: A Guide for Cloud Infrastructure Customers

Deciphering Microsoft Azure’s New Pricing and Strategic Shifts: A Guide for Cloud Infrastructure Customers

Microsoft’s Azure cloud services have become a popular choice for businesses seeking scalable and efficient cloud infrastructure. However, recent developments have significant implications for Azure customers. On April 1st, 2023, Microsoft announced a 9-15% price increase for European Azure customers. This change, coupled with revelations about Azure’s market share and an unexpected move to offer ChatGPT for free internally, has stirred concerns among customers. In this article, we explore the reasons behind these developments and the potential impact on businesses.

1. Microsoft Raises Azure Pricing

On April 1st, 2023, Microsoft implemented an across the board 9-15% price increase for European Azure services. The decision was driven by the need to harmonize Azure’s pricing with that of the US dollar, considering fluctuating currency exchange rates and market conditions. Periodic adjustments are common practice for companies like Microsoft, ensuring reasonable alignment across regions and safeguarding against the effects of currency fluctuations.

For customers operating under Enterprise Agreements (EA), Enterprise Subscription Agreements (EAS), Microsoft Products & Services Agreement (MPSA), or Server and Cloud Enrollments (SCE), existing agreements provide some protection against the price hike. They will either pay the lower of the baseline price or the new market price, preventing an increase above their baseline prices. However, for customers under the pay-as-you-go model (MOSP/Web-Direct), the new pricing took effect April 1st earlier this year bringing it in line with US dollar pricing.

2. Azure’s True Market Share Revealed

Microsoft policy has always maintained a policy of not breaking out revenues for Azure obscuring what the actual market share of their cloud infrastructure business was. Recently however, as part of an antitrust court case regulators unveiled internal documents that shed light on this well-kept secret. It was revealed that Azure generated $34 billion in revenue over a 12-month period ending in June 2022, while its primary rival, Amazon Web Services Inc. (AWS), generated $72 billion in the same timeframe.

The revelation indicated that Azure’s market share in the cloud computing infrastructure business is significantly smaller than previously estimated. While Azure remains a major player, this disclosure has raised concerns among investors and customers alike impacting their perception of Microsoft’s cloud success.

3. Free Offering of ChatGPT to Internal Microsoft Product Groups

Microsoft’s decision to offer ChatGPT, a computationally intensive machine learning application, for free to internal product groups has also garnered attention. While this move might be seen as a strategic investment in improving product development and user experience, it has implications for existing Azure customers. Offering such a computationally costly application for free internally means the investment burden is transferred to existing paying customers including Azure customers!

Additionally, concerns arise over Microsoft’s compute capacity, given the apparent constraints in providing such a high-cost, high-compute application for free. This could lead to paying customers competing with internal product groups for available infrastructure resources and potentially impacting service quality as well as additional impairments on pricing.

How to Maximize Your Azure Investments

As Microsoft Azure moves towards a new pricing structure and revelations about its market share emerge, customers and investors must navigate potential implications. The price increase for European Azure services aims to align pricing with US dollar standards and account for currency fluctuations. However, it may pose challenges for businesses operating under different agreements. The disclosure of Azure’s true revenue highlights the need for increased transparency in the cloud computing industry, offering more accurate insights to investors and customers alike.

Moreover, Microsoft’s decision to offer ChatGPT for free to internal product groups raises questions about compute capacity and its impact on paying customers’ service quality. While Azure remains a reliable cloud solution, businesses should carefully assess the pricing changes and consider their long-term cloud strategy to make informed decisions that align with their objectives. Microsoft’s commitment to providing predictability through bi-annual pricing reviews should be closely monitored, as it affects customers globally.

Maximizing your Azure investments continues to mean focusing on securing the best deal and optimizing your cloud investment at all times. There are many paths to that goal. The most effective way to manage spending is to make smart cloud cost-allocation decisions, and keep costs under control by using a dedicated third-party tool like Yotascale. Learn more about Yotascale’s Azure capabilities here.

With Yotascale, you a get powerful, in-depth, Azure cloud cost management solution that gives you granular, real-time, unified view of forecasted and actual cloud spend across container and non-container workloads. It scales and automates real-time cost reporting, anomaly detection, and other tasks across your multi-cloud environment. As providers continue to expand their AI offerings, it falls upon their infrastructure customers to police terms of their contracts and utilize third-party products like Yotascale to mitigate the developing macroeconomic situation. Discover the Yotascale difference today by scheduling a demo now.