Earlier today Microsoft unveiled it's pricing model for its forthcoming Windows Azure cloud services platform. What's interesting about the pricing model is that they seem to be taking direct aim at Amazon Web Services.

To recap, Amazon charges 12.5 cents per hour for a basic Windows Server instance in contrast Microsoft's stated that their price will be 12 cents.They noted that the service will remain free until November. I should also point out that it still isn't clear if comparing Windows Azure to Amazon's Windows EC2 is a fair comparison given the rather drastic differences in functionality.

Microsoft calls Windows Azure a "cloud services operating system" that serves as the development, service hosting and service management environment for the Azure Platform. They've also said they will offer a private data center version of Azure that will be capable of being hosted within a "private cloud" context. This will be most likely as part of their upcoming virtual infrastructure platform "hyper-v" possibly as a virtual machine image. Currently to build applications and services on Windows Azure, developers can use their existing Microsoft Visual Studio 2008 expertise with the ability to easily run highly scalable ASP.NET Web applications or .NET code in the MS cloud.

In a post this afternoon, John Foley at Informationweek did the math on Azure's new pricing scheme and had this to say "Microsoft officials had previously indicated that Windows Azure pricing would be competitive, but the price differential may be more symbolic than material. At their published rates, if you ran a Window server in the cloud every hour of the day for an entire year, you'd save a mere $43.80 going with Microsoft. Indeed, if penny pinching is important, Amazon Web Services actually has a cheaper alternative, though it's not Windows. Amazon charges 10 cents per hour for "small" virtualized Linux and Unix servers."

Personally I believe that the half cent price difference is quite certainly material for those running larger cloud application deployments. A few cents can quickly add up. For me the move indicates that Microsoft is certainly not afraid to subsidize its cloud pricing in order to take a larger piece of the cloud market and with the large cash reserves Microsoft is said to have, they can certainly afford to engage in a price war. The bigger question will be how other more closely related cloud platform providers will adjust their pricing models? Right now all signs are starting to point a cloud price war. I suppose time will tell if I'm right or not.

(Disclosure, I am on the Microsoft Windows Azure Advisory Council)