Google Cloud Flex agreements attract users during a slowdown in demand

As macroeconomic uncertainty continues to slow enterprise spending on public cloud services, Google Cloud is offering a new type of contract called Flex Agreements to encourage enterprises to move workloads to its data centers.

As the name suggests, Flex contracts offer businesses the option to move their workloads to Google data centers with no upfront commitment, as well as access to free storage, compute, and networking services like Spanner, BigQuery, and AutoML.

“Some customers do not have clear visibility into the future, making it difficult to predict their cloud usage needs. That’s why we’re excited to introduce a more flexible approach to how customers can consume and pay for Google Cloud services with the introduction of Flex Contracts,” said Kelly Ducourty, VP of Google Cloud Operations.

As part of this new licensing option, registered businesses will be offered incentives such as monthly cost discounts, committed usage discounts, cloud credits and access to professional services based on monthly costs, Ducourty added.

Unlike Google Cloud’s free tier, which offers $300 in cloud credits and uses more than 20 free services for 90 days, primarily as a way for users to try out services, Flex agreements kick in when an enterprise customer plans to spend money;

Flex contracts eliminate cost commitments

“A flex contract is used when a customer wants to run a production workload on GCP and spends money. With flexible contracts, they don’t need to sign long-term contracts to unlock discounts and other incentives,” said a Google representative.

The launch of Flex Agreements isn’t the company’s first attempt to woo enterprise customers with deals that promise to lower their cloud costs. In 2017, the company introduced the “Mandatory Usage Discounts” scheme, within the framework of which it provided discounted prices in return for an obligation to use a minimum level of resources for a certain period.

In 2022, the company introduced another plan called Flexible CUD, which offers predictable and simple flat-rate discounts that apply across multiple VM families and regions.

Demand for cloud services is declining

Google Cloud and its rivals in the public cloud services sector, including AWS and Microsoft, are seeing demand for cloud services slow as businesses facing uncertain macroeconomic conditions rein in spending.

Google Cloud revenue grew 32% year-over-year in the quarter ended in December, up from 38% in the year-ago quarter.

AWS has seen a similar trend. Despite 20% year-over-year revenue growth to $21.4 billion in the fourth quarter of 2022, AWS’s growth rate was slower compared to the 27.5% and 33% growth in the third and second quarters, respectively.

Microsoft has also seen its cloud demand slow and is strategizing to use AI-based products to bridge the revenue gap.

The Windows maker reported a 29% increase in total cloud revenue to $21.5 billion for the second quarter of fiscal 2023, slowing from the previous quarter, when the company posted 31% growth for the segment.

As revenue growth slowed and hiring intensified during the pandemic, tech companies embarked on massive layoffs.

Copyright © 2023 IDG Communications, Inc.

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