As macroeconomic uncertainty continues to slow enterprise spending on public cloud services, Google Cloud is offering a new type of contract, dubbed Flex Agreements, to incentivize enterprises to move workloads to its data centers.
As the name suggests, Flex Agreements offers enterprises the option to migrate their workloads to Google’s data centers with no up-front commitments, along with access to free storage, compute and, network services such as Spanner, BigQuery, and AutoML.
“Some customers don’t have strong visibility into what the future holds, making it challenging to predict their cloud usage needs. That’s why we’re excited to launch a more flexible approach to how customers can consume and pay for Google Cloud services with the introduction of Flex Agreements,” said Kelly Ducourty, vice president of operations at Google Cloud.
As part of this new licensing option, enterprises that sign up will be provided with incentives such as monthly spending discounts, committed use discounts, cloud credits, and access to professional services based on monthly spend, Ducourty added.
In contrast to of Google Cloud’s free tier, which offers $300 in cloud credits and use of over 20 free services for a period of 90 days — essentially as a way to allow users to try out services — Flex Agreements comes into play when an enterprise customer plans to spend money.
Flex Agreements eliminate spending commitments
“A Flex Agreement is used once a customer wants to run production workloads on GCP and will be spending money. With flex agreements they don’t need to make long term agreements to unlock discounts and other incentives,” a Google spokesperson said.
The launch of Flex Agreements is not the company’s first effort to entice enterprise customers with deals promising to bring down their cloud spending. In 2017, the company introduced the Committed Use Discounts scheme, under which it provided discounted prices in exchange for a commitment to use a minimum level of resources for a specified term.
In 2022, the company introduced another plan, dubbed Flexible CUD, that offers predictable and simple flat-rate discounts that apply across multiple virtual machine families and regions.
Demand for cloud services wanes
Google Cloud and its rivals in the public cloud services segment, including AWS and Microsoft, have been experiencing a slowdown in demand in cloud services as enterprises — facing uncertain macroeconomic conditions — rein in their spending.
Google Cloud revenue grew 32% year-on-year for the quarter ended December compared to 38% growth during the prior sequential quarter.
AWS saw a similar trend. Despite a 20% year-on-year increase in revenue, reaching $21.4 billion in the fourth quarter of 2022, AWS’ growth rate was slower compared to the 27.5% and 33% growth seen in third quarter and second quarter, respectively.
Microsoft, too, has seen its cloud demand slow down and is strategizing to use AI-based products to bridge the revenue gap.
The Windows maker reported 29% growth in total cloud revenue, rising to $21.5 billion for the second quarter of fiscal year 2023, slowing from the prior quarter, when the company posted 31% growth for the segment.
As a result of a slowdown in revenue growth in the wake of a hiring sprees during the pandemic, tech companies have implemented sweeping layoffs.