How multiyear contracts with business changing the economics of cloud

As it scaled its way to unicorn status and beyond over the last few years, Pinterest was more focused on adding features to its image-sharing social media site and ensuring its reliability than how much it was spending on cloud services — right up until the moment it realized it had a spending problem.

Pinterest’s resulting five-year $750 million deal with Amazon Web Services is just one example of how spending on cloud services is evolving beyond its roots as an ad-hoc credit-card driven process. In exchange for a more predictable level of spending at a discount to its prior rate, Pinterest happily hitched its wagon to AWS in 2017 for five years, and it’s not alone in adopting such a strategy.

Cloud computing has changed so many things about how the business world uses information technology, and one of the biggest differences is how money flows between buyers of information technology and their suppliers. Over the past year or so, the impact of those changes has materialized in several ways:

  • A surge in multiyear cloud-computing deals that lock in discounted rates in exchange for minimum levels of spending.
  • Companies that provide services around identifying and tracking cloud spending are enjoying a rush of interest.
  • Interest in both extremely granular pricing options and monthly cloud subscription services is changing the product roadmaps at cloud providers.

AWS

And more change is around the corner as more and more businesses start to plot their cloud computing strategies after years on the sidelines.

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