Google Cloud Flex Agreements woo users during a slowdown in demand

As macroeconomic uncertainty continues to slow business spending on public cloud services, Google Cloud is offering a new type of contract, called Flexible Agreements, to incentivize companies to move workloads into their data centers.

As the name suggests, Flex Agreements offer companies the option to migrate their workloads to Google data centers with no upfront commitments, along with access to free storage, compute, and network services like Spanner, BigQuery, and AutoML.

“Some customers don’t have great visibility into what the future holds, making it difficult 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, Google Cloud’s vice president of operations.

As part of this new licensing option, businesses that sign up will receive incentives such as monthly spend discounts, commitment-to-use discounts, cloud credits and access to professional services based on monthly spend, Ducourty added.

Unlike Google Cloud’s free tier, which offers $300 in cloud credits and use of more than 20 free services over a 90-day period, essentially as a way to let users try out services, Flexible Agreements come in at stake when a business client plans to spend money.

Flex Agreements remove spending commitments

“A Flex contract is used once a customer wants to run production workloads on GCP and is going to spend money. With flexible deals, they don’t need to make long-term deals to unlock discounts and other incentives,” a Google spokesperson said.

The launch of Flex Agreements isn’t the company’s first effort to lure enterprise customers with offers that promise to reduce their cloud spending. In 2017, the company introduced the Committed Use Discounts scheme, under which it provides 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, called Flexible CUD, which offers simple and predictable flat-rate discounts that apply across multiple virtual machine families and regions.

Demand for cloud services decreases

Google Cloud and its rivals in the public cloud services segment, including AWS and Microsoft, have been seeing a slowdown in demand for cloud services as companies, facing uncertain macroeconomic conditions, control their spending.

Google Cloud revenue grew 32% year-over-year during the quarter ending in December compared to growth of 38% during the prior sequential quarter.

AWS saw a similar trend. Despite a 20% year-over-year increase in revenue, reaching $21.4 billion in Q4 2022, AWS’s growth rate was slower compared to the 27.5% and 33% growth seen in the third and second trimester, respectively.

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

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

As a result of a slowdown in revenue growth in the wake of a hiring spree during the pandemic, tech companies have implemented sweeping layoffs.