Amazon Web Services (AWS) is dropping the price  of Windows On-Demand EC2 instances up to 26 percent, which is another clear sign of the price wars in the cloud computing market. The news follows Google’s announcement earlier today that it is dropping instance prices by 4 percent.

AWS says the drop in price continues its tradition of  exploring ways to reduce its costs:

This reduction applies to the Standard (m1), Second-Generation Standard (m3), High-Memory (m2), and High-CPU (c1) instance families. All prices are effective from April 1, 2013. The size of the reduction varies by instance family and region. You can visit the AWS Windows page for more information about Windows pricing on AWS.

AWS has extended its support for AWS in the last month with support for SQL Server AlwaysOn Availability Groups, a beta of the AWS Diagnostics for Microsoft Windows Server, and new drivers for our virtual instances that improve performance and increase the supported number of volumes.

Earlier today, Google opened Compute Engine to developers who subscribe to Google’s $400 per month Gold Support package. The package includes 24/7 phone support. Users can access Compute Engine without the need to talk to sales or an invitation.

Google and Microsoft have consistently been dropping prices over the past several months. In November, Google dropped storage prices by 20 percent.

For AWS, the price drops are consistent with its strategy. AWS believes it can use its scale, purchasing power and deeper efficiencies in the management of its infrastructure to continue dropping prices.

The market is diversifying and AWS sees a need to extend its dominance in the market. But with Google and new players in the mix, it’s unclear  how the strategy will pan out, as competitors offer a more high-touch type of service.

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