The world's biggest software company said it will match Amazon's prices for some of the more common online data services it provides, which would mean cutting prices by 21 to 33 percent.
It is the most aggressive move in the arena yet by Microsoft, which is hoping its Windows Azure business can win customers from Amazon Web Services (AWS), which pioneered the renting out of technology resources such as computing power and storage, known as cloud computing.
"If you had concerns that Windows Azure was more expensive, we're putting those concerns to rest today," said Steven Martin, an executive in Microsoft's Azure business.
Windows Azure, part of Microsoft's fast-growing Server and Tools unit, wants to supplant Amazon as the backbone of many companies' cloud infrastructure, for example, by storing and handling data for companies' online applications, using vast data centers in remote locations.
The main benefit of the approach is that businesses do not have to buy, build and run their own technology set-up, instead paying for only what they use.
This is a growing business for Microsoft, which claims more than 2,00,000 Windows Azure customers, but the company does not break out the revenue from it.
AWS generated about $1.8 billion in revenue last year and could pull in $20 billion by the end of this decade as larger companies use its cloud services more, Bernstein Research analysts estimated last week in a note to investors.
This success has lured other large technology companies into the cloud computing business, including Google Inc and Microsoft.
AWS is known for its low prices, which have dropped more than 20 times since its launch in 2006.
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