Amazon Offers 'Reserved Instances'

Amazon has introduced "reserved instances," a new Amazon EC2 pricing option that lets businesses claim a part of the Amazon cloud as their own.

"Amazon Web Services is introducing Reserved Instances, an additional pricing option for Amazon EC2 that extends the current on-demand, pay-as-you-go pricing by giving customers an option to make a low, one-time payment to reserve capacity and further reduce hourly usage charges. As with On-Demand Instances, customers will still pay only for the compute capacity that they actually consume, and if they do not use an instance, they will not pay usage charges."

Okay, so let me get this straight. Customers make a low, one-time payment for each instance they want to reserve and Amazon gives them a significant discount on the hourly usage charge for that instance. The pricing for reserved instances is shown below:

Lydia Leong, a member of the Gartner Blog Network, did me a favor and crunched the numbers: "An Amazon small instance (one virtual core equivalent to a 1.0-1.2 GHz 2007 Opteron or Xeon) is normally $0.10 per hour. Assuming 720 hours in a month, that's $72 a month, or $864 per year, if you run that instance full-time... Under the reserved instance pricing scheme, you pay $325 for a one-year term, then $0.03 per hour. That would be $21 per month, or $259 per year. Add in the reserve fee and you're at $584 for the year, averaging out to $49 per month - a pretty nice cost savings."

However, I would urge you to run the numbers for your own systems. You could find that this is the cloud computing version of a cell phone plan... non refundable if you no longer need the service. I suspect the same type of financial motivation is behind this as well. That's okay, if it's makes good business sense for you.

One of things to keep in mind is while the term "reserved instances" denotes dedicated hardware in the cloud, there is really not much that changes here other than the pricing. This has caused some confusion, but that's not Amazon's fault. If you're looking to leverage servers in the cloud that you control, and not just an instance of a virtualized system, then you can look to other infrastructure-as-a-service providers that, in essence, provide "data-center-as-a-service," but the cost structures are not as attractive as public shared clouds.

Good thing? Sure! For companies that are dedicated to using cloud computing resources such as AWS, long term, they will benefit from this kind of pricing. The other infrastructure-as-a-service providers will follow soon.

What I do see evolving are fixed fees or Enterprise-License-Agreement types of pricing that let you purchase an all-you-can-eat use of the cloud for a pre-negotiated fee -- perhaps over several years. That will happen when we're beyond kicking the cloud tires.Amazon has introduced "reserved instances," a new Amazon EC2 pricing option that lets businesses claim a part of the Amazon cloud as their own... Good thing? Sure! Companies that are dedicated to using cloud computing resources such as Amazon Web Services will benefit from this kind of pricing.