Amazon EC2 Reserved Instances

Amazon just announced “reserved instances”, guaranteeing uptime and a price reduction if customers commit to Amazon’s cloud solution for a year or more.

“We’ve learned that some of our customers have needs which aren’t addressed by the spot pricing model. For example, some of them were looking for even lower prices, and were willing to make a commitment ahead of time in order to achieve this. Also, quite a few customers actually told us something even more interesting: they were interested in using EC2 but needed to make sure that we would have a substantial number of instances available to them at any time in order for them to use EC2 in a DR (Disaster Recovery) scenario. In a scenario like this, you can’t simply hope that your facility has sufficient capacity to accommodate your spot needs; you need to secure a firm resource commitment ahead of time.”

For example, a small ec2 instance that regularly costs $0.10 per hour, while if we commit for one year for a reserved instance paying a fee of $325, the hourly cost drops to $0.030, to an effective 24/7 cost usage of $0.067/ho. Obviously this is very interesting for people that run their sites full time on Amazon EC2 that can obtain a nice price reduction using this (check out the complete EC2 pricing info). With the regular on demand prices, one small ec2 linux instance will cost (just the compute instance) approx 72$/mo. This means that if you run your site on a single instance full time, this will become interesting only if you intend to run it for more than 6 months. Anything less, is still better to run with the on demand pricing. Of course this is just talking about the pricing.

Also they added new API command line tools to support this new feature:

• ec2-describe-reserved-instance-offerings command lists the set of instance offerings that are available for purchase.
• ec2-purchase-reserved-instances-offering command makes the actual purchase of one or more reserved instances.
• ec2-describe-reserved-instances command displays a list of the instances that have been purchased.

In conclusion, this is an interesting move from Amazon, trying to get clients to commit on a long term basis, as opposed to the regular pay as you use model cloud computing became famous. This will be very interesting for people running 24/7 their sites on ec2, but for the rest that start instances as needed, in a true hourly based usage, this will not offer any advantage. Just imagine Amazon started their cloud computing offerings with such prices; even if they are lower I am sure that people would have not seen this very different than the regular VPS offering where they have to pay a flat rate regardless of their usage. But now, if you put it like that, it doesn’t look so bad, right? and probably many startup owners will be quite happy on the price reduction they get by using the reserved instances.