Friday, March 13, 2009

Amazon reserves the right to host your applications

At first the concept of Amazon's Reserved Instances didn't really make any sense to me. But then it suddenly became clear what Amazon is doing with its new Reserved Instances feature. Simply, they are going after the web hosting space.

According to the Amazon EC2 email sent out earlier, the EC2 reserved Instances is "an option to make a low, one-time payment for an instance to reserve capacity and further reduce hourly usage charges. As with On-Demand Instances, you will still pay only for the compute capacity that you actually consume, and if and when you do not use an instance, you will not pay usage charges for it."

The pricing is as follows;

Standard Reserved Instances 1 yr Term 3 yr Term Usage
Small (Default) $325 $500 $0.03 per hour
Large $1300 $2000 $0.12 per hour
Extra Large $2600 $4000 $0.24 per hour
High CPU Reserved Instances 1 yr Term 3 yr Term Usage
Medium $650 $1000 $0.06 per hour
Extra Large $2600 $4000 $0.24 per hour

What I find most interesting about this is Amazon seems to be going after the service provider & web hosting space with pricing model that is compelling for services that may not need instant scale but instead require cheap, reliable and affordable web hosting.

In doing the math, @ $0.03 a hour, a small reserved EC2 instance will cost you about $262 a year for the uptime, and $325 for the reservation or about $48 dollars a month. Compared to about $876 a year or $73 a month using an on demand instance (not including storage and bandwidth). This new pricing model brings EC2 inline with most VPS style hosting providers and removes any doubt for those who may want to host their web applications completely on EC2.

What is clear is that Amazon is a master of utility pricing and they are not afraid to continue innovating on it. As always, I'm blown away by there unique and cutting edge approach to cloud costing. Nice work guys!

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