Amazon Web Services (AWS) is aggressively offering a service called reserve instances. For a one-time fee, companies may have the option to launch an EC2 instance for one or three years. AWS maintains it lowers costs as you get a choice of the types of instances you buy. You can get discounts by buying on a volume basis.
Reserved instances means AWS guarantees the capacity you need for the workloads you put on the service. Its reserved instances provide a significant discount on the hourly charge for that instance – often more than 71% over on-demand rates.
It sound good but there are also risks. It’s a considerable investment. You get a sense of that on the AWS site. You get a 10% volume discount when you spend more than $250,000. AWS offers 20% off when you spend more than $2 million and will negotiate when companies buy more than $5 million of reserved instances.
You can get a good deal, but customers need to look at a host of factors to determine what their costs actually are. It means understanding the tradeoff between cost and utilization over a period of time.
Newvem, a startup out of Israel, has launched a feature today called “KnowYourCloud Analytics” which tells which parts of a user’s AWS cloud will benefit from reserved instances.
Newvem Co-Founder Zev Laderman says the new offering is a Google Analytics type of service for AWS. It looks at baseline level of usage a customer will need during the length of the AWS contract. It examines the types of machines and instances they’ll need to meet their business’s requirements. It also helps determine the best geographic location of the instances. In essence, it helps them have some certainty about what they are getting before they commit to a long term contract.
Here’s a look at the type of dashboard Newvem offers:
AWS faces more competitors. Open cloud initiatives are gaining traction. OpenStack, Cloudstack and Eucalyptus are all establishing a foothold in the market. Microsoft’s Windows Azure is quietly gaining acceptance while Google is just getting started.
Giving volume deals signals how AWS is competing on pricing and seeking large, enterprise customers that want to do all-you-can eat deals. For the bulk of its customers, though, it’s a tough sell. Startups and app developers can’t afford reserved instances. More so, AWS is trying to lure customers who might otherwise use a service like OpenStack to build their own customized infrastructure.
I had a conversation with Piston Cloud’s co-founders Gretchen Curtis, Joshua McKenty and Christopher MacGown at OSCON this week. The startup has developed software built on OpenStack. It works with companies to build open clouds for companies that have the infrastructure to build their own elastic environment. They make the point that AWS has lowered its prices 19 times in the past five years. They will do it again. That means a company buying reserved instances could get locked in at a price that remains fixed while AWS drops prices over time.
It’s an issue for negotiation that any company needs to consider when buying reserved instances. Analysis tools from companies like Newvem can help make sense of the costs so better decisions can be made.