New AWS Pricing – It’s Getting Hairy (But We’ve Got Sharp Scissors)

November 6 2012 | by Zev Schonberg AWS, Cloud Cost Management, reserved instances

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Typically, when a vendor lowers their prices you’d have cause to celebrate. However, last week, when Amazon Web Services cut their On-Demand pricing, but not their Reserved Instance pricing, the benefits were not shared equally among all customers. While the lower AWS pricing for On-Demand definitely benefits new or prospective AWS customers, existing clients already using Reserved Instances are in a different boat.
Let’s take a quick look at some of the issues that Amazon’s frequent pricing changes are causing.

Am I Still Getting Better ROI on My Reserved Instances

You bought into AWS’ pitch that Reserved Instances will save you big bucks over On-Demand. But now with an 18% price drop for On-Demand, you need to totally rework the justification for reservations’ up-front cost and long-term commitment. And the RI math ain’t that simple.

For example, here are the projected AWS cloud costs versus potential savings that a healthier dose of Reserved Instances provided before the price change.1 Optimized-EC2-Deployment-Oct12

But now the ideal blend of On-Demand and Reserved Instances and associated savings has totally changed.2 Optimized-EC2-Deployment-Nov12

I think the takeaway here is that the cloud moves fast and accurately determining your optimal cloud deployment with full justifications – no matter what AWS does with their pricing, is critical for ensuring a healthy cloud ROI.

Dropping Prices Make the AWS Reserved Instance Marketplace a Tough Sell

While Amazon’s RI marketplace in theory allows RI users to offload unwanted reservations, by simultaneously dropping prices for On-Demand, it’s much harder to find buyers for these partial-term RIs.

Additionally, if Amazon drops prices on Reserved Instances (and they have in the past), it will further diminish the attractiveness of buying partial-term reservations. And despite their lower upfront cost, since Amazon keeps the hourly rates fixed at the old pricing, a buyer will have to really analyze the ROI of On-Demand vs. current, full-term RIs vs. the partial-term RIs. Not exactly what you’d call a ‘no-brainer’.

But fear not ye faithful clouders. Cloudyn’s Reserved Instance Calculator does all the heavy lifting and determines your ideal deployment – including comprehensive buy and sell recommendations that reflect real-time pricing.

So even though Amazon will probably be doing a lot of fancy pricing footwork, we keep your cloud ROI calculation simple – Sign-Up for FREE Now!

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