Amazon To Let Customers Determine Pricing For Its EC2 Service

Amazon is taking a page out of Ebay's (or Easyjet's) book by offering the possibility for its customers to name their prices in a process that Amazon calls Sopt Instances.

Users will be able to bid on unused Amazon EC2 capacity and make use of these instances as long as their bid is higher than the current spot price; arguably this changes depending on demand and supply, in a way similar to Easyjet's seat tariffs.

Amazon says that Spot instances will complement On-Demand Instances and Reserved Instances, in yet another analogy with the airline industry. Obviously, those with the most flexibility are more likely to gain from this scheme by running these non-prioritised instances.

Using the airline industry - at least in Europe - as a comparison, those applications that can afford a flexible start and stop times such as data processing, financial modeling and analysis, web crawling, image and video conversion and rendering and load testing.

Amazon is therefore able to derive residual revenues from unused capacity which would have otherwise been lost. Crucially also, EC2 will terminate instances whose bid price are lower than the spot price.

In a statement on the AWS (Amazon Web Services) website, the online retailer says that "By being flexible on when their instances run, coupled with the ability to bid what they’re willing to pay for capacity, customers can significantly lower their Amazon EC2 costs.”

Our Comments

A smart move by Amazon, which is incidentally positioning itself as the leader in the cloud computing market. Others are likely to follow as we witness the commoditisation of this segment. This would mean much cheaper prices and wider availability.

Related Links

Amazon EC2 Spot Instances

(EC2)

Amazon EC2 Spot Instances - And Now How Much Would You Pay?

(AWS Blog)

Amazon EC2 gets a spot market

(Cnet)

Platform-as-a-service: next year's big thing?

(Computing)

Amazon EC2 urges customers to name their price

(Nokia)