Amazon announces reserved instances

Amazon’s announcement du jour is “reserved instances” for EC2.

Basically, with a reserved instance, you pay an up-front non-refundable fee for a one-year term or a three-year term. That buys you a discount on the usage fee for that instance, during that period of time. Reserved instances are only available for Unix flavors (i.e., no Windows) and, at present, only in the US availability zones.

Let’s do some math to see what the cost savings turn out to be.

An Amazon small instance (1 virtual core equivalent to a 1.0-1.2 GHz 2007 Opteron or Xeon) is normally $0.10 per hour. Assuming 720 hours in a month, that’s $72 a month, or $864 per year, if you run that instance full-time.

Under the reserved instance pricing scheme, you pay $325 for a one-year term, then $0.03 per hour. That would be $21 per month, or $259 per year. Add in the reserve fee and you’re at $584 for the year, averaging out to $49 per month — a pretty nice cost savings.

On a three-year basis, unreserved would cost you $2,592; reserved, full-time, is a $500 one-time fee, and with usage, a grand total of $1277. Big savings over the base price, averaging out to $35 per month.

This is important because at the unreserved prices, on a three-year cash basis, it’s cheaper to just buy your own servers. At the reserved price, does that equation change?

Well, let’s see. Today, in a Dell PowerEdge R900 (a reasonably popular server for virtualized infrastructure), I can get a four-socket server populated with quad-cores for around $15,000. That’s sixteen Xeon cores clocking at more than 2 GHz. Call it $1000 per modern core; split up over a 3-year period, that’s about $28 per month. Cheaper than the reserved price, and much less than the unreserved price.

Now, this is a crude, hardware-only, three-year cash calculation, of course, and not a TCO calculation. But it shows that if you plan to run your servers full-time on Amazon, it’s not as cheap as you might think when you think “it’s just three cents an hour!”

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Posted on March 12, 2009, in Infrastructure and tagged , , . Bookmark the permalink. 1 Comment.

  1. Lydia,

    Two tweaks on your calculations:

    (1) A ‘small’ instance at EC2 billed at $0.10 per hour (or $0.03 per hour if ‘reserved’) is a lot less than a modern 2.0Ghz core (as you allude to..).

    A modern (2009) AMD Opteron ‘Shanghai’ processor (running at 2.5Ghz) is about 20-30% faster clock for clock than the ‘Barcelona’ Opterons (circa 2008), which was in turn faster clock for clock than their ‘Italy’ Opteron predecessors.

    So, I think it’d be fair to say that your calculation should account for $0.10 per hour being equal to closer to -half- (perhaps less) of a modern core. Indeed, although they don’t disclose it, Amazon actually jams 2 VMs onto a single core in their current deployment architecture.

    Amazons price/performance (what you get for $0.10 per hour) hasn’t changed since the service was launched in 2006. Should it have? Should EC2 follow Moores law? I think that’s the topic of a really interesting discussion.

    (2) The R900 is relatively poor price/core. It’s also got a lot more margin built into the price than Dells single and dual socket servers (volume buyers can get SIGNIFICANT discounts off the $15,000 number you quoted). A better price/core comparison would be something like the SC1435 or 2950 which would come out to closer to $500-600 per core (before discounts). If you tweak things around further, you can get that number _well_ under $300 per core.

    Obviously, your numbers (and my tweaks) only account for pure capex and don’t factor in opex at all. That’d be an interesting topic for another time.

    Another interesting point is there’s no way that the enterprise could replicate a virtualized environment using VMWare (and having to pay the VMWare tax which often approaches or exceeds the cost of the underlying hardware) and come even close to these numbers…

    Without a fully commoditized (ie. free) hypervisor (Xen), the business models of EC2 and similar solutions (including our soon to be announced SilverLining service) just don’t make any sense.

    -r

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