Amazon Web Services announced an addition to their pricing model today called Reserved instances
. Instead of just an hourly and usage fee, you pay an annual or triannual fee together with a lower hourly usage fee. The details can be found here: Amazon Elastic Compute Cloud Pricing
If I take the simplest example of running a small standard demand Linux instance continuously for a year (8760 hours) in the US and ignore data transfer, storage and leap years, the prices work out as:
On Demand Instance: 8760 * 0.10 = $876
Reserved Instance: $325 + (8760 * 0.03) = $587.80
The minimum number of small instance run time hours in a year to make reserved instances cost-effective can be found by solving for x:
x * 0.10 = 325 + (x * 0.03)
x = 4643 hours (rounded up)
So Reserved Instances in this case become cost-effective if you plan to keep an instance running for just over half a year. If you order a reserved instance for a 3 year term, cost-effectiveness for the small instance kicks in at around 7143 hours
, implying if you plan on close to a year of run time in any 3 year period, get the 3yr reserved instance contract.
To make a real world cost-effectiveness calculation for pay-by-the-hour computing resources implies you have a comprehensive understanding of your physical hardware costs (electricity, rack space, IT staffing/hardware support, equipment costs, replacement costs, etc.) as well as average and peak data storage and usage requirements factoring in growth, and implementation costs of any new software solution. The calculation is further complicated when data service providers start offering license fees by the hour instead of fixed one time or annual fees - another calculation around the number of usage hours required to break even becomes necessary.
Also to be factored in is whether security, performance, availability and reliability concerns outweigh the many cloud benefits including rapid scalability and SAAS friendly model. Not everyone is convinced commercial cloud offerings currently meet all the requirements: Cloud computing not fully enterprise-ready, IT execs say
- though enough people are convinced to make for some nice looking graphs
; and AWS customer numbers are now approaching half a million