Amazon Slashes Cloud Pricing for Those Who Commit

Amazon Web Services has added a new option for its EC2 hosted cloud service that allows customers to sign long-term commitments in exchange for substantial discounts over its existing offering.

The new service, called Reserved Instances, is available for one- and three-year terms starting at $325 and $500 respectively, though costs can be as high as $4,000 for a high-capacity configuration. Amazon is offering it as an alternative to its existing EC2 On-Demand Instances, which requires no commitment. 

Reserved Instances is targeted at enterprises running mission-critical applications. Amazon said those who sign up for one year can save 30 percent, while the savings for organizations signing three-year contracts can be as much as 50 percent. "We've learned that some of our customers have needs which aren't addressed by the spot-pricing model," said Jeff Barr, an Amazon Web services evangelist, in a blog posting.

The fees are nominal for organizations that are looking to use EC2 for applications that may be running 24x7, according to Forrester analyst Jeffrey Hammond. "They've got customers that have sustained demand for instances where they're wanting better pricing in turn for predictability. I think that's a really good sign for EC2," Hammond said.

The Reserved Instances option is only available for certain flavors of Linux and Unix. Amazon has not said whether it will offer a hosted version of Windows Server. Amazon does offer Windows Server and hosted SQL Server through its EC2 On-Demand offering.

"It's probably due to high licensing costs, same for Red Hat Enterprise instances," said Roger Jennings, OakLeaf Systems principal, in an e-mail.

An Amazon spokeswoman said the company is negotiating licensing terms with Microsoft and that existing SLAs are covered.

The news comes just two days after Microsoft announced it would offer cloud-based SQL Data Services (SDS) as a pure relational database service by exposing its Data Stream over-the-wire protocol.

Jennings noted in a blog posting today that Amazon's move promises to pressure Microsoft into revealing pricing for its new SDS service (in an interview yesterday, Niraj Nagrani, a senior product manager for SDS at Microsoft, said pricing won't be determined until mid-year).

Jennings also speculated that Amazon's move might have been in response to Rackspace Managed Hosting, which is scheduled to launch custom cloud services next week starting at $10.95 per month.

Amazon also announced APIs for Reserved Instances.

About the Author

Jeffrey Schwartz is editor of Redmond magazine and also covers cloud computing for Virtualization Review's Cloud Report. In addition, he writes the Channeling the Cloud column for Redmond Channel Partner. Follow him on Twitter @JeffreySchwartz.

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