Amazon Introduces Spot Pricing: Smart For Amazon, Good For Customers

Amazon has added yet another arrow to its quiver of cloud computing services and options with the launch of Amazon EC2 Spot Instances. The new purchasing option is smart for Amazon, as it provides a way to burn off excess capacity at their discretion, while giving customers an alternative way to pay and consume that capacity. Amazon Spot Instances are best suited for workloads where time to completion is not critical, but the amount of processing is large and resource intensive, such as web crawling, data analysis, and data or media conversion.

No sooner did Joe Wineman, vice president for AT&T Business Solutions, make a series of pricing-related predictions for cloud computing did Amazon respond with its latest flexible pricing option. But, let's be clear: this is not market-based pricing and we haven't suddenly entered the world of commodity pricing via a public exchange, as some have suggested. With Amazon Spot Prices it is Amazon that sets and controls the market. Nonetheless, it is a great option for their customers and it does point to a not-to-distant future where cloud providers and customers can trade in an open market.

According to Werner Vogels, Amazon's CTO, "the central concept..is that of the Spot Price, which we determine based on current supply and demand and will fluctuate periodically". He continues:

If the maximum price a customer has bid exceeds the current Spot Price then their instances will be run, priced at the current Spot Price. If the Spot Price rises above the customer's bid, their instances will be terminated and restarted (if the customer wants it restarted at all) when the Spot Price falls below the customer's bid. This gives customers exact control over the maximum cost they are incurring for their workloads, and often will provide them with substantial savings. It is important to note that customers will pay only the existing Spot Price; the maximum price just specifies how much a customer is willing to pay for capacity as the Spot Price changes.

For more detail on how Spot Instances work and how to use them, check out the Amazon EC2 Spot Instances web page.