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7/2/2014
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Amazon Strikes Back With Lower Cost Instances

Amazon Web Services feels the breath of competition, responds with lower cost, "bursty" T2 instances.

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Amazon Web Services has introduced a lower cost, general-purpose instance type for users who want both a modest CPU and also an ability to burst CPU capacity when needed. That describes the T2 micro, small, and medium instances, launched Tuesday.

A T2 micro has a single virtual CPU, which means it's given a share of an Intel Xeon core equivalent to a 2007 Xeon CPU running at 1 GHz. That's known in Amazon's lexicon as an EC2 Compute Unit (ECU). The clock speed of the today's Xeon cores in EC2 is more like 2.5 GHz, but the virtual CPU will get only a share of the core. Likewise, the T2 medium is assigned 2 ECUs, or two virtual CPUs, or a larger share of a core.

Despite the virtual CPU limits they've been assigned, each instance type can burst into full-core use when the workload demands it. In the announcement Tuesday, Amazon EC2 VP Matt Garman said the T2s "optimize their performance and cost for applications that don't use the full CPU capability frequently, but require the full CPU resources for short bursts."

It's not clear from the announcement for how long "short bursts" may be or whether more frequent use will result in the customer being reassigned to an instance type more appropriate for the workload being run.

The lack of clarity about such issues indicates that Amazon has placed a spotlight on first-time and small-use customers. It appears that the growing popularity of services such as Linode and Digital Ocean, serving the large programmer population working in and around New York City, has caught Amazon's eye.

[Want to learn more about deciphering cloud pricing? See Why Cloud Pricing Comparisons Are So Hard.]

New York-based Digital Ocean has implemented $5-a-month virtual servers and solid-state drives as standard storage. Its small servers spin up rapidly and exhibit fast I/O performance based on solid state. At the Structure 2014 conference in San Francisco June 20, Adrian Cockcroft, the former Netflix cloud architect, now technology fellow at Battery Ventures, noted the rise of such service providers in 2012 and 2013. He said of Digital Ocean: "I'll take a twenty-fold growth rate any time."

Amazon is not about to let such upstarts grow into real challengers without some attempted counter measure. Its T2 micro, small, and medium instances come with 1, 2, and 4 GBs of memory respectively, giving it an edge over Digital Ocean. The latter's version of a $5 micro server comes with only 512 KBs of memory; to get to a GB, the customer has to pay $10 a month; two GBs, $20 a month; and 4 GBs, $40 a month. Those prices also include storage and network bandwidth, something that will cost extra on Amazon. Nevertheless, T2 appears aimed at Digital Ocean's weak point: solid-state memory is still more expensive than spinning disks.

(Source: Steve Lyon.)
(Source: Steve Lyon.)

Amazon's pricing comes in just under Digital Ocean's for comparable memory sizes, when only the instance price lists are compared. That closes a much larger gap that had existed with its larger M3 instance sizes, for example, while opening the option of "bursty" CPU power. The T2 micro is priced at 1.3 cents an hour, which comes out to $9.50 a month versus Digital Ocean's $10.

The T2 small is priced at 2.6 cents per hour, and the T2 medium at 5.6 cents per hour, with monthly rates of about $19 and $38 respectively.

But Marty Puranik, CEO of rival service Atlantic.net in Orlando, Fla., said Amazon's prices don't include persistent storage, high performance I/O, and network bandwidth, the way Digital Ocean and Atlantic.net prices do. "Amazon prices don't include data transfer, any local storage, or support," he said. And if you pay Amazon extra to get them, the upstarts have a price advantage again.

Puranik said Amazon's price list is the equivalent of "quoting the price of a car without the wheels included."

The concept of a bursty CPU isn't new with Amazon. Rackspace divides up its CPUs into virtual units to provision cloud users. But even when a customer pays for only part of a CPU, he gets the whole core if his application demands it, if no other customer is already using it. As with the ill-defined "bursts" of Amazon's T2, customers can't be sure how this will work out in practice; probably fine, unless constant price cutting starts to load up cloud hosts with so many workloads that they're pressing against the CPU's ceiling.

Indeed, the T2 instances are Amazon's answer to smaller customers worried about performance in the cloud, as well as price. AWS is by far the most successful cloud vendor, but Digital Ocean, Atlantic.net, and others are making inroads based on solid-state drive performance. Atlantic.net boasts instances at prices ranging from $4.97 to $9.93 a month. In addition, its SSD-based virtual servers spin up in 30 seconds, it claims on its website.

Getting new customers in the cloud, particularly the valued developer communities that will grow into using other resources, is as much about performance as it is about price.

InformationWeek's new Must Reads is a compendium of our best recent coverage of the Internet of Things. Find out the way in which an aging workforce will drive progress on the Internet of Things, why the IoT isn't as scary as some folks seem to think, how connected machines will change the supply chain, and more. (Free registration required.)

Charles Babcock is an editor-at-large for InformationWeek, having joined the publication in 2003. He is the former editor-in-chief of Digital News, former software editor of Computerworld and former technology editor of Interactive Week. He is a graduate of Syracuse ... View Full Bio

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MissEvlyn
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MissEvlyn,
User Rank: Apprentice
7/21/2014 | 9:35:23 AM
Amazon Prices
Much like the hosting industry, there are big players and smaller players in IaaS, but just because Amazon is the biggest doesn't make it the best for every situation. Providers like Atlantic.net and Digital Ocean provide great alternatives to AWS. And the idea of pricing is interesting, because AWS can get pretty pricey very quickly, so I thought when the Atlantic.net CEO said 'Amazon's price list is the equivalent of "quoting the price of a car without the wheels included,"' that was a pretty spot on observation. 
Charlie Babcock
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Charlie Babcock,
User Rank: Author
7/8/2014 | 1:04:26 PM
Amazon and the dwarfs
Of  course Amazon backs up basic cloud servers with reputation, operational experience and a long list of related services that become valuable if you're doing more than software development. Competition in the cloud is about more than just price. It's about kind of operational environment can you create and sustain.
Li Tan
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Li Tan,
User Rank: Ninja
7/5/2014 | 10:12:38 PM
Re: Bursty cloud instances
There is no doubt that Amazon can further compete in the aspect of price. So the other game player needs to have some mitigations in hand. In other words, they must offer something unique compared  to AWS/EC2 to win the market share.
danielcawrey
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danielcawrey,
User Rank: Ninja
7/5/2014 | 5:00:32 PM
Re: Bursty cloud instances
I havce never heard of Digital Ocean before this post - but it is obvious that although they must be tiny in comparison to Amazon, it must be a direct threat if costs are being lowered. 

Amazon can compete with price if it wants to in this space - it does this in other areas it does business in - so hopefully Digital Ocean has some key differentiators to help it compete. 
Joe Stanganelli
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Joe Stanganelli,
User Rank: Ninja
7/5/2014 | 1:51:48 AM
Re: Rackspace original leader in "bursty" CPUs
@Brian: There have certainly been developments with shopping via Internet video, but the tech developments there seem to have stalled over the past few years.

As far as the cloud stuff goes, I'm reminded of this bit of dialogue from the 1985 film Clue:


> Why is J. Edgar Hoover on your telephone?


> I don't know; he's on everyone else's!  Why shouldn't he be on mine?

Brian.Dean
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Brian.Dean,
User Rank: Ninja
7/4/2014 | 9:21:17 PM
Re: Rackspace original leader in "bursty" CPUs
@Joe, good point, it all depends on resource allocation. Here is a scenario that I hope plays out in the real world, a consumer is watching a cat video when they suddenly notice an inverter based air conditioning unit in the video, next the consumer begins researching the unit and discovers that they could be saving 50% on their energy bill -- lets include LED lighting and front loader washing machines into the video and if we are imaginative, then we can attribute the billions of dollars saved in power usage to the PC and Cloud.

Cloud providers have absolutely suffered a great deal due to Snowden's revelations -- it gave overseas players an artificial advantage. Looking at the positive side, I feel, it has made the local providers much more competitive in terms of price, and with time, business confidences could be restored.
Joe Stanganelli
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Joe Stanganelli,
User Rank: Ninja
7/4/2014 | 4:48:36 AM
Re: Rackspace original leader in "bursty" CPUs
>  PCs are one of the most efficient devices in businesses and houses, when compared to other devices and appliances.

Depends on how you look at it.  Is keeping my food refrigerated and my dishes clean a more or less efficient use of resources -- and by how much -- than keeping me entertained with cat pictures and YouTube videos?  ;)

That said, the American cloud providers are absolutely going to battle with each other over prices right now -- especially as others begin to catch up to Amazon and in the wake of the Snowden revelations costing American cloud companies business.
Brian.Dean
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Brian.Dean,
User Rank: Ninja
7/3/2014 | 10:07:21 PM
Re: Rackspace original leader in "bursty" CPUs
These prices are great, considering that the average PC consumes between 60 to 260watts of energy, if we take the upper limit and 1 Kw/h of electricity cost at around $0.10, the PC would be costing 2.6 cents to operate in electricity charges in an hour. PCs are one of the most efficient devices in businesses and houses, when compared to other devices and appliances.

I think IaaS prices would have a certain level of elasticity with the cost of power, and a Cloud provider with a good PUE score (Power usage effectiveness) would be able to offer lower prices. However, Moore's law is an important consideration as well.
Laurianne
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Laurianne,
User Rank: Author
7/3/2014 | 12:30:36 PM
Re: Rackspace original leader in "bursty" CPUs
Interesting context Charlie. Now will Rackspace go private? Hmmm.
Charlie Babcock
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Charlie Babcock,
User Rank: Author
7/2/2014 | 1:11:33 PM
Rackspace original leader in "bursty" CPUs
I always liked the fact that Rackspace didn't hold back. If you were a customer and your application needed more CPU cycles, Rackspace would give them to you, if all they were doing was idling away. This isn't well known nor is it easy to market, since extra cycles may not be available when you want them. But it follows a line of thought that it's always best to make maximum use of the resource -- it's consuming electricity anyway -- in useful work than in rationing it strictly based on price. It's a cloud-like concept.
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