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Amazon Streamlines Reserved Instance Pricing, Options

Faced with frequent complaints about complexity, Amazon stripped down the number of Reserved Instance types and simplified its billing.
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Amazon Web Services tossed out "light" and "medium" virtual server choices among its Reserved Instances Tuesday, leaving the more powerful "heavy" RI server. With the move, AWS stripped away much of the complexity around its RIs, and enabled the heavy RI server to be configured in several ways, said J.R. Storment, chief customer officer, and Toban Zolman, VP of product development, at Cloudability, one of several third-party providers of AWS configuration and billing analysis.

Cloudability said of the 100,000 RIs used by its customers only 13% were light or medium servers, with 87% heavy servers. Amazon used the light, medium, and heavy designations only for its RIs, which further complicated a picture that was already burdened with confusing choices. The terminology among its on-demand servers is micro, small, medium, large, extra-large, 2X large (or double extra-large), 4X large (quadruple extra-large), and 8X large for its seven different instance types.

RIs are virtual servers that customers sign for with a one-year or three-year contract. They tend to be implemented by customers who know they will have a long-term, steady-state cloud usage. Analysis by independent experts has consistently concluded that customers who committed to RI realized substantial savings, even when they didn't fully utilize their servers over the one- or three-year period.

[Want to learn more about Reserved Instances? See Amazon On-Demand Vs. Reserved Instances: Cost Comparison.]

Previously, customers made an upfront down-payment on the RI, paying off the remainder in a lower hourly rate. In the one-year contracts, they tended to save 25% to 30% off an on-demand instance price, said Storment. Amazon claims the savings are higher in the three-year contract -- up to 63% off the on-demand price.

Amazon has done away with the down-payment concept and will offer three payment options in its place. AWS evangelist Jeff Barr wrote in a blog post Tuesday that RI customers may:

  • Pay off their reserved capacity at the start of the contract for what would amount to Amazon's best hourly rate
  • Make a partial payment, such as 50%, paying off the remainder in monthly bills at the reduced hourly rate (whether they use those hours or not) at a rate that blends maximum RI payment with the on-demand rate
  • Pay nothing upfront and get a rate that represents a 30% savings over on-demand when they commit to a one-year contract

The billing options simplify how customers calculate the value of their RIs versus possible shorter-term on-demand uses, or assess one RI option versus another. Amazon has attempted to make money-saving options clearer through an AWS Trusted Advisor. Cloudability was one of the third parties to give AWS customers a source of outside intelligence in RI use through its Reserved Instance Planner. The calculator has been revised to reflect Amazon's configuration and billing changes.

RI users have previously complained that their RIs were assigned to one physical location, such as a particular data center in Availability Zone 4 of US East, and couldn't be shut down there and resurrected in another location if the customer's needs changed. In mid-September, Amazon announced that customers who signed up for one zone would be able to move their RIs to another zone before the end of their contracts, provided they stayed in the same region, such as US East (Ashburn, Va.) or US West - Oregon or US West - Northern California. Even so, the notion that the RI may not leave one physical location may still apply, since each Amazon data center location tends to host multiple zones.

RIs, however, are likely to always be a way for customers to save money on cloud computing because they help AWS with its long-term capacity planning. By getting more of its customers to take advantage of the long-term price savings, AWS is better able to forecast and right-size its data center build-out to match demand.

For more information, see Amazon's updated FAQ on Reserved Instances.

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