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Amazon Auctions Off Cloud Capacity

Amazon is looking to offer lower-cost cloud services for those whose needs are less mission-critical.

The company on Monday launched the beta for Spot Instances, which lets developers and customers acquire unused capacity on Amazon's EC2 service. Just like an auction, pricing is determined by demand and availability.

"Customers bid any price they like on unused Amazon EC2 capacity and run those instances for as long their bid exceeds the current Spot Price," said Amazon CTO Werner Vogels in a blog post. "Spot Instances are ideal for tasks that can be flexible as to when they start and stop. This gives our customers an exciting new approach to IT cost management."

This may apply to non-mission-critical tasks such as research, video and image processing, and financial modeling and analysis, according to Amazon. Vogels describes these as "incidental tasks" that aren't necessarily time-sensitive.

"For most of these tasks, their completion is not time-critical, and as such they are ideal targets for additional cost savings," Vogels noted.

According to Amazon, Spot Instance prices fluctuate depending on supply and the demand for capacity at the time a bid is placed. The customer must place a request specifying the region, instance type, number of instances and the maximum price he or she is willing to pay per instance in a given hour.

To help customers determine how much to bid, they can use the EC2 API and AWS Management Console to see prior Spot Instance prices.

While Amazon's offer may have appeal for certain applications, it might be less appropriate for others, according to industry analysts. "The whole idea here is cloud computing is a commodity," said Ovum analyst Tony Baer. "You are getting what you pay for. This is raw cloud."

Pund-IT analyst Charles King said it could allow for customers to pay significantly lower prices for non-critical functions. The biggest pitfall is flexibility.

"The customer has to be flexible in when a job can be run and/or finished, and needs to stay on top of the process in case the Spot Price exceeds an existing bid, at which point the customer's bid will be terminated," King said in an e-mail interview. "However, the opportunity to pay a significantly lower-than-usual price for AWC services could justify those shortcomings."

King described it as analogous to participating in an eBay auction. "Choosing the 'Buy It Now' option usually costs more but it also ensures that you get the product you want," he said. "If certainty of price or timing isn't a big deal, participating in auctions can result in excellent deals."

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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