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AWS Announces Spot Instances: Market-Priced Cloud Computing

AWS recently announced a new service: Spot Instances.

Today we launched a new option for acquiring Amazon EC2 Compute resources: Spot Instances. Using this option, 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.” 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.

The central concept in this new option is that of the Spot Price, which we determine based on current supply and demand and will fluctuate periodically. 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.

Interestingly, this isn’t a technological innovation but is a major business innovation. The instances they are offering are the same instances offered in the tried and true AWS EC2 system. However, now they can offer these instances at a (presumed) lower price with the caveat that you may lose your instance if the market price for that compute power goes above what you are willing to pay for it.

What strikes me about this is the amazing efficiency of the system. Amazon could (in theory) rent out 100% of their aalable computing power through the EC2/spot instance system. If Amazon needs the computer power back, such as during the Christmas shopping season, they can raise the spot price and reclaim many of the resources. If a third party needs more compute power than is available, they increase their bid and drive up the price.

It should be interesting to see applications built around this model. Protein folding is the obvios example, but I can also see this as very useful for graphics rendering or even mundane tasks such as sending out newsletters.