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Summary:

Amazon — which knows a thing or two about online marketplaces — is launching one for Amazon Web Services customers who may have over-provisioned their EC2 reserved instances. Now they can buy or sell those instances with other AWS customers

Amazon Web Services
photo: Flickr/Will Merydith

Amazon is sticking its toe into tricky new waters: It’s building a spot market for cloud computing resources with a new plan to let users buy and sell their Amazon cloud resources. This is tricky because previous attempts to navigate these waters haven’t done much. Enomoly tried a variation of this plan  and Verizon has a patent for it, but there’s not been much traction.

But then again, Amazon knows a bit about cloud computing and a lot about online marketplaces, so things may go better. For companies that may have over stocked Amazon EC2 reserved instances, there’s now a way out: You can sell off your excess capacity on a new Amazon marketplace.

Amazon  reserved instances are less expensive than on-demand instances , but they’re sold on 1- and 3-year commitments and, as we all know, computing needs can change dramatically. This marketplace will facilitate reserved instance transactions between buyer and seller. Amazon will charge the seller a 12 percent service fee, according to the Amazon Web Services blog.

Here’s the deal, according to the blog:

If you have excess capacity, you can list it on the marketplace and sell it to someone who needs additional capacity. If you need additional capacity, you can compare the upfront prices and durations of Reserved Instances on the marketplace to the upfront prices of one and three year Reserved Instances available directly from AWS. The Reserved Instances in the Marketplace are functionally identical to other Reserved Instances and have the then-current hourly rates, they will just have less than a full term and a different upfront price. Transactions in the Marketplace are always between a buyer and a seller; the Reserved Instance Marketplace hosts the listings and allows buyers and sellers to locate and transact with each other.

The marketplace might be of interest to companies who booked reserved instances in one AWS Region, but needs to move them to another. Or perhaps the application has (in AWS terms) put on a little weight and needs a larger instance type.

Amazon is seeing increased competition on many fronts — from new OpenStack clouds coming online from Rackspace and others, from ProfitBricks, which just launched in the US and lets companies pay for their compute resources by the minute rather than the whole hour. In  addition there’s a flock of companies — Newvem, Cloudability, Cloudyn, etc.– offering services to help companies better plan their use of AWS computing, cutting back on over provisioning.  Amazon is nothing if not proactive when new competition comes online.

Feature photo courtesy of  Flickr user Will Merydith

  1. Amazon definitely need to do this – reserved instances are a good cash flow product for them. However, it’s a good step to take because it means there’s less perceived risk for customers reserving instances so they’re more likely to do so. And so they’re more likely to take the step to use Amazon’s services. This is a win for Amazon because it makes it more likely a customer will buy in for the long term. And it’s a win for the customer because if they use case does change, they can trade/sell the capacity and not lose out financially.

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  2. The new AWS Reserved Instance marketplace will accelerate RI adoption. The greatest barrier to RI purchasing is that many cloud architectures are changing every 6-9 months, and it’s difficult to commit to one instance type for 1 or 3 years. But now I can sell/trade my RI’s I can use RIs with more confidence.

    The marketplace removes the hesitancy to make larger RI purchases.

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  3. Pricing of computing power should come down by 50% every 18 months, according to Moore’s law. No?

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  4. It’s interesting to see a cloud marketplace being offered to businesses. Given cloud storage can be considered a commodity, I think it makes sense that it can be bought and sold according to each business’s needs. I’ll be curious to see what happens as Amazon and others develop.

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