Blog Post

Amazon Web Services adds no-money-down reserved instances

Amazon Web Services didn’t announce any new price cuts at its annual re:Invent conference last month, but there’s more to the economics of cloud computing than just lower prices. The company demonstrated as much on Tuesday by announcing two new billing tiers for its pre-paid virtual servers, which it calls Reserved Instances.

Now, AWS customers have the option to pay only part of the Reserved Instance cost upfront, or, if they prefer, nothing at all. This is a pretty substantial change from the original all-upfront pricing model in place since AWS launched Reserved Instances in 2009.

The catch with the new payment options is that cost-savings are tied to how much a user pays upfront. According to a blog post announcing the new options, paying the full price of the instances will save users an average of 63 percent off the monthly on-demand price over three years, while paying nothing upfront (an option only available in one-year terms) will result in savings of about 30 percent.

This is just the latest tweak AWS has made to Reserved Instances over the years, previously adding options such as moving them across Availability Zones within AWS regions or letting users change the size of their instances.

Amazon’s announcement also comes just a couple months after [company]Google[/company], which increasingly looks like AWS’s biggest competitor in cloud computing over the next few years, cut its standard compute prices by 10 percent. Last March, Google announced it would calculate billing by the minute rather than by the hour, and that it would offer users reductions of up to 40 percent based on how long a virtual server runs in any given month.

4 Responses to “Amazon Web Services adds no-money-down reserved instances”

  1. This is certainly a response to Google’s Sustained Discounts. The advantage Google launched back in March was the ability to get up to 30% off with no effort. No commitment. No upfront payment. It’s all automatic.

    This is Amazon’s take on the same thing, the biggest advantage being no upfront payment. This is important for startups especially but reserving the best discount for those who can pay is somewhat still making the best deal only available to those who pay up.

    And you still have to commit for at least a year.

    The big difference though is the “up to 63% off” for the top option, whereas Google “only” offers 30%.

    More shots in the price war. This is what competition is about!

    • Nicolas Fonrose

      > This is certainly a response to Google’s Sustained Discounts.

      Not sure it is, because Google doesn’t ask for any commitment. So AWS would have had to remove the commitment or at least make it ligther to get closer to what Google offers.

      But they actually chose to take the oppositive direction and ask for *more* commitment than before (since you can no longer go for Medium and Light RIs). The only thing they’ve removed is the need for the upfront payment.

      So I think that, more than a response to Google, it’s just a simplification of the RI model.

      And I’d be surprised that AWS would just remove light and medium RIs without any replacement. They will very likely provide another simplified model for “reservation without commitment” or “reservation with low commitment” in the near future. Because there is a need for it.