Archive for February, 2010

Basic Math

February 23, 2010

Amazon today announced the availability of Reserved Instance pricing for Windows. For users who will run server instances for more than about about 37% of the year, it is a new price reduction.  By paying a fee up-front, you get a huge discount on the per-hour price.  The break-even is about 37% of a year, if you start and stop all the time, or 19.3 weeks, if you just run all the time.

For example, if you are running on our new cloud recovery service, you will want to run an EC2 Small Windows Instance, 24 hours per day, 7 days per week, for as long as you use the service.  Here is how the numbers work out for you:

  • On-demand pricing: $0.13 per hour, or $1,139 per year.
  • Reserved instance pricing: $227.50 up-front fee (for the one-year deal), plus $0.06 per hour, totaling $753 per year.

This is a nice savings of $386 per year, or about 34%.  (Amazon also offers a 3 year deal, with even better savings; this breaks-even at about 30 weeks of full-time usage).  Of course, one of the key benefits of cloud computing is the ability to pay as you go, and stop whenever you need.  In this case, though, I suggest making a small investment.  As long as you think you will keep running for 19 weeks, you cannot lose, and every hour you run after that gives you a nice discount.

Will Electricity Someday Become a Commodity?

February 10, 2010

via Twitter, @brennels asks: “Is Cloud Computing a Commodity? or will it be?”

I think it is a good question, because I think the commodity idea is at the heart of the cloud computing idea.  In “The Big Switch“, Nicholas Carr draws a parallel between the history of the electric utility industry, and the computer industry.

Electricity from a utility is, perhaps, the ultimate commodity.  Each unit of consumption is completely undifferentiated, to the point that few people can even identify where or even how the electricity in their home or office is generated.  This wasn’t always true.  One hundred years ago, 95% of electricity was generated by custom-built systems, owned, managed, and maintained by technicians employed by the factory.  The industrial age was defined by the power of machines in factories, and the start of that age had every factory generating it’s own source of energy.

Today, we are in the information age, and it is defined by the power of our information systems.  We are used to thinking of these systems as the humming, blinking boxes, racked and stacked in air-conditioned rooms.  But that is like thinking of your house as the land it is built on.  Processors and memory and disks and cabling are just the substrate, the surface upon which information systems are built.  The real systems are software applications.  When a CFO wants a new accounting system, the vendor typically says “start with a server with X capacity, and Y operating system”, and then makes configuration changes to the accounting software to accommodate the business.

In a factory, that is like a machine demanding a certain type and amount of electricity.  Today, a factory owner doesn’t have his PT (power technology) department build up a properly sized generator.  He just has an electrician put the proper type of outlet in the wall, and expects to see his monthly electricity bill go up.

Cloud computing has this same promise, that we can just buy as much undifferentiated computing power as we need, without building it ourselves.  Along the progression from dedicated on-site generators to ubiquitous electric utility, though, were a few stages.  Thomas Edison invented the idea of the electric utility, and launched the first one.  But his idea was a bunch of small providers, serving the local community, and his companies supplied the equipment to those providers.  Large companies bought his equipment and served their own office campuses.

Today, we have an integrated grid of power generators and consumers.  Adding more capacity to the grid is like pouring more water into a barrel – it all looks the same to the consumer.  Amazon is starting to make cloud computing look like a commodity, because I can just consume more storage and more CPU cycles, and they all look about the same.  But someday, I won’t care if my CPU cycles come from Microsoft, or Amazon, or Google, or Rackspace, because they will all look alike.  Maybe some trader will buy up cheap storage-hours in bulk from a local vendor, and sell them on the grid at market price.

Is Cloud Computing a Commodity?  It is getting close – I can order capacity on demand, and not worry about how it got built, or even too much about where it lives.  Someday, when I don’t care who’s name is on the building where my capacity lives, then it will be a real commodity.

Amazon Price Reduction

February 3, 2010

On Monday, Amazon Web Services (AWS) announced a price reduction.  Specifically, they reduced the cost of outbound bandwidth by two cents per GB for all pricing tiers.  At the lowest-volume pricing tier (10TB per month), this is about a 12% discount.  At the highest-volume tier (150 TB per month), the discount is nearly 20%.  Depending on how you are using AWS, this might not be that big of a deal.  But if, say, you are running a web application that consumes a lot of outbound bandwidth for page views and downloads, this could be a big deal.  What if half your AWS bill comes from outbound bandwidth?  You would suddenly be saving between 5% and 10% of your costs.

Amazon has done this a couple of times in the time I have been watching this solution.  They have lowered the cost of compute time, and also inbound bandwidth.  I can only assume that any IaaS vendor that is competing with Amazon will have to make similar reductions in prices.  I think that this behavior could be one of the greatest features of cloud computing.  Now, businesses lower their prices all the time.  In the computer world, we know that memory and disks will be cheaper next year than they were this year.  But knowing that the next guy is going to get a better price on a hard disk than you got is not that interesting.  On the other hand, knowing that your on-going operating cost for your cloud-based infrastructure is going to go down significantly, without you even having to change vendors or renew a long-term contract – well, that is pretty interesting.