Something we should always remember when considering the implications and hermeneutics of AWS pricing (from Brad Stone's book):
Bill Miller, the chief investment officer at Legg Mason Capital Management and a major Amazon shareholder, asked Bezos at the time about the profitability prospects for AWS. Bezos predicted they would be good over the long term but said that he didn’t want to repeat “Steve Jobs’s mistake” of pricing the iPhone in a way that was so fantastically profitable that the smartphone market became a magnet for competition.
In some respects it's Google's model too. They gave away Google Apps free to small businesses for years as they pursued Microsoft's Exchange Server market. At first Google Apps was free for up to 100 users, then 50, then 10. Now they charge $5 per user per month for new plans. Legacy pricing is grandfathered so they didn't really piss anybody off in the process, but it seems pretty clear the strategy was to subsidize the product and accumulate market share.
I'd actually be worried with Google. They've demonstrated a willingness to shut down revenue sinks even if it costs them good will. If these companies find themselves in a position that they're subsidizing their cloud computing offerings with profits made elsewhere, it might make more sense just to pull the plug.
Providing cloud computing services is bulk business where the economies of scale is important Google is itself cloud computing company. When they sell resources to others, it's way to become bigger and reduce cost margins for the platform they are using for themselves.
As long as there are people who pay more for the Google cloud service than Google's own usage is worth, selling to others reduces the overall costs of computing for Google.
> They've demonstrated a willingness to shut down revenue sinks even if it costs them good will.
Google isn't running a charity. Shutting down losing services is a smart business decision. If you see the cloud going the way of the typewriter, then you should also be looking elsewhere to run your computing resources.
Yeah, I don't disagree at all. I think Amazon is making a longer term strategic move with AWS and is more likely to swallow a few years of not making any money than Google however. Of course a couple years ago I would have said the same about Google, but they've been on a bit of a tear recently where that doesn't seem to be as much the case anymore.
Ditto. At the AWS keynote today Andy Jassy, Senior Vice President, spoke of cost saving initiatives AWS has going with $200m already saved via automated notifications to customers to power down their inactive EC2 instances. Andy emphasized the importance of great customer service by AWS & helping customers cut costs. Use that as your leverage point in the discussions with your sales rep. Hope it works out for you!
Well, I bought a 3-year reserved heavy utilization plan just a couple of hours before these news went live. My pain is about 2 orders of magnitude less than yours, though. I wonder if you can contact someone at Amazon and ask for some kind of discount.
Anyway, what a massive drop in price and what a swift reaction from Amazon. Competition can really do wonders. I just hope we won't be seeing drops in the level of service.
Knowing amazons customer service, I would be floored if they would refund you the difference. A couple weeks/days? Maybe maybe not, depends on which rep you get honestly. But a couple hours? That would just be cruel for them not to.
They might (a little) in that this 'friction' is exactly the sort of plain bottom-line info to get people to make the step to move off of heroku and on to raw EC2 (or other more infrastructure based setups).
They already charge an immense premium over your own fleet of micro to large instances, but by the time you rack up enough dynos for it to make sense to spend the necessary weeks migrating your infrastructure there's a good chance that replicating the environment with your own in house version (30+ instances?) is non trivial enough to be scary.
Once you're over a handful of dynos, the sunk costs and uncertainty will keep you there until it becomes totally ludicrous.
I see that the prices on the M3 instances dropped a bit more than the prices on the M1 instances did, so they are encouraging us customers even more to move from the older HHD based instances to the newer, faster SSD based instances.
How many instances do you run? At $17.52 saved per year for m1.small that means you must be running over 10k instances to save enough for another full-time dev or two... if your devs are located in SF area.
We're currently spending about $20k/month on EC2 and are about to migrate a bunch of our colos over. Between what we are spending and what we're budgeting to spend with our new architecture, we're looking at a couple devs/year savings (Victoria, BC)
Let us hope that RDS prices also drop as a result of this. It's enough of a value for us at the current price rates to be happy with it, but there will need to be some decrease to make sure that it makes financial sense over straight self-managed EC2.
Any time something is announced for April 1, I always have to take a minute to figure out if it's a joke or not. If I wanted to make a change for my company beginning in April, I think I would announce the planned date as April 2nd just to avoid any confusion.
The most striking thing to me is that they seem to be aggressively motivating people to longer reservations. For RDS they only dropped prices for on-demand (which is still expensive) and 3 year, heavy utilization instances.
I wouldn't take it that far! There is conflicting information on which between Standard EBS and Instance store performs better but there have been benchmarks to support that EBS does perform more consistently than instance store (example: http://serverfault.com/questions/111594/which-is-faster-for-...). Also, you can now launch EBS optimized instances which use a network stack intended to separate EBS I/O giving better throughput. iops is expensive but is great to have when you need it.
Sure, if EBS goes down in your zone, you're hosed. But unless you're completely independent as a service, chances are you do depend on something which uses EBS so you might be hosed anyways.
Instance store is great free storage to use. Since it needs to be mounted explicitly, I'm guessing that most people don't end up using it. Thats a shame too; so use that free storage but EBS isn't evil either.
Most of AWS's major outages have been related to EBS. Although outages can happen to any hosting provider, and I am sure they have fixed the previous issues. So EBS should get more stable over time and it is already quite stable.
The performance of EBS is pretty bad, and getting decent performance is expensive. Having said that, if your application runs in memory and disk usage is infrequent then it is probably fine to use EBS. EBS is also much more expensive than the instance storage, but it is also durable unlike instance storage.
On the whole, "never ever EBS" is too strong language making it incorrect. As usual, it depends.
It went down in 2012 and somehow rather than get the correct idea from that (everything breaks) people took this bizarre notion that EBS is bad and everything else has perfect reliability. In reality, tons of other AWS services run on top of EBS, including load balancers. When EBS fails again, the people thinking they are avoiding it will still have outages.
Well, you break your services out onto stateless and stateful machines. After that, you make sure that each of your stateful services is resilient to individual node failure. I prefer to believe that if you can't roll your entire infrastructure over to new nodes monthly then you're unprepared for the eventual outage of a stateful service.
Most databases have replication but you need to make sure that the characteristics of how the database handles a node failure are well understood. Worst case you use EBS, put your state on it, snapshot it regularly, and ship those snapshots to another region because when EBS fails it fails hard.
Also, logs make every machine stateful. Use something like logstash to centralize that state.
If ELB is down in a given region then DNS failover to another region. Assuming you feel comfortable rolling your entire infrastructure monthly, have good images / configuration management, and have the state replicated in the backup region.
That or sidestep ELB in your region to a team of stateless load balancers that terminate SSL.
But the thing people are needlessly concerned about with EBS is full datacenter failure. Which is just as much a problem for those EC2 instances. Synchronous replication to another data center is a massive performance killer.
I find it bizarre that Amazon put so much effort into pushing the idea theat their killer feature is price. Plenty of people outflank them on price. What's best about Amazon it their tooling. They have hands-down better tooling than their competition.
I use gandi for my personal stuff (because I'm less bothered by the French government spying on me than the US one) and it's much cheaper than Amazon. But in terms of being able to easily mass-manage a complex environment? Not even close. DO? Don't make me laugh.
With Digital Ocean, you only get almost bare VPS hosting (which is not bad per-se, I use them for a couple of personal projects), as with AWS, I get 1-click solution for pretty much anything I need, from S3 and Cloudfront, to Elasticache, hosted PostgreSQL, Route 53, OpsWorks, and numberous others.
The EC2 C3 instance type is going to be about the same price as DO for 1 year reserve and less than DO for 3 year. Spot pricing will also be lower than DO for C3s. On top of that EC2 is far superior to DO in many ways: EBS off instance storage (DO is local storage only), volume snapshots, IPv6, load balancing, private IPs, multiple IPv4 addresses, 8 data centers globally, firewalls, VPN, VPC, PCI DSS compliance, companion services like S3/CloudFront/Route 53 and much higher default quotas just to mention a few. DO is essentially a VPS with utility pricing.
Just to make sure I'm reading this right, the upfront reservation fees are higher, but the reserved hourly rates dropped a good bit. It's cheaper over the duration of the reservation, but you owe more of the term upfront.
Given this tidbit, might you reserve an instance now, pay the lower fee, but still take advantage of the new hourly rates on April 1? Or are you locked in at whatever rate your reservation is for?
The other fun tidbit is on heavy reservations you pay per-hour even if you're not using the machine. That's not the case for the light or medium. So keep that in mind when planning out your reservations.
When we switched off EC2 it was financially advantageous to basically give away our heavy instances on the marketplace just to shed the liability.
After this latest round of price cuts, I'm starting to question whether I even want to reserve instances on the lower end. An m3.medium is about $52/month on demand vs $35/month (amortized over 12 months with a 1-year heavy usage reservation).
In this example, it becomes a question of whether it's worth saving $130'ish a year for the liability that a 1-year m3.medium heavy util reservation represents. At the lower end, that's not a huge amount of liability, but it may be a case where I just don't bother reserving m3.mediums anymore because it's a wash.
Maybe my math is off, but I calculated $35/mo for medium utilization m3.medium vs $32/mo for heavy utilization. In that case, I don't think a heavy utilization reservation makes sense but a medium utilization reservation still might (as you're saving ~$20/mo over on-demand).
I tried to give away a heavy instance in the past but to sell on the Reserved Instance marketplace you must have a US bank account. Worth noting if you are considering heavy instances and are based outside the US. You will be stuck with them for the life of the reservation term.
Whoops, sounds like bitter (but still good) news for companies like ours that have million-dollar contracts of reserved instances. If we were to grab our reserved instances right now instead of a few months ago, we'd have saved more than half a million over the next year. Bleh.
There are a bunch of calculators to compare reserved vs. on demand pricing, but it just occurred to me that they should really be comparing reserved vs. predicted on demand pricing, taking into account inevitable future price drops. Instead of locking in savings, reserved instances are really locking in today's high prices.
I was just thinking that, the micro EC2 is now becoming more and more devalued as the higher ones get closer to it's price per performance. I was hoping for us to be able to spin up Beanstalk apps a little cheaper though and it is the cheapest server option and $50/app vs Heroku is a bit expensive since it requires the ELB. I wouldn't mind it all if they had a way to deploy multiple apps using the EC2 servers and ELB you setup though.
I'm very impressed with Amazon's scale and their ability to produce such low prices. Whilst many SaaS vendors (and even traditional brick and mortar business) seemingly keep on increasing prices because of "inflationary" pressures and whatnot... Amazon just keeps on showing - the consumers are being taken for a ride by the rest of the businesses out there.
It's interesting how all of the focus of this discussion is Google, Amazon, and Heroku. Why hasn't RedHat's OpenShift gained more mindshare? It's not a bad platform, although I've found their support leaves something to be desired. It's also priced very competitively for small apps (you get 3 nodes free).
We are in the middle of deracking and throwing out (no kidding) some 3+ year old machines at my work. Care to take a guess at what a 3+ year old machine's specs are? Cause I know you don't have a chance at getting it right.
Dell C1100 1U (almost 4 years old)
2x 6core with HT, 24 active threads
144 GB RAM
10x 300 15k SAS
I think there are very few use cases where Amazon makes sense. Their VMs are very expensive, and under powered for what you pay.
And yet, very rational people, with full understanding of the costs of both environments, and pretty detailed spreadsheets (I've spoken with them) continue to buy into PaaS/IaaS offerings aggressively.
For the most part, it's because the cost of hardware isn't the only factor, but the flexibility, ability to rapidly scale (and descale), and, most importantly, the fact that Amazon takes care of all the dirty network engineering/system administration work required to keep the plumbing working.
But, hey, that's the great thing about the free market - every company/individual gets to make the choices that are most advantageous for themselves. I wouldn't be surprised that in regions where network engineers/sysadmins make less than $125-$150K/year, and there isn't a need to turn up a dozen servers overnight, (and, turn them off the night after that) - that AWS/Azure/GCS isn't attractive. But, clearly, for others, it is.
Well, I always see it this way: With Amazon you never pay for the actual hardware, because that would be a rip-off. You pay for the service of not having to "throw out old machines", you pay for being able to start a machine with one click, you pay for the services around (S3, Dynamo, ELB, Route 53 etc.) and ultimately, you pay for not having to care about 80% of infrastructure problems.
Amazon markets the story that they operate on thin margins (which no doubt they do in retail) but in AWS the margins are probably fairly attractive. They don't break this out in their SEC filings because (a) they don't have to, and (b) doing so would undermine their marketing message.
Economically cloud can make a lot of sense for several potential customers, including:
* those who have highly variable workloads (so they can spin up lots of servers to meet demand then spin them down afterwards)
* those who favor OpEx over CapEx (Like startups)
* and for those who are bypassing internal IT for TTM reasons (e.g. "shadow IT")
Another point to consider is that while AWS is increasingly dropping prices the same is in effect happening for people procuring their own hardware. The performance over price ratio (on multiple axis) is also improving for on premises deployments (c.f. Moore's Law).
They're not making profits. Most quarters they are only slightly profitable. Current P/E is 582, which is astronomically high. E.g. for comparison Apple's P/E is 13.
But that's been Amazon's strategy for almost two decades. Their goal is to instead grow their business. Currently they are at $74 Billion / year in revenue, and still increasing. Once they stop their massive spending on growth, they will (presumably) be able to increase their profits.