Amazon EC2 Spot Pricing – Why bother with regular EC2 instances?

Business by on December 14, 2009 at 1:05 pm

Amazon announced today Spot prices for EC2 instances - market-driven pricing for unused Amazon EC2 capacity.

You bid an amount per hour of usage, and if the spot price is equal to or lower than the amount, you then get the instance for that hour. This would be a great way to do things such as process time-insensitive data (maybe log files, updates of denormalized data, etc.)

A quick look at the historic graph, shows spot pricing for a Linux m1.small running between $0.025 and $0.35 per hour, averaging $0.030 per hour. Normal instances cost $0.085 per hour. Reserved instances cost $0.030 per hour.

The question that I’m most intrigued with currently is whether we should just move all of our normal instances to Spot instances. We would then set bids equal to the regular pricing. In theory, our pricing should never be worse than what we pay currently and would most likely be much better.

The long-term outcome is likely to be that all of EC2 pricing (except for the Reserved instances) moves to Spot Pricing.

The only risk I can think of is other companies doing the same thing but bidding more than the regular instance price. Then we’d get screwed as all of our instances are turned off. But of course, any company that switches from a regular instance to Spot instances, should free up an equal amount of capacity as they are currently using.

What am I missing? Are there other risks to this strategy?


  1. Thorsten@RightScale — February 5, 2010 @ 6:35 am

    There are several problems with your strategy. First you are creating an incentive for Amazon to raise the market price. If everyone bids like you propose they would clearly maximize their revenue by raising the spot price up to the on-demand price. A second problem is that all your instances may get terminated at the same time as the price rises above on-demand. Third the spot price can and has risen above on-demand. Spot pricing is by no means easy to understand and the API is quite a mess. Sigh.

  2. Dave Naffziger — February 5, 2010 @ 7:33 am

    Great thoughts. The second point has been what has worried me the most.

    Presuming entirely rational actors with perfect information (and the
    ability to act on it), the spot price (if it is truly a market price)
    should never rise above on-demand. But, switching instances is far
    from frictionless so invariably you have the likelihood of creating
    the third point (spot is more expensive).

    I wasn't aware that the spot price had ever risen above on-demand. I
    find it pretty fascinating though that it has already happened.

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