AWS Unveils Simplified, Flexible (Lower!) Pricing for Cloud Services

By Jeff Muscarella

EVP, IT Spend Management Services, NPI

December 08, 2014

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For much of 2014, cloud pricing has been a hotbed for transformation (read more here). The latest news from Amazon Web Services (AWS) indicates that more changes may be in store in 2015 as pricing competition increases among vendors. Earlier this week, AWS announced new pricing options for its Reserved EC2 Instances (RIs) – suitable for customers that are in a position to commit to EC2 services for longer periods of time in exchange for lower rates.

As of yesterday’s announcement, customers now have three ways to pay for RIs:

  • Full upfront payment for the RI in a one or three-year contract.
  • Partial upfront payment for the RI, where a portion of the RI is paid at the start of the contract term and the remainder is paid throughout the term (at a slightly higher cost).
  • No upfront payment – customers can pay for RIs as they are consumed (this option is limited to a one-year contract).

Compared to AWS’s on-demand, by-the-hour pricing, the savings are substantial. Customers that agree to full upfront payment can save more than 60 percent, while those that prefer partial upfront payment can still see savings around 30 percent.

Compared to Google’s Sustained Use Infrastructure (the closest apples-to-apples comparison), AWS’s new RI pricing options offer significant savings for certain VM configurations. For customers that don’t want to pay anything up front, AWS can be as much as 30 percent less than Google, and as much as 14 percent less for customers that pay partial upfront fees. Those customers that are willing to provide full upfront payment over a three-year contract term stand to save the most with savings as high as 38 percent. However, it should be noted that Google doesn’t require a usage commitment.

We don’t yet know how Google will respond to AWS’s pricing changes – but historical precedence indicates that we can expect Google to make a move soon. Meanwhile, AWS customers may finally have the motivation they need to start taking a longer-term approach to their cloud cost management strategy.