{"id":7161,"date":"2019-06-18T14:22:29","date_gmt":"2019-06-18T14:22:29","guid":{"rendered":"https:\/\/www.version1.com\/en-us\/?p=7161"},"modified":"2019-06-18T14:22:29","modified_gmt":"2019-06-18T14:22:29","slug":"cloud-economics-spot-pricing","status":"publish","type":"post","link":"https:\/\/www.version1.com\/en-us\/cloud-economics-spot-pricing\/","title":{"rendered":"Cloud Economics – Spot Pricing"},"content":{"rendered":"

Cloud Economics Part #2: Some Thoughts On The ‘Spot’<\/h2>\n

If you missed the first instalment in our Cloud Economics series, please click here to catch up on our discussion<\/a> of whose responsibility is it to manage your Cloud expenses and control spend excesses and how to avoid the financial sting in the tail of Public Cloud services.<\/em><\/p>\n

Cloud economics are complicated.<\/p>\n

The plethora of pricing and provisioning options available mean that it\u2019s often difficult to understand what\u2019s available to you, and what might be the best option for your particular use case. Furthermore, even with standard offerings, it\u2019s possible that localised and decentralised operational nuances provide additional layers of complexity. Conversely, though, such diverse dynamics might also provide commercial opportunity.<\/p>\n

As an example, let\u2019s look at and expand on, a recently provisioned (H2 2018) academic paper<\/a> investigating the distribution of Amazon EC2 instance spot pricing.<\/p>\n

First off, some background and explanations.<\/p>\n

One of the standard offerings from Amazon Cloud Services is EC2 \u2013 delivering Infrastructure as a Service (IaaS) \u2013 i.e. renting servers.<\/p>\n

Such services can be provided based on many variables, and the servers vary in the resources they provide and consume \u2013 in terms of CPU sizes, memory, geographical location, multi or single tenancy, resilience capability, transience and so on.<\/p>\n

As well as the many provisioning options available, there are also different ways of purchasing your required resource.<\/p>\n

Standard pricing is pay as you go<\/em> \u2013 on-demand,<\/em> usually by the hour or second depending on the instance secured.<\/p>\n

Reserved instance pricing brings a \u2018loyalty\u2019 bonus \u2013 if you know that you need an instance on a long-term, steady or predictable state, then making a larger commitment to pay brings significant benefit. You can for example, pay for an entire year, or three, and make that payment partially or in-full up front, for additional discounts.<\/p>\n

One of the less mainstream provisioning options is Spot Pricing,<\/strong> the topic of the academic paper referenced above. It\u2019s a particular provisioning mechanism which might be viewed in a somewhat contrary fashion to Reserved Pricing \u2013 it makes use of spare cloud capacity, and can provide this at extremely high discount levels, based on trends in supply and demand. Spot prices update on a regular basis. (Note this isn\u2019t necessarily the same as saying that the prices change regularly \u2013 more on this later).<\/p>\n

Requests are usually based on the maximum price that you\u2019re willing to pay for the instance type you need, and if the current published spot price is less than your maximum, then your instance is created (assuming the capacity is available).<\/p>\n

However, should EC2 need the capacity for guaranteed purposes, or demand changes the Spot price above your maximum, or Spot capacity reduces, then your Spot instance will normally be ‘interrupted’ at two minutes’ notice. You and your application need to cater for that.<\/p>\n

Instances can sometimes achieve up to 90% discount and would therefore seem to be a great deal \u2013 but due to the ‘interrupt’ behaviour such instances would normally only be used in specific use cases. Where applications are fault tolerant, have high degrees of restart capability, or are non-critical, spot instance pricing can bring significant financial benefit. Development and non-production applications might therefore be extremely well suited to make use of such instances. Other nuances in spot instance capability add flexibility and tolerance, with the penalty of reduced discount.<\/p>\n

One thing to note before we progress \u2013 we\u2019re just looking at pricing of the EC2 instances here \u2013 not any supplementary licensing costs \u2013 e.g. Oracle or Microsoft Licenses \u2013 you might want to review some of the other blogs in our AWS series (CPU Optimisation<\/a> and Licensing Oracle on AWS – An Independent Review<\/a>).<\/p>\n

Ok, back to the spot instances and the academic view \u2013 prices are updated regularly based on trended supply and demand. The reviewers wanted to understand if there were particular trends over a time frame, with respect to the Geographical location of the launched spot instances \u2013 could any useful, exploitable insights be achieved looking at Spot Instance Data in the EU geography compared to the US, Asia Pac, Canada, and additionally across a particular region\u2019s Availability Zones (AZ), or inter geography domain \u2013 eu-central-1a versus eu-central-1b for example or eu-central-1a versus eu-west-1c?<\/p>\n

The researchers used standard AWS API\/CLI calls to retrieve a set of over 4 million data points for analysis, and concentrated on the following principal areas of analysis:<\/p>\n

    \n
  1. Average price analysis across all instance types within a region across all timed data<\/li>\n
  2. Average price analysis for each instance type in a region<\/li>\n
  3. Analysis of frequency of prices per instance in particular AZs in the region<\/li>\n
  4. Cross comparisons of these analysis groups<\/li>\n<\/ol>\n

    So, what did they find? (I\u2019ll mostly reference the papers researched calculations rather than refresh with current data unless noted otherwise, and whilst some examples refer to currently unavailable previous generation instances, the logic still applies).<\/p>\n