What does an “instance” mean for AWS

Amazon Web Services just announced that users can now sell their unwanted EC2 instances on an AWS sponsored secondary market. See the following letter:

Dear Amazon Web Services Customer,

We are excited to announce the Reserved Instance Marketplace, an online marketplace that provides AWS customers the flexibility to sell their Amazon Elastic Compute Cloud (Amazon EC2) Reserved Instances to other businesses and organizations. Customers can also browse the Reserved Instance Marketplace to find an even wider selection of Reserved Instance term lengths and pricing options sold by other AWS customers.

Reserved Instances allow customers to lower costs by making a low, one-time payment to reserve compute capacity for a specified term, and in turn, receive a significant discount on the hourly charge for that instance. The Reserved Instance Marketplace gives you the flexibility to sell the remainder of your existing Reserved Instances as your needs change, such as wanting to move instances to a new AWS Region, changing to a new instance type, or selling capacity for projects that end before your term expires. Amazon EC2 Instances purchased on the Reserved Instance Marketplace offer the same capacity reservations as Reserved Instances purchased directly from AWS.

You can also now shop the Reserved Instance Marketplace to purchase Reserved Instances outside the standard one-year and three-year term lengths. For example, if you anticipate increased website traffic for a short period of time, or if you have remaining end-of-year budget to spend, you will be able to search for Reserved Instances with shorter duration times.

To learn more about the Reserved Instance Marketplace, visit the Reserved Instance Marketplace Web Page.

Sincerely,
The Amazon EC2 Team

The 3  limitations:

AWS will charge a 12% transaction fee and imposes the following limitations: users must have paid the upfront fee and owned the instance over 30 days, buyers remain bound by the same hourly pricing as the original purchase plan, and users need approval to sell over $50,000 of instances per year.

What does this mean from the AWS perspective?

Well, it seems that AWS wants to encourage the purchasing of Heavy Utilization and longer terms. This new marketplace allows customers who have purchased those types of instances to unload them if they become unnecessary. This is particularly important when considering Heavy Utilization because instances purchased under that tier accrue costs irrespective of whether being used or sitting idle.

What does this mean from a customer perspective?

As a customer, this offers an opportunity to save even more money through strategic purchasing decisions.

However before examining that opportunity, we want to re-emphasize that customers should not let this new ability determine their “what-to-purchase” decision. This new ability is a “how-to-purchase” option and should not be mistakenly conflated with the what-to-purchase decision.

As we have written about in our Cost Management Series whitepapers (https://cloudcheckr.com/whitepapers/), before considering how to purchase, users need to first identify what they need.

After determining what instance and term is needed, to benefit, customers need to take 2 steps:

First, the AWS set-up shows the straight-line depreciation and the lowest comparable market listing. Users should always check this before buying a Reserved instance directly from AWS. Anytime the lowest comparable is below the straight line, the purchase through this system may be cost effective.

Second, customers should also check the hourly rates associated with the instance. AWS has consistently lowered prices. Customers need to avoid purchasing an instance with older higher hourly rates. That will rarely be economical (even if the upfront seems very low).

So, if the hourly rates match current rates and the lowest comparable price is below the straight-line depreciation, this is the instance to purchase.

 

CloudCheckr (www.cloudcheckr.com) can help automate this entire analysis.

See here for more information from AWS : https://aws.amazon.com/ec2/reserved-instances/marketplace/

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