New Amazon EC2 Pricing Model

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Amazon announced a change in the pricing model of its cloud computing platform, Amazon Web Services, creating what’s called “Reserved Instances” for its EC2 Product.

Reserved Instances basically lowers the price of the service and guarantees storage capacity in exchange for a commitment to use EC2 for a year or more.

Amazon says that its new pricing model lowers cloud computing costs for businesses; customers must merely make a one-time payment for each instance they want to reserve and in turn will receive a significant discount on the hourly usage charge for that instance.

An instance is Amazon’s unit of computational capacity). After the one-time payment, the instance is reserved and there is no further obligation; customers only pay for the compute capacity that they consume. For example, an on-demand EC2 Small instance costs $0.10 per hour. For a one-year commitment for the EC2 Reserved Instance, the cost is $0.067 per hour, including a one-time Reserved Instances fee and usage cost. Amazon compares the one-time fee to “acquiring hardware,” and the hourly usage fee to “operating costs.”

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