What you need to know about AWS Reserved Instance Marketplace

Tune in as our editors discuss the new Amazon Web Services (AWS) Reserved Instance Marketplace and whether other providers should follow suit.

Cloud capacity planning is a tricky business, particularly for Amazon Web Services customers. Users want to lock in the discounted rates of AWS Reserved Instances' one- or three-year terms -- often priced 20% to 40% lower than those of On-Demand Instances -- but they also want to avoid spending more money than they have to.

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Amazon has attempted to reconcile these competing demands with the launch of its Amazon Web Services (AWS) Reserved Instance Marketplace, which enables customers who have purchased and held Elastic Cloud Compute (EC2) instances as active for at least 30 days to list and sell the unused instances to other buyers. Amazon takes a 12% cut.

In this week-in-review podcast, join site editor Jessica Scarpati and news writer Gina Narcisi as they discuss this news and more from SearchCloudProvider.com for the week of Oct. 1, 2012:   

The following is a transcript of the podcast.

Jessica Scarpati: You're listening to Cloud Cast Weekly, a podcast by SearchCloudProvider.com.  I'm Jessica Scarpati, site editor of SearchCloudProvider.com.  And with me, in the podcast studio, is my co-hostess, co-pilot, co-CloudProvider news junkie, news writer Gina Narcisi.  Thank you, Gina, as always, for being here.

Gina Narcisi: Hi, Jessica. Thanks for having me.

Scarpati: We're here to give you a quick wrap up of everything that's new on the site this week.  So, you wrote this week about Amazon's, their new marketplace, right?  The Reserved Instance Marketplace.  Why don't you start off by telling us about that?

Narcisi: Sure.  So the new marketplace, sort of called "The Craigslist of the Cloud".  Basically, it's for users who already buy reserved instances, which is basically a cloud computing term, one- to three-year cloud computing terms.  You purchase them for low price, and you get some great discounts on the hourly charges as well. So it's worth it if a certain customer knows they're going to be needing a lot of compute power over a certain period of time, over an extended period of time. 

But, still, cloud capacity planning is really hard for a lot of customers, even the ones that know they're going to need it for a long period of time.  So to sort of alleviate the pain in over-buying cloud, Amazon has introduced this new marketplace, and basically users can post their unused instances for other users to buy. 

So it sounds like a good offering for -- It sounds sort of like a win-win for everyone, just because Amazon charges 12%, so they're actually getting back more money on something they already sold.  But at the same time users get to maybe recoup some of their losses, and then other users that maybe would have never considered a reserved instance in the first place because maybe they only need compute power for a three month project, now they're going to have the opportunity to buy some of these reserved instances that are at a really discounted rate. 

And James Staten wrote a blog about this for Forrester, and he was talking about how some of the discounts can even be up to 40%.  Then I talked to another analyst who said that the reserved instances sort of, it's sort of the anti-cloud model because it kind of locks people into this commitment, and she said it was kind of like scalping in the cloud, which I thought was kind of interesting.  But Amazon does have safe guards in place.  You can't sell over $5,000.00 in instances a year, and you can't sell them at the last minute if they are going to expire in a few days. You can't go on the marketplace and try to sell them at that point. 

And this is a pretty good offering that other cloud providers could potentially benefit from as well.  They would just need to have that volume that Amazon has.  So some big ones out there, mentioned, were Rackspace and Microsoft Azure, because obviously you don't want people to go to a marketplace, and there are three offerings, and that's it. 

So you definitely need that volume, but if a cloud provider is trying to compete with Amazon, this marketplace, this could be the way to go.

Scarpati: Yeah.  I thought it was interesting how much thought Amazon put into it some of the protections to prevent server scalpers, or whatever.

Narcisi: Right.

Scarpati: That was one of the things that jumped out at me.  The other was, I just had this thought when I was reading it, that in general, maybe outside of IT, or even inside of IT, buying used has this sort of this bad stigma attached to it.  But with cloud, you're always buying used anyway.  The resources that you're using are the ones that someone else used maybe two weeks ago.

Narcisi: That's true. And with that discount in place, I don't know that it would really matter.

Scarpati: Yeah.

Narcisi: And I think it would also get people to get into the cloud that maybe wouldn't have thought about it before.  So this is even expanding their customer base, essentially.  Which is a great idea for any cloud provider. 

And then getting to your point about the safe guards, that's also a good idea because it can start this whole secondary market of people making a business of selling instances, and I think they're really trying to protect from that as well.

Scarpati: Were there any drawbacks to this?  Did anyone mention any reasons that another cloud provider might not want to do this?  Or maybe there are none?

Narcisi: Not so much another cloud provider.  Just in general, I guess the drawbacks were, one of the analysts mentioned that, over time, she could actually see people being able to profit from this marketplace, even with the safe guards in place.  I don't think that's right away, and I actually don't know that the marketplace has exactly taken off right away because it's so new, but I guess it's one of those things we will see over time just like with most of the cloud.

Scarpati: Great. Well, Gina, thank you as always for joining us.

Narcisi: Thank you.

Scarpati: Application awareness isn't some new ground breaking technology.  There's been talk in the industry for years about networking devices treating applications differently based on their unique needs.  It makes sense, right?  Building intelligence into the network, and all that. 

And Tom Nolle, president of CIMI Corporation looks at whether it's practical for cloud providers to do this in his recent article, "Application Awareness in Cloud Networking: Real or Imagined?" Let's start by looking at why application-aware networking might be a good fit for the cloud.  Due to several factors, not least of which the fact that, many users are accessing cloud-based apps over the Internet, the cloud is especially sensitive to application performance issues. 

Poor application performance equals poor quality of experience.  Poor quality of experience equals unhappy customers. Nobody wants an unhappy customer, so yeah, sure, application aware networking sounds like a good solution, but not so fast. 

The complexity of the cloud makes app-aware networking a bit tricky.  In his piece, Tom identifies two potential paths to salvation for his providers.  OpenStack and software define networking.  Let's start with OpenStack. 

The way OpenStack's platform links applications to the cloud, is through virtual interfaces: One for storage, one for compute, and one for networking.  The virtual interface for networking is called Quantum, and it's the first abstraction of network behavior that's designed to enable applications to describe what they expect from network services. 

The other path is software define networking, also known as SDN.  If you haven't heard about SDN, here's a quick and hilariously over-simplified overview.  In traditional networking, each device has its own control plane that decides what to do with incoming packets, and its own data forwarding plane that looks up the information needed to determine where they should go.  SDN separates the control and data planes, leaving the data forwarding on the devices, but consolidating the control planes into a centralized controller, which defines how traffic flows across the network. 

The goal is simplified management and more granular programmability.  So with this in mind, SDN could be used to create virtual networks that offer each cloud app a different quality of service.  There are pro's and con's to each approach.  Find out what they are by checking out Tom's piece this week. 

Also, this week, we have a column from Charles Weaver, CEO and co-founder of the MSPAlliance, an industry group for managed service providers.  The MSP Alliance's big conference MSP World is coming to Austin this week, and Charles already knows what the hot topics are going to be this year. 

Spoiler alert: Cloud tops the list.  Find out how else you can show off at all the vendor-sponsored cocktail parties by checking out Charles's column, "MSP Alliance: Four hot topics you'll hear about at MSP World 2012."

And that is all that we have for this week.  Be sure to check out all the articles we talked about and more at SearchCloudProvider.com.  We are off next week, but we will see you the second week of October.  Thanks for listening.

This was first published in October 2012

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