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EC2 Reserved Instance Marketplace

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62 pointsjeffbarr36 comments

I based my PhD thesis on the idea of trading computational cloud (or any, really) resources. I went a little further though, and looked at how to design algorithms for the actual marketplaces, which allowed them to optimise how they competed with other marketplaces. A bit like London Stock Exchange competing with the New York Stock Exchange.

While my research was a little blue sky (what isn't) I do think that electronic trading of computation resources is the future, and I think Amazon are ahead of the game in this respect.

Would you be willing to share some links to your research? I find this area fascinating, and also believe this is going to be a big market in future.

Apparently http://www.eddrobinson.net/papers/robinson_2011_phd_disserta...

Have you read Permutation City? The computation market in that book was very interesting, and a lot more flexible among cloud providers than what we have so far.

The RI team is hiring if you want to put your research to good use. Just get in touch with me via the email address in my HN profile.

I wish they would allow sellers to receive the funds as AWS-credits as well. Creating a US bank account just for this will be too much of a hassle for many non-US companies.

Not to mention that if your bank has a fee for receiving wire payments, selling micro instances is pretty much pointless.

Ya, this is pretty much useless for people with 1-2 instances. It simply isn't worth the hassle. That said, if there is a way to donate reserved capacity for open source projects without any hassle, it will be more useful.

It's important to note this only works if you're a business with an American bank account. Everyone else can't sell EC2 instances there.

As I just discovered, would have been nice to unload a couple of instances. Don't hold your breath waiting for this to change, the level of interest for non-US DevPay support over the years has been huge, but it's just sat on some todo list somewhere.

I agree that that stinks, but international payments are really hard to get right.

This is so 'Amazon'. (There's a little hint of Enron, too... but the shard of Enron that made economic sense, markets for expiring capacity.)

The frightening part about Enron is how much of it made sense, in a theory kinda way.

It's late so maybe I'm missing something but is there a way to make money out of this for sellers and turn a profit? Not just recoup some costs of a reserved instance(s) they no longer need?

Probably not -- the 12% fee would severely limit the margin if you tried to trade them.

We made the mistake of buying a ton of reserved instances up front which we have been stuck with because we moved on to a different instance with the high IO. We have been complaining to them about the need for a RI secondary market at all the AWS events we could attend

This has been my hesitation for doing any reserved instances. I expect to need larger instances in teh next 6 to 12 months, so any reserved instances I purchase today would have extra time on them without utilization ... This at least gives a way to ease the pain of reserving instances that you know you will out grow ...

Hi sum1randum,

Have you tried engaging the AWS customer service team on this? AWS has a public face that looks 100% robotic and automated, but I assure you there are AMAZING support & engineering teams behind the scenes who have a strong vested interest to make sure customers are successful using AWS.

IMHO, it might be worth a shot to send them a ticket that basically says, we bought RI's for the instance type we needed at the time, but now you guys released the new High IO type, and for us to be successful we really need to upgrade these RI's. So, the ideal outcome is you go buy your new reservations and then they give a prorated credit for the rest of your RI term on the old ones. I would imagine they might still steer you to the RI marketplace now but it's worth a shot if you can be persuasive enough.

I'm starting to think Amazon is cynically exploiting the edge cases of its pricing to make a large portion of its money.

This looked great at the start, but the details really make this shitty. You need to sign up as a seller and all the hassle it entails (I'd be happy with AWS credits, I'm just going to spend them on another instance), they charge 12% and then they also round down to the nearest month.

In fact, a large portion of Amazon's business model seems to be selling the same thing multiple times. We still waste a lot of money because EC2 insists on charging for a full hour no matter what (eg even if the instance didn't even start!), and it seems a pretty scummy way of making a lot of extra margins. And now they're doing the same thing here.

Could Amazon be theoretically more efficient - sure. In fact, I wouldn't be surprised, if over time, the time requirement for owning (30 days) and the round off period (To the month, rounded down) and the fee (12%) is rounded down - but, this is a new service that did not exist before - so from that perspective, it's great. All the things that you used to be able to do (lend someone your EC2 instance) still exists.

It just seems like a long winded way to avoid just charging at shorter intervals for reserved instances.

I guess the margins on these things are really thin but I don't see why, they can't charge monthly or let you upgrade a reserved instance (this I find particularly silly)

I spoke to someone in Amazon's NYC event earlier this year, and they said the reservations are used to help guide their hardware purchases. Since the hardware will be around for quite a while, they require longer terms (for now, anyway)

Really cool! New startup idea: create a trading algorithm that acts as a market maker of reserved instances. You should probably be able to price the reserved instances pretty much like bonds, if you compare it to the on-demand instances. You lock your money for a while but you get some yield in return.

It's a bit more complicated than that -- RIs are bonds with unknown future payouts (since the hourly prices drop from time to time) and a very high transaction cost (AWS takes a 12% cut each time an RI is sold).

Sure, but you could perhaps model that as some form of default risk. Real bonds also have a risk of not returning the yield they're supposed to return (just look at Greece). Also, if they add support for getting paid in AWS-credits, I'm sure they'd be able to lower the transaction-fee.

I don't think RI is a bond. Bond is a debt instrument and you don't loan anything to AWS when you purchase an RI. RI is a hedging instrument instead - you think that if you end up running an instance non-stop or near-non-stop, you are hedging against paying a full price. Hence, RI is more like an option.

Further parallels with options are: 1) your upfront payment is option premium; 2) your RI has time value which is always declining as time passes; 3) RI gives you a right, not obligation, to do something; 4) RIs have many series, each expiring at the same time, just like exchange-traded options that expire at predetermined times.

All in all, this is huge. Or even bigger than huge. It can enable certain things that were not possible before, and personally I am very excited about opportunities it will present and how it will re-shape public IaaS.

It's already being done by a startup I know, I think they might still be in stealth though.

Until this announcement, trading (buying and selling) of any EC2 entity was theoretically impossible.

Many companies claim to be working on things like marketplaces etc, but unless you can sell (buying is always trivial) and further unless you can sell to not just AWS but to a pool of other users, it ain't no marketplace.

[mistake]

Looking at the pricing on the amazon site here: http://aws.amazon.com/ec2/pricing/#lightUtilizationRILinux

does it mean Small (Default) linux server only cost $69 for a whole year? likewise $138 for a medium instance for whole year?

I'm wondering about this too. Or is is 69+ regular hourly charges?

$69 is the upfront fee for a 1-year "light utilization", you pay hourly on top of that at $0.039/hour. Note this is half of the $0.080/hour normal price (non-reserved). If you wanted a dedicated (100% utilization) reserved small Linux instance, it would be $195 setup and $11.71/month (total $335/year) vs. non-reserved at $58.56/month (total $702.72/year). Note that the upfront fee is paid each time you renew a term, it's not really a "one-time" fee like with dedicated servers.

Edit: source: http://calculator.s3.amazonaws.com/calc5.html

Great new business plans: Instance squatting. Instance futures trading. Instance futures trading analysts ...

Absolutely fantastic idea.

I assume people have been doing this on a somewhat grey market up until now, so it's great that is now an approved system.

This is great

Awesome!

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