Amazon AWS 19th Price Reduction – a Closer Look

If you have been following me regularly then you would know that I maintain that charges for cloud services are not coming down in proportion to the routine reduction of hardware cost. So, let us examine in Amazon has reversed the trend with its latest announcement of price reduction. On 6th March, 2012 Amazon announced:

“…a reduction in Amazon EC2, Amazon RDS, and Amazon ElastiCache prices. Reserved Instance prices will decrease by up to 37% for Amazon EC2 and by up to 42% for Amazon RDS across all regions. On-Demand prices for Amazon EC2, Amazon RDS, and Amazon ElastiCache will drop by up to 10%. We are also introducing volume discount tiers for Amazon EC2, so customers who purchase a large number of Reserved Instances will benefit from additional discounts. Today’s price drop represents the 19th price drop for AWS**, and we are delighted to continue to pass along savings to you as we innovate and drive down our costs…”

**since the launch of the service – (my addition)

How much of this (37%, 42%, 19th etc.) is sales talk and how much of it is reality? Let me just present the data that I have collected.

Have a look at the data you be the judge.

[Update: Why am I not surprised that Google drops the price of Cloud Storage service within a week?]

[Update: This was going to happen and it has happened within 10 days! Microsoft Trying Hard to Match AWS, Cuts Azure Pricing]

How does the current price compare with what existed in January, 2010

I had taken a dipstick of the prevailing AWS prices on Jan-10 which you can check here. There is no doubt that the breadth and the depth of offering has increased significantly, but we can still compare the price of those offering which existed then.

Here is a comparison between prices then and price now.

Jan-10 Mar-12
On-Demand Instances Small – Linux – N. Virginia $0.085 $0.080
Quadruple Extra Large – Windows – N. California $3.160 $2.504
Data Transfer – In Free till June 2010 Free
Data Transfer – Out Per GB depending on the total monthly volume $0.1 to $0.17 $0.05 to $0.12
Storage (EBS) Per allocated GB per month $0.10 $0.10
I/O Requests Per million I/O $0.10 $0.10

Price Reduction in last 3 years

I could locate 12 instances of price reduction announcement in last 3 years. Except for the current announcement all other have lowered price on only one element of AWS. Here is the summary:

  • On-demand instance: 2 Times (Mar-12 & Oct-09)
  • Reserved Instances: 2 Times (Mar-12 & Augt-09)
  • Storage: 3 Times (Mar-12, Feb-11 & May-10)
  • Data Transfer: 2 Times (Jul-11 & Feb-10)
  • Cloud Front: 2 Times (Jul-11 & Jun-10)
  • Cloud Watch: 1 Time (May-11)
  • Premium Support: 1 Time (Jan-11)

Here is the full list:

New, lower pricing for Amazon EC2, RDS, and ElastiCache Mar-12 Reduction in Amazon EC2, Amazon RDS, and Amazon ElastiCache prices. Reserved Instance prices will decrease by up to 37% for Amazon EC2 and by up to 42% for Amazon RDS across all regions. On-Demand prices for Amazon EC2, Amazon RDS, and Amazon ElastiCache will drop by up to 10% All
New Lower Pricing Tiers for Amazon CloudFront Jul-11 Lowered prices for Amazon CloudFront — we’ve added new usage tiers in every region, and in the US and Europe we’ve reduced data transfer pricing in every existing tier Cloud Front
AWS Lowers Data Transfer Costs – Effective May 1 Jul-11 We will no longer charge a separate fee for internet data transfer in. For internet data transfer out, in the US and Europe we’ve reduced the price at every existing usage tier and in all regions Data Transfer
Amazon CloudWatch Announces Custom Metrics, Lower Prices for Amazon EC2 Monitoring May-11 We are lowering the price of existing Detailed Monitoring for Amazon EC2 instances by 68% to $3.50 per instance per month Cloud Watch
Amazon S3 announces new lower prices for standard storage Feb-11 All Amazon S3 standard storage customers will see a reduction in their storage costs. For instance, if you store 50 TB of data on average, you’ll see a 12% reduction in costs, and if you store 500 TB of data on average, you’ll see a 13.5% reduction in costs Storage
AWS Introduces New Premium Support Plans, Lowers Usage Prices by 50% on Existing Plans Jan-11 Usage pricing on existing Premium Support Gold and Silver offerings by 50% Premium Support
Amazon CloudFront Adds HTTPS Support, Lowers Prices, Opens NYC Edge Location Jun-10 Reduced our pricing for regular HTTP requests by 25%: prices for HTTP requests now start at $0.0075 per 10,000 requests Cloud Front
New Lower Prices for High Memory Double and Quadruple XL Instances May-10 Lowered the On-Demand and Reserved prices for High Memory Double Extra Large (m2.2xlarge) and Quadruple Extra Large (m2.4xlarge) DB Instances Storage
AWS Announces Lower Pricing for Outbound Data Transfer Feb-10 Lowering AWS pricing for outbound data transfer by $0.02 across all of our services, in all usage tiers, and in all Regions Data Transfer
Announcing Lower Amazon EC2 Instance Pricing Nov-09 Lowering prices up to 15% for all On-Demand instance families and sizes On-Demand Instances
New Lower Price for Windows Instances with Authentication Services Oct-09 Removed the distinction between Amazon EC2 running Windows and Amazon EC2 running Windows with Authentication Services On-Demand Instances
New Lower Prices for Amazon EC2 Reserved Instances Aug-09 Lowered the one-time fee for all Amazon EC2 Reserved Instances by 30% Reserved Instances

Amazon AWS pricing details

Here is a Snapshot of the pricing as it exists now (March, 2012)

I will be able to use this in future for comparison!

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6 Game Changing Technology Events of 2011 – and 2 Non-Events

1. Steve Jobs resigns permanently

Steve Jobs, the genius is no longer with Apple.

Would you like to take a bet that within next three years, Apple will not be able to come up with another game changing innovation like iPad, iPhone, iPod, Mac or Apple PC?

2. Google goes social

Paul Allen says Google+ growth is accelerating and passes 62 million users, adding 625,000 new users per day and will probably have 400 million users by end of 2012. Whether this will threaten Facebook or not is less important than how this is going to affect search result.

Google knows much more about us than we can imagine – sometime you may feel that it can even read your mind – it is scary.

3. Microsoft chooses Metro UI for Windows 8

This bold decision is either a make or break for Microsoft – well not necessarily for Microsoft but for their OS business. If people reject it then Microsoft can say goodbye to mobile and tablet OS. But if it gets accepted then surely there is a chance that they will go on to be a strong player in both phone and tablet OS market.

Mobile and tablet UI needs innovation and Metro UI may just be that.

4. HTML5 has won the mobile war

What is going to stop HTML5, especially in the mobile? All leading players have adopted it – Apple, Microsoft, Google and now even Adobe. Have you seen the HTML5 version of Angry Bird?

Yes, HTML5 has won – would it have happened if Steve Jobs had not refused to allow Flash in iPhone?

5. Watson- Breakthrough in AI influences Google

How big a deal is IBM Watson winning Jeopardy!? It is just another milestone like Deep Blue beating Kasparov in chess which did not have any game changing effect? What is more interesting is how this has affected Google. Just after Watson won, Google has started replying to your search query with an explicit answer and it is continuously improving.

Are we moving towards an era where there will be an all knowing machine which will answer all questions?

6. Motion sensing technology comes of age

Which is the “Fastest-Selling Consumer Electronics Device”? No it is not the iPhone or the iPad. It is, according to Guinness Book of World Record, Kinect for the Xbox 360 which sold an average of 133,333 units per day, for a total of 8 million units in its first 60 days on sale from 4 November 2010 to 3 January 2011. Microsoft seems to have made significant breakthrough in motion sensing technology.

Is this going to be one of the key building blocks of required for a household robot?

A. No Facebook IPO

This is really an event that did not happen. Why did it not happen? Is it due to the launch of Google+ which spoiled the party, or the informal valuation of Facebook already too high?

Or is this a sign that social networks has less influence on buying decision than what people would like to believe?

B. Nothing on Cloud Computing

I cannot think of even one event in cloud computing which is worth a mention. That by itself is worth a mention.

Is cloud computing losing its value proposition?

Other not so significant events

Significant product launches

  • Android 4.0, Ice Cream Sandwich
  • Windows Phone 7.5, Mango
  • iPhone 4S
  • Galaxy S2
  • iPad 2
  • Kindle Fire
  • Google+

Merger, Acquisition and Strategic Partnership

Patent war

Related Articles

Microsoft’s Second UI Innovation

Critics have always accused Microsoft of copying UI from Apple. As Chris Madden in this interesting post point out that Apple fans state that:

“…every Mac OS feature and icon eventually shows up in Windows (and in fairness many do)…”

First time Microsoft came up with a revolutionary UI design was when it created the Ribbon. Like most revolutionary design it was thoroughly criticized. Here is one such post – I am sure if you search you will find many more.

It was different and if you keep all your previous learning aside, it was much more intuitive. I think they did one big mistake of not putting the “File” tab.

What is more interesting is that Microsoft revealed the complete story of how they went about creating the ribbon. The story is fascinating and I strongly recommend that you listen to it. Here is the link for the complete presentation and here is the link to the presentation.

[Well, can you imagine Apple making such a presentation?]

You need to note 2 points highlighted in that presentation:

  1. Traditional interface which is a combination of pull down menu and toolbar is not very intuitive when you have close to 300 menu options and 18 toolbars
  2. It is important to base your UI design on the actual usage data

There are people who still don’t like ribbon but most people (including myself) find ribbons to be much more intuitive. In a nutshell, we can call ribbon a success and it can be said without any doubt that Microsoft is the creator.

Microsoft’s 2nd UI Innovation

By now it is obvious to us that WIMP interface does not work well on a touch device. That is why Windows CE based devices required a stylus. That is why Windows tablet never took off. That is why Apple created a different UI for iPhone – different from Mac OS.

But has the UI standard for touch reached a stage where we can consider it done? I don’t think so.

That is what makes Windows 8, Metro interface so promising. Why? Well there are several reasons:

  1. It works well on a touch device – of different size – even very large ones
  2. The interface is active – which opens up more possibilities
  3. They have managed to combine – very neatly – the WIMP and the Touch interface
  4. The interface is being designed for different types of processors
  5. For the app developer – same application will work on PC, tablet and smartphone

Will it succeed? Is Microsoft too late in the tablet and smartphone game? Will it go the Vista way?

Only time can tell – but you need to admit that Metro interface is very interesting and full of promise.

Also: see this and this.

 

Are we falling back on IT Innovation?

Smartphones, tablets, and the cloud – are they true IT innovation?

Or,

As Bob Lewis suggests, are they consumer innovation or port of one or more of the dozen earlier innovations to these new platforms?

In this article he has listed out a list of 12 innovations that had created the ability to do something new and significantly different from anything that had been done before. They are:

  1. Programmability – Starting with ENIAC
  2. Storage and management of structured data – Earliest commercial mainframe to RDBMS and beyond
  3. Electronic publishing – Linotype machines to electronic page setting
  4. Word processing – Ability to edit and reprint document
  5. Electronic spreadsheets – Starting with VisiCalc
  6. Visual programming
  7. Personal empowerment – The PC revolution
  8. Personal information management – Starting with Sidekick
  9. Electronic mail
  10. Electronic communities of interest – Starting with electronic bulletin board
  11. The WIMP interface – Windows, Icons, Mice, and Pointers = GUI
  12. E-commerce

I have 6 cribs – more about the article than about the list.

Anybody can contest this list and create a separate list of technologies. I also have few technologies which I would like to see in this list. But that is not the point.

When can you proclaim a technology to be truly innovative?

It is very difficult to know the true disruptive potential of any innovation when you too near to the time when the innovation happened. Only on hindsight, when several years have passed, can you really say that “yes; that was a disruptive innovation”.

Each one of the innovations in that list (for that matter such list) falls into the category where the true disruptiveness was realized several years after the initial innovation. It also takes several years for the innovation to mature.

So, we should judge smartphones, tablets and cloud five years down the line.

12 innovations in 60 years = 1 in 5 years

On a linear time scale, 12 innovations in 60 years translate to one innovation every 5 years. How are we doing on that scale?

The “electronic communities of interest”, though initiated several years back, became disruptive only with Facebook, Twitter, LinkedIn etc. and that has happened in last 5 years.

Similarly, “E-commerce” took off within last ten years, “Personal information management” in last 15 years and so on …

May be, we need to wait for another 5 years to realize that another disruption has happed.

How to date the disruption?

“Storage and management of structured data”, as pointed out in the post, starts from the first generation mainframe computers and goes at least till the creation of RDBMS. There is a hint that we should extend the concept to the newer post SQL data storage techniques.

So, should we date this innovation to early 50’s when the mainframe computers were commercialized? Or, should we date it to Codd’s publication of A Relational Model of Data for Large Shared Data Banks, which happened in 1970?

What is the date of WIMP innovation? Is it when it was first created in Xerox PARC in 1973 or should we take the date of release of Macintosh in 1984? The “Touch” technology available in smartphone and tablet is possibly as disruptive as WIMP and you need to credit Apple – iPhone for popularize it. More work needs to be done but it should evolve over a period of time and it will probably become all pervasive and as disruptive. Like microprocessor, it will be embedded in every piece of equipment that we see – as pointed out by Robert Cringely.

Level of abstraction

“If you wish to make an apple pie from scratch, you must first invent the universe” … Carl Sagan

There is no doubt that the 12 innovations listed have been true game changer but future innovation will necessarily be built on top of the 12 innovation listed.

So, should we treat “virtualization” to be a separate technology innovation? It is another matter that we may have to wait for several years to judge the impact of it and by extension judge the innovative impact of the “Cloud”.

Do we still have a distinction between consumer and business technology?

Any consumer innovation disruptively impacts business. Gone are the days when IT was primarily used for improving efficiencies. Today, almost every IT application has an outside-in look. It has to interface with the customers and other stakeholders. It is part of every product and service design.

Here is an article by Adam Richardson on the four technologies that will have a disruptive impact on your business, almost regardless of which industry you’re in. They are:

  • Microprocessors
  • Sensors
  • Wireless connectivity
  • Databases

I would like to add touch screen to this list.

Finally my crib about …

What has been missed out from the list?

  1. Compiler
  2. Hyperlinking
  3. Search
  4. RDBMS – it deserves a separate mention
[Update: Thanks Madan]
Yes, Networking should be in the list.
In fact, all future innovation will either enhance our connected-ness or leverage it.
By connected-ness I mean human to human connection, human to machine connection and machine to machine connection.

Microsoft spends more on R&D than Google

This is true not only in absolute dollar term but also true as a percentage of revenue. In fact, Microsoft spends more on R&D among all the IT and software companies – in both absolute dollar terms as well as percentage of revenue.

Have a look at the data below. I have picked it up from a post in Infoworld by Ted Samson.

Revenue in billion US$

R&D Budget in billion US$

R&D Budget  as % of Revenue

Microsoft

62.5

8.7

13.92%

Oracle

35.6

4.5

12.64%

Google

29.3

3.7

12.63%

IBM

99.9

6.0

6.01%

Apple

65.2

1.8

2.76%

HP

126.0

3.0

2.38%

It was a surprised to see Oracle so high up in the list but I guess it may be a legacy from Sun. However, what is more surprising is to see Apple and HP spending so less on R&D.

I poked around a little to cross check the validity of the data – it appears indicatively accurate. In fact Microsoft R&D spending may be little understated. (See Microsoft R&D Spending, Comparative R&D Spending and Oracle R&D Spending).

Here is another chart from Business Insider which is based on 2009 data.

So, it would be foolish to write-off Microsoft in mobile. They have a habit of bouncing back and taking the lead after late start. Let us wait and watch where Microsoft will it be in ten years?

Cloud – Market forces working

Some time back I had complained that price of cloud service offering are not coming down fast enough compared to the drop in hardware price reduction. But then we see the following release from Amazon – AWS.

“…we’ve often told you that one of our goals is to drive down costs continuously and to pass those savings on to you…” (see this)

Indeed, from 1st July, they have eliminated the inbound data fee. It used to be US$ 0.10 per GB.

Also they have reduced the outbound data fee between 20% (for lower end of usage) to almost 40% (at the higher end of usage).

Here is the comparison of per GB outbound data fee, before and after 1st July (for US-Standard, US-West and Europe regions):

Slab for Data Transfer per month

Price per GB before 1st July

Price per GB from 1st July

First 1 GB

Free

Free

Up to 10 TB

US$ 0.15

US$ 0.12

Next 40 TB

US$ 0.11

US$ 0.09

Next 100 TB

US$ 0.09

US$ 0.07

Next 350 TB

US$ 0.08

US$ 0.05

Over 500 TB

US$ 0.08

Special price – not disclosed

However, was this change in price done, as claimed by Amazon, to pass the cost reduction benefit to customer? Probably not because few days before this announcement Microsoft had announced that inbound data transfer will be free from 1st July, 2011 (see this).

BI in the Cloud becomes attractive

This change may one up interesting possibilities for doing DW & BI application on the cloud. Earlier, the biggest roadblock for moving such application to cloud was the prohibitive cost of transferring data into the cloud. With the removal of that stumbling block the economics of BI in the cloud looks more attractive.

How reliable is the Cloud?

Recently InfoWorld published a list of 10 worst cloud outages which happened in last 3 years. The list included all the big name like Amazon, Google, Microsoft, Rackspace etc. The focus of the post is to draw lessons from these failures. However, for an objective assessment, we need to ask the questions:

  • How reliable are these cloud services?
  • Are they more or less reliable than your in-premise application?
  • Should reliability be measured in the same way for IaaS & SaaS?

(Here is the link to the article)

How reliable are these cloud services?
According to my calculation the reliability number for these services comes out as follows.

  1. Amazon Web Services = 99.920%
  2. Sidekick = 99.400%
  3. Gmail > 99.999%
  4. Hotmail > 99.999%
  5. Intuit = 99.750%
  6. Microsoft’s BPOS = 99.958%
  7. Salesforce  = 99.996%
  8. Terremark = 99.971%
  9. Pay Pall = 99.983%
  10. Rackspace = 99.958%

How does it compare it what you have?

How do you calculate the reliability?
The answer is not as straight forward as you may think. For example, it is commonly believed that air travel is much safer than road travel. But it depends on how you are measuring the reliability. If you go to the Air safety in the Wikipedia you will notice that three different statistics are provided.

  1. Deaths per billion passenger-journeys: Both Bus (4.3) and Car (40) comes out much safer than Air (117)
  2. Deaths per billion passenger-hours: Though Air (30.8) is safer than Car (130), it is still worse than Bus (11.1)
  3. Deaths per billion passenger-kilometers: Here Air (0.05) is much safer than both Bus (0.4) and Car (3.1)

This is how I have calculated the reliability number.

I have assumed that these are the only failure these services have suffered in last 1000 days. The reliability % is calculated by the following formulae:

% Reliability = 1 – (down days / 1000) * fraction of services or users affected

For AWS:

Down days = 4

Fraction of services or users affected = 1 of the 5 availability zone = 0.2

AWS reliability % = 1 – (4 / 1000) * 0.2 = 0.9992 = 99.92%

For Gmail:

Down days = 4

Fraction of services or users affected = 150,000 out of 200 million users = 0.00075 or 0.075%

AWS reliability % = 1 – (4 / 1000) * 0.00075 = 0.999997 = 99.9997%

Should reliability be measured in the same way for IaaS & SaaS?
As far as reliability is concerned, there is a fundamental difference between IaaS and SaaS.

If you are using IaaS you can take the following measures:

–          Have an alternate DR site

–          Have your own backup of the data

However, when you are using SaaS, neither of these approaches is feasible. Imagine setting up a backup mailing system to cater for Gmail going down! For that matter, can you imagine backing up your data which stored in Salesforce.com.

So, the reliability standard for SaaS has to be much higher than IaaS.