4643 is the magic number for Amazon EC2 reserved pricing
Posted 25 March 2009 @ 3:03 pm by Jim LiddleAs Kamran Yousaf and I found out when looking at when EC2 reserved pricing makes sense, the simple answer is 4643.
Amazon recently announced new pricing option where you can reserve an instance for one or three years and then have discount on the hourly rate. The table below describes the cost per year if the instance is up for the whole year.
| Instance Type | Cost/Year On Demand instance $ | Cost/Year for 1 year reserved instance $ | Cost/Year for 3 Year reserved instance $ | |||
| Small |
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| Large |
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| Extra Large |
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| Medium High CPU |
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| Extra Large High CPU |
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The above prices were calculated using Linux instance and US pricing
Cost/Year On Demand instance$ = cost per hour * 365*24
Cost/Year for 1 year Reserved instance $ = 1 Year reserve price + (cost per hour * 365*24)
Cost/Year for 3 Year reserved instance $ = (3 Year reserve price /3)+ (cost per hour * 365*24)
Now this brings the interesting question when is it cost efficient reserve an instance ?
We can calculate the minimum usage hours over which the cheaper per hour price for a reserved instance starts to decrease the overall cost using the following formula
Instance Reserve Price/(On Demand Instance Hourly Price – Reserve Instance Hourly Price)
e.g for a small one year reserved instance
350/(0.10 - 0.03) = 4642.8 hours
For small 3 year reserved instance
500 / (0.10 - 0.03) = 7142.8 hours
The above calculated numbers are same for all instance types. So you should reserve a one year instance if you intend to use more than 4643 hours or the instance is up 53% of the time in one year. With a 3 year reserved instance you can save money if over 3 year period you use 7143 or more hours or the instance is up 27% of the time over a 3 year time period.
(adapted from our original post on Cloudiquity.com)
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