AWS works hard to lower our costs so that we can pass those savings back to our customers. We look to reduce hardware costs, improve operational efficiencies, lower power consumption and innovate in many other areas of our business so we can be more efficient. The history of AWS bears this out — in the past six years, weve lowered pricing 18 times, and today were doing it again. Were lowering pricing for the 19th time with a significant price decrease for Amazon EC2, Amazon RDS, Amazon ElastiCache and Amazon Elastic Map Reduce.

Amazon EC2 Price Drop

First, a quick refresher. You can buy EC2 instances by the hour. You have no commitment beyond an hour and can come or go as you please. That is our On-Demand model.

If you have predictable, steady-state workloads, you can save a significant amount of money by buying EC2 instances for a term (one year or three year). In this model, you purchase your instance for a set period of time and get a lower price. These are called Reserved Instances, and this model is the equivalent to buying or leasing servers, like folks have done for years, except EC2 passes its benefit of substantial scale to its customers in the form of low prices. When people try to compare EC2 costs to doing it themselves, the apples to apples comparison is to Reserved Instances (although with EC2, you don’t have to staff all the people to build / grow / manage the Infrastructure, and instead, get to focus your scarce resources on what really differentiates your business or mission).

Todays Amazon EC2 price reduction varies by instance type and by Region, with Reserved Instance prices dropping by as much as 37%, and On-Demand instance prices dropping up to 10%. In 2006, the cost of running a small website with Amazon EC2 on an m1.small instance was $876 per year. Today with a High Utilization Reserved Instance, you can run that same website for less than 1/3 of the cost at just $250 per year – an effective price of less than 3 cents per hour. As you can see below, we are lowering both On-Demand and Reserved Instances prices for our Standard, High-Memory and High-CPU instance families. The chart below highlights the price decreases for Linux instances in our US-EAST Region, but we are lowering prices in nearly every Region for both Linux and Windows instances.

For a full list of our new prices, go to the Amazon EC2 pricing page.

We have a few flavors of Reserved Instances that allow you to optimize your cost for the usage profile of your application. If you run your instances steady state, Heavy Utilization Reserved Instances are the least expensive on a per hour basis. Other variants cost a little more per hour in exchange for the flexibility of being able to turn them off and save on the usage costs when you are not using them. This can save you money if you dont need to run your instance all of the time. For more details on which type of Reserved Instances are best for you, see the EC2 Reserved Instances page.

Save Even More on EC2 as You Get Bigger

One misperception we sometimes hear is that while EC2 is a phenomenal deal for smaller businesses, the cost benefit may diminish for large customers who achieve scale. We have lots of customers of all sizes, and those who take the time to rigorously run the numbers see significant cost advantages in using EC2 regardless of the size of their operations.

Today, were enabling customers to save even more as they scale — by introducing Reserved Instance volume tiers. In order to determine what tier you qualify for, you add up all of the upfront Reserved Instance payments for any Reserved Instances that you own. If you own more than $250,000 of Reserved Instances, you qualify for a 10% discount on any additional Reserved Instances you buy (that discount applies to both the upfront and the usage prices). If you own more than $2 Million of Reserved Instances, you qualify for a 20% discount on any new Reserved Instances you buy. Once you cross $5 Million in Reserved Instance purchases, give us a call and we will see what we can do to reduce prices for you even further we look forward to speaking with you!

Price Reductions for Amazon RDS, Amazon Elastic MapReduce and Amazon ElastiCache

These price reductions dont just apply to EC2 though, as Amazon Elastic MapReduce customers will also benefit from lower prices on the EC2 instances they use. In addition, we are also lowering prices for Amazon Relational Database Service (Amazon RDS). Prices for new RDS Reserved Instances will decrease by up to 42%, with On-Demand Instances for RDS and ElastiCache decreasing by up to 10%.

Heres a quick example of how these price reductions will help customers save money. If you are a game developer using a Quadruple Extra Large RDS MySQL 1-year Heavy Utilization Reserved Instance to power a new game, the new pricing will save you over $550 per month (or 39%) for each new database instance you run. If you run an e-commerce application on AWS using an Extra Large multi-AZ RDS MySQL instance for your always-on database you will save more than $445 per month (or 37%) by using a 3-year Heavy Utilization Reserved Database Instance. If you added a two node Extra Large ElastiCache cluster for better performance, you will save an additional $80 per month (or 10%). For a full list of the new prices, go to the Amazon RDS pricing page, Amazon ElastiCache pricing page, and the Amazon EMR pricing page.

Real Customer Savings

Lets put these cost savings into context. One of our fast growing customers was primarily running Amazon EC2 On-Demand instances, running 360,000 hours last month using a mix of M1.XL, M1.large, M2.2XL and M2.4XL instances. Without this customer changing a thing, with our new EC2 pricing, their bill will drop by over $25,000 next month, or $300,000 per year an 8.6% savings in their On-Demand spend. This customer was in the process of switching to 3-year Heavy Utilization Reserved Instances (seeing most of their instances are running steady state) for a whopping savings of 55%. Now, with the new EC2 price drop we’re announcing today, this customer will save another 37% on these Reserved Instances. Additionally, with the introduction of our new volume tiers, this customer will add another 10% discount on top of all that. In all, this price reduction, the new volume discount tiers, and the move to Reserved Instances will save the customer over $215,000 per month, or $2.6 million per year over what they are paying today, reducing their bill by 76%!

Many of our customers were already saving significant amounts of money before this price drop, simply by running on AWS. Samsung uses AWS to power its smart hub application which powers the apps you can use through their TVs and they recently shared with us that by using AWS they are saving $34 million in capital expenses over 2 years and reducing their operating expenses by 85%. According to their team, with AWS, they met reliability and performance objectives at a fraction of the cost they would have otherwise incurred.

Another customer example is foursquare Labs, Inc., They use AWS to perform analytics across more than 5 million daily check-ins. foursquare runs Amazon Elastic MapReduce clusters for their data analytics platform, using a mix of High Memory and High CPU instances. Previously, this EMR analytics cluster was running On-Demand EC2 Instances, but just recently, foursquare decided they would buy over $1 million of 1-year Heavy Utilization Reserved Instances, reducing their costs by 35% while still using some On-Demand instances to provide them with the flexibility to scale up or shed instances as needed. However, the new EC2 price drop lowers their costs even further. This price reduction will help foursquare save another 22%, and their overall EC2 Reserved Instance usage for their EMR cluster qualifies them for the additional 10% volume tier discount on top of that. This price drop combined with the move to Reserved Instances will help foursquare reduce their EC2 instance costs by over 53% from last month without sacrificing any of the scaling provided by EC2 and Elastic MapReduce.

As we continue to find ways to lower our own cost structure, we will continue to pass these savings back to our customers in the form of lower prices. Some companies work hard to lower their costs so they can pocket more margin. Thats a strategy that a lot of the traditional technology companies have employed for years, and its a reasonable business model. Its just not ours. We want customers of all sizes, from start-ups to enterprises to government agencies, to be able to use AWS to lower their technology infrastructure costs and focus their scarce engineering resources on work that actually differentiates their businesses and moves their missions forward. We hope this is another helpful step in that direction.

You can use the AWS Simple Monthly Calculator to see the savings first-hand.

— Jeff;