Price Spikes Impact Amazon Spot Cloud Market

Bidding for unused capacity on Amazon's EC2 cloud computing platform has become more competitive, causing periodic price spikes in the spot market Amazon has created. Prices for virtual machine deployments that normally cost less than a dollar an hour to have risen to $5 to $10 an hour, and sometimes even as high as $999 per hour.

Amazon Web Services (AWS) says the price spikes are caused by periods of "constrained capacity" in particular availability zones and customer bidding strategies that employ above-market bids to prevent interruptions of their computing jobs. Amazon says these strategies result from confusion about how spot pricing works, and has posted a video outlining effective approaches to spot bidding.

"These price spikes are new, and they call into question assumptions that many users have made about how the auctioning of computing resources works," wrote Jonathan Boutelle, co-founder and chief technology officer of Slideshare, in a guest post Tuesday at GigaOm, which shared strategies for EC2 users to manage the impact of these price spikes on cost and availability. "Almost every class of servers has hit spikes of more than 10 times their retail price in last few months."

The spike to $999.99 per hour was noted back in September by SEO Moz and a discussion on the AWS Developer Forum.

"We are seeing a number of customers using bidding as their sole source of managing interruption, rather than building automation into their applications," wrote Amazon's Dave Ward in the forum thread. "We advise against this behavior ... it is important to be able to handle interruption in your application, as prices will change and could potentially be higher than your maximum bid price."

That's what happened in the case of the extreme price spike, which was related to a sudden increase in demand for a particular type of instance which depleted the unused capacity. Since there was a customer with a number of bids at the price of $999.99 to prevent interruption, the price spiked up to that level.

A key task for users is structuring their use of EC2 between spot instances and reserved instances, so that a sudden surge in both demand and price won't interrupt an important service or result in excess fees, according to Boutelle.

Meanwhile, Amazon is adding additional availability zones as it deploys new data center capacity, and says it hopes to include more zones in its spot market in the future.