Dave Ward, AWS Senior Manager EC2, discussed Amazon’s pricing options and strategies with theCube hosts Dave Vellante and Jeff Frick, live at the Amazon AWS 2013 Summit

Dave Vellante asked Ward, “the resident expert on compute pricing,” to discuss the different pricing options and giving a quick overview of what’s available. He explained that the main pricing philosophy for AWS is that the client wants to pay for what they use. The three available options are On-Demand, Reserve and SPOT Instances.

3 main options : AWS

With the On-Demand option, customers pay by the hour for any service they need to use. It is a pricing model targeted at people who are relatively new to AWS and want to try it or use it to benchmark new applications.

The second option, Reserve Instances, means customers pay a one-time fee to book the services they need, and also offers them a lower price for on-the-hour payments. It addresses customers who have already decided to “basically run on AWS” and are good for predictable workloads that cannot be interrupted.

The third option, SPOT, it’s an opportunistic strategy, it allows customers to bid on unused EC2 capacity available from Amazon. The main use cases for SPOT are for companies who normally have a baseline workload that they run through Reserve Instances, and see a spike in workload that needs more resources that they opportunistically add, or customers that need to address a “need-by-date workload” – e.g. end of month.

There is also a Reserved Instances marketplace available where customers can trade RIs previously purchased from Amazon. Ward explained that the marketplace was established as “customers were asking for more flexibility” with their changing workload.

Speaking of savings, Ward mentioned that on-demand cost savings should be computed by comparing the “peak amount of capacity you needed to have on premise,” and renting that infrastructure for an hour. The TCO savings in this example will vary widely or perhaps not at all depending on the level of utilization on premise. Customers using the reserved pricing option, on average, see a 72 percent savings relative to On-Demand pricing. With SPOT, customers have reported 80 percent savings, and reached as much as 92 percent according to Ward.

EC2 needs hyperscale engineers

Asked if the EC2 team was hiring, Ward said they were looking for a great senior manager to run SPOT engineering work, as well as engineers, specializing in highly distributed and highly scalable computing, web designers and other experts. “We are hiring all over the place,” he added, mentioning he was looking forward to meeting those interested. He also mentioned many of the algorithms Amazon uses for its pricing strategies are patentable.

Talking about the Trusted Adviser service provided by AWS and its contribution to pricing, Ward mentioned Amazon made $22 million in cost savings recommendations for customers. Trusted Adviser helps customers save money and improve best practices by pointing out the best pricing option to them.

Sharing his insight into Amazon culture,  Ward explained  “I am a mini general manager.” That allows him to make a lot of decision, helping his team operate very fast, “in an agile fashion.” He also added that the company culture focuses on openness.

Here’s the conversation with Amazon’s Ward: