Yesterday, news came down from Amazon that they were going to an almost Google Adsense style auction model to their EC2 platform.

Spot Instances allow you to specify the maximum hourly price that you are willing to pay to run a particular instance type. We set a Spot Price for each instance type in each region, which is the price all customers will pay to run a Spot Instance for that given hour. The Spot Price fluctuates based on supply and demand for instances, but customers will never pay more than the maximum price they have specified. These instances are used for workloads with flexible completion times.

Initially, I had imagined it was a simple cut and dried move to further commoditize the cloud hosting and computing world.  The easy comparison to make is to compare this as a one-to-one thing to Google’s AdSense, observe what it did to the content business, and translate that to cloud.

Some of those observations are valid.  Google devalued online advertising, but it also made it ubiquitous.  It brought down the cost to advertisers, and similarly severely limited what not just publishers could make but what other competing networks could charge.

Ultimately, it was a net gain for everyone, over the long run, because as a by-product of this depreciation, they brought along innovation.  They made making money from a site simpler than copy and paste, in many instances, and simply pushbutton.

I’ve asked a lot of questions of others over the last 24 hours, though, and I’ve got a slightly deeper perspective on this.  Thinking as a content producer and occasional coder, my geek muscles are still churning over how to apply this spot-computing technology.  In a practical sense, though, IT folks seem to be viewing this new technology with extreme skepticism.

This will ultimately be inconvenient for us as customers but good for Amazon,” said one IT guy. “That generally seems to be their guiding principal, though.”

They are keeping the market on its toes both from a feature standpoint as well as from a delivery and pricing choice standpoint, that goes without saying. The feeling I got was that this odd pricing structure was going to end up being more confusing to the customer than to competitors in the space, even if the opposite was the desired effect.

Is it about pricing or lock-in?

“The average price will be the less than list for everyone (if you take the average of Spot pricing, and full utility price),” said one industry insider.  “So why not discount everyone’s price vs. having them go through these gyrations?”

The answer here is simple – it creates a moving target for competitor’s to price against. They keep people from competing directly with price against them and they can preserve their margins (which are pretty fat).  If someone tries to undercut them, Amazon can simply say "buy a reserved instance."

At the end of the day, the real benefit to Amazon isn’t about pricing, economics, or undercutting the competitors – the difference in price between Rackspace and Amazon is minute at best, and the level of support one gets on a bad day from Rackspace is better than the support you’ll get from Amazon (which is a bundle of online help documents) any day of the week. No, at the end of the day, it’s all about lock-in.

This new package does the opposite of what Google AdSense did, which was commoditizing the subject of the product.  With AdSense, you’re stuck with a line of Javascript and exportable log files.  With Amazon’s Spot instance product, they’re innovating themselves into a corner where should any customer find a valid use for a non-continuous cloud computing instance, there’s nowhere for them to take it should they decide to leave the Amazon fold.

That, more than anything, is off-putting to IT, and will prevent this from gaining wide acceptance.