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Mark Atwood
I predicted the new AWS EC2 "Spot Instance" pricing model a year and a half ago
Way back in 2008-05-30, in this post, I said the following:

But then I realized that the better way would be to do it as a continuous dutch auction. I would specify the most per instance-hour I was willing to pay, and EC2 works out the lowest price across the entire universe of currently outstanding bids that will completely fill the capacity available for these things. As more people come into the system and bid for capacity, my instance-hour price I am paying can rise or fall based on everyone else's bids, and I could have my instances shut down if the current market clearing price rises higher than my set max bid.

There is competition to EC2 coming online soon. Eventually, someone is going to try this charging model.

If I was to build an EC2-like system, it's the charging model I would use. It would most perfectly capture and monetize my value to my users, giving me the largest possible income for the value I am providing, which I can use to build more capacity. It would also give me a much better and smoother signal to how much my users like my system, other than "there is more capacity than is being used, I overbuilt" or "I'm oversubscribed, and at 100% utilization, I need to build out more".

As long as *anyone* bids into the auction, for more than the equipment capital and power cost of running their jobs, and yet doesn't get any cycles, because someone richer has outbid them, that signals to me, the grid operator, that it will be worth investing in more grid.

And now Amazon AWS EC2 has done exactly this very thing, calling it "Spot Instances", in parallel with their existing "per instance hour" pricing model, which basically puts a maximum cap on the auction price.

Am I the only person to publicly predict this?

Current Location: Home, Capitol Hill, Seattle WA

4 comments or Leave a comment
From: (Anonymous) Date: December 20th, 2009 08:53 pm (UTC) (Link)

Other people predicted it

Hi, Mark. I think there were others. I wrote about it in Jan 2007


but I am sure there were many others.
loganb From: loganb Date: December 21st, 2009 06:31 am (UTC) (Link)
One thing to note (I mentioned a few days ago in a post) is that because Amazon is the only supplier, it doesn't quite run like a dutch auction. In fact, Amazon can always make more profit by never running at 100% capacity. Of course, then you can start optimizing on the meta level and suggest that running 100% reduces long term customer turnover, etc., though that gets far more complicated and looks even less like an auction. :)

Indeed, Amazon is very careful to never actually call it an "auction" or a "market" price, instead always choosing to say that Amazon sets the price (because they do).

I hope instances get commoditized to the point we can actually have a true market for them, spot instances are only marginally useful to consumer (though FANTASTIC for Amazon).
fallenpegasus From: fallenpegasus Date: December 21st, 2009 07:58 am (UTC) (Link)
I'm not sure that there being a sole supplier stops it from being a market and an auction.

This is the auction system that was used to run the IPOs for Google, for Andover, and for Rackspace, and yet there was a "sole supplier" in those cases as well.

I think actually called it's a "reverse dutch auction" instead of a "dutch auction".
awfief From: awfief Date: December 21st, 2009 05:55 pm (UTC) (Link)
What's the difference if you were the only one to predict this?

I guess I'm not sure what the point of this post is, it reads very much like dick-waving to me.....
4 comments or Leave a comment