Amazon EC2 customers can pay up front to drive down hourly costs

In a move that could help cloud computing leader Amazon realize much of its revenues almost a year earlier, the company this morning announced an alternative payment structure for users of its EC2 cloud-based hosting service. For subscribers willing to pay up front for a one-year contract between $325 for a standard virtual machine instance and $2,600 for a CPU-intensive instance, their per-hour usage charges can be reduced around 75% - 80%.

The typical usage charge for a standard hosted Windows Server 2003 instance is $0.125 per hour, or $0.10 for Linux. Those charges will both decline to $0.03 per hour for subscribers who pay up front $325 for a one-year contract, or $500 for a three-year contract. "Extra Large High-CPU" instance usage charges drop from $1.20 per hour ($0.80 for Linux) to $0.24 per hour, for up-front payments of $2,600 for one-year, or $4,000 for three-year.

In a prepared statement this morning, Amazon EC2 General Manager Peter De Santis said, "Customers of all sizes enjoy the pay-as-you-go flexibility of Amazon EC2, but many have told us they are ready to reserve capacity in order to achieve even lower costs. Now customers can choose to reserve capacity as if they owned the hardware, but unlike traditional infrastructure, with Reserved Instances, customers do not pay to maintain and operate idle hardware, and instead pay usage charges only when actually utilizing the instances."