Amazon EC2 Dedicated Server Offering Addresses GRC Niche

Gartner's latest Magic Quadrant for Cloud Infrastructure as a Service and Web Hosting, published at the end of 2010, placed Amazon and its Elastic Compute Cloud (EC2) offering in the Visionary quadrant. It called Amazon a "thought leader" and "extraordinarily innovative, exceptionally agile and very responsive to the market." On the negative side, it cautioned that the company was the only vendor that did not offer dedicated non-virtualized servers. Until now.

Amazon has just added the Dedicated Instance concept to its Amazon Virtual Private Cloud (Amazon VPC), which makes it possible to run hardware dedicated to a single customer within a customer's VPC. Amazon says that this new capability enables users to take advantage of on-demand elastic provisioning, pay only for what they use, and have a private, isolated virtual network--all while ensuring that their Amazon EC2 compute instances will be isolated at the hardware level.

According to an Amazon blog, Dedicated Instance was introduced to address a minority of customers that have regulatory or other restrictions that require physical isolation. Each VPC and each EC2 instance running in a VPC now has an associated tenancy attribute. Customers will incur a $10/hour charge whenever they have at least one Dedicated Instance running in a Region, as well as a "modest" premium to the On-Demand pricing for the instance to represent the added value of being able to run it in a dedicated fashion.

As noted by Gartner, dedicated servers are not new to this market. StrataScale announced a hybrid hosting solution that integrates physical managed servers and virtualized cloud servers in March 2010. Another Amazon competitor, GoGrid, announced a dedicated private cloud solution at the start of 2011.

While Amazon may be among the last to the dedicated-server party, Robert Mahowald, research VP, SaaS and cloud services, IDC, doesn't think the absence of dedicated non-virtualized servers has hurt it in the least. "It's just not been the primary focus of its business model to first offer rentable dedicated non-virt servers, they don't yield scale, and leading with them would take Amazon back to the days of co-location--dedicated networking, servers, SANs, routing, etc. for each customer," he saysHe added that firms such as AT&T, which have a significant legacy dedicated non-virtualized business, make money from it because it provides physical-level security and isolation, as well as the flexibility of the capital expense of leasing vs. buying the dedicated equipment. "That said, there is a legitimate requirement for physical isolation, and for so long as customers are willing to pay the amazingly modest surcharge, Amazon now provides it."

Analyst Judith Hurwitz, president and CEO, Hurwitz & Associates, says Amazon EC2 is indeed innovative in the way it provides quick and relatively inexpensive access to virtual images, allowing developers to get access to resources in an on-demand way. "They have truly commercialized this model. However, in exchange for the price and speed, you give up the ability to have dedicated resources and a predictable level of service. The Amazon EC2 model is predicated on what you see is what you get. The company makes no promises that you will be able to use the same resource that you started with. Nor do they promise that there will be consistent and predictable performance."

She says that makes Amazon best usage for opportunistic situations where there are spikes in demand for short durations. "Companies that are asking for dedicated resources are, in essence, asking Amazon.com to change its foundational business model. In the long run, they may come to a decision to provide some more dedicated services. I think they do offer a virtual private network."

There are several reasons why customers want dedicated resources, says Hurwitz. First, they need them for compliance purposes. Second, they are looking to be able to manage the quality of service so that they need to have consistency and predictability that requires dedicated resources. "For Amazon to change to a new model would require a different pricing and different business model. Companies that offer managed services based on a guaranteed level of service are a different breed of company with a different business model."

Mahowald sees the need for dedicated instances/servers as primarily a governance, risk and compliance (GRC) requirement. "The incremental cost of reserved instances on dedicated physical machines is quite low here, so it may presumably afford customers a reason to opt for dedicated servers when they don't absolutely have a good reason to. It's all part of Amazon's scale model, and it makes an even more compelling argument that probably less than 0.01 percent of businesses have the sophistication to build to this level of cost efficiency as Amazon."See more on this topic by subscribing to Network Computing Pro Reports Strategy: Private Cloud Blueprint (subscription required).