Article on the History of Spot Instances: Analyzing Spot Instance Pricing Change

Summary

TL;DR‍Spot Instances enable cloud providers to monetize idle data center capacity at steep discounts (50-90% off). Amazon Web Services (AWS) pioneered auction-based Spot markets in 2009, but abandoned them in 2017 for provider-managed spot pricing through price smoothing, where prices change gradually based on longer-term supply and demand trends. Google Cloud Platform (GCP) and Azure never used auctions at all, relying instead on provider-managed pricing models. In 2024, Rackspace revived the auction model with full transparency.Key Takeaways:1960s-1990s: Researchers proposed auctions as the solution to allocating scarce compute resources2009-2017 (AWS Auction Era): AWS ran Spot as an auction where users bid for spare capacity. Despite appearing market-driven, researchers found prices were algorithmically controlled with hidden reserve prices.2017 AWS Shift: AWS abandoned auctions for provider-managed Spot pricing with price smoothing. Ironically, this made spot instances more expensive on average. Users lost the ability to capture rock-bottom prices during low-demand periods.2023 Reality: Research shows AWS Spot prices increased significantly in major regions. AWS deliberately increased prices to push users toward less-popular instance types and reduce congestion on popular ones.2024 Rackspace Spot, The Transparent Alternative: Rackspace Spot revived auction-based pricing with full transparency. Your bid actually matters, prices reflect real supply and demand, and you can see exactly how the market works.GCP and Azure's Approach: Both GCP and Azure use variable pricing that adjusts based on supply and demand. Neither provider ever used auctions.Bottom line: Understanding how Spot pricing works, and which provider you choose, directly impacts your cloud costs. Provider-managed opaque pricing from AWS, GCP, and Azure may cost you more than transparent auctions where you directly participate in price formation.‍Introduction‍“We should probably be using spot instances...