Nemertes Impact Analysis:

Amazon.com (NASDAQ:AMZN) has introduced Spot Pricing, a new pricing scheme for its Elastic Compute Cloud. With this addition, Amazon has three pricing schemes for computing: On-Demand Instances billed by the minute, Reserved Instances with a higher up-front cost and lower per-minute cost and Spot Pricing with variable pricing. By offering three pricing schemes, Amazon can not only cater to very different computing needs but also maximize the utilization of their data centers and exploit economies of scale. While spot pricing is not full market-based commoditization (Amazon sets the price, not an open market), it will undoubtedly lead to market-responsive pricing. Amazon's ability to clear the computing "inventory" with "fire sales" pushes computing services closer to a market-based utility model.

Impacts:

Enterprise: Using spot pricing, cloud computing customers can expand capacity and reduce costs significantly.

Vendors: Cloud computing providers have a lot of work to catch up with Amazon. Innovation is pricing is a key competitive differentiator worth pursuing.

Investors: Cloud computing can turn unused capacity into profits through innovative market pricing, more effectively than any other hosting model. Opportunities for investment include Amazon (NASDAQ:AMZN), Microsoft Azure (NASDAQ:MSFT), Terremark (NASDAQ:TMRK), Savvis (NASDAQ:SVVS) as well as privately held Rightscale, Eucalyptus, CohesiveFT and others.

By Andreas Antonopoulos, Senior Vice President and Founding Partner

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