ElasticHosts Offers Twist On Consumption-Based Cloud Pricing

ElasticHosts is taking a shot at Amazon Web Services with a new twist on the consumption-based pricing model, which the company said will save users and partners huge amounts on cloud costs.

ElasticHosts CEO Richard Davies touts the company's new Elastic Containers as the first cloud offering to be truly priced on consumption. The London-based company estimates that a typical cloud workload uses only 50 percent of the capacity that the customer paid for, because of non-peak hours or because capacity was overestimated to handle heavy load times. However, that means that companies are often overpaying by 50 percent or more, Davies told CRN.

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"In our world a customer can come in and say exactly what I want is the following ... and they get exactly the shape they want and they pay for that. That definitely saves people money today," Davies said.

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Many cloud providers today bill every hour for the storage regardless of whether the server is heavily or lightly loaded at each hour of the day, he said. Elastic Containers takes consumption-based pricing "one step beyond Amazon" by billing in 15-minute intervals on usage instead of by the hour, as most cloud companies do, according to Davies.

"We saw the potential to build something that was a step beyond what the cloud providers were offering in terms of scalability, flexibility and elasticity. We said we can build this purely usage-based product with substantial cost savings, scalability and the reduced manual effort to achieve scaling. It’s a very major product release for us," Davies said.

Amazon did not respond to a request for comment from CRN.

ElasticHosts partners, who account for approximately 10 percent of the company's overall business, can white-label ElasticHosts' cloud offering, which Davies said lets them provide a better offering to customers than Amazon because of the usage-based billing under their own brand. Solution providers receive 30 percent margin on ElasticHosts' white-label cloud offerings.

"We really think that this is a good opportunity for anyone in the channel. [It's an opportunity for] these ISVs, VARs, traditional hardware resellers, who haven’t worked out what their cloud strategy is, to put their foot into the water. This is a way for them to very quickly, with no startup cap-ex, to rebrand under their own brand," Davies said.

Jonathan Blessing, CEO of New Haven, Conn-based Series Digital, an ElasticHosts partner, previewed the company's new container-based release.

"We are excited to offer this solution to our customers. The usage-based billing and fine-grained auto-scaling are unique in the market and should prove to be very attractive to our customers," Blessing said.

"Together, these features will afford our customers substantial cost savings versus all major IaaS clouds today, where customers need to pay for the entire size of their cloud servers regardless of whether these are currently at 100 percent load. With ElasticHosts' new container-based IaaS, customers will save by paying only for what they actually use. And that’s very exciting.’

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The savings come from three places, ElasticHosts' Davies said. First, there is a basic cost savings associated with not paying for high capacity during low workload times, such as late at night. Typical companies can save 50 percent with the switch, with some saving 75 percent or more on cloud costs. Second, the high-capacity servers allow for higher maximums, which will not increase costs unless that capacity is actually needed. Third, for those companies that have actively tried to adjust capacity manually or through auto-scaling tools, Elastic Containers is much more accurate and will save costs even further.

This level of consumption-based pricing can't be achieved with traditional virtualization technology, which means that in order for Amazon to catch up, it would have to completely overhaul its cloud capabilities and technology, Davies said.

The product itself would have been impossible a year ago, Davies said, because it was made possible by a recent Linux update. ElasticHosts started developing the product at the very beginning of developing container technology for Linux, Davies said, which means it is ahead of the game and expects others to be developing the technology within the next two or three years.

Elastic Containers are "Linux-only, since they use Linux kernel containerization technology," Davies added. "At present, there is no equivalent technology for Windows, so we have no [immediate] plan to expand Elastic Containers to Windows," he said.

"I think in the short- and medium-term [we] set ourselves apart," Davies said. "For someone else to quickly replicate it would be difficult because it is a fundamental rearchitecting ... so we definitely see ourselves as an innovator here. We see ourselves as the first for a truly usage-based model."

Elastic Containers will be available to channel partners April 16.