What actually is Amazon EC2's 'pay per hour' for on demand instances?

Question

I'm thinking to host my ROR website on Amazon EC2. I wont be needing a S3 as of now.
But when I check the their pricing it's like

Micro - $0.020 per Hour

I don't get this per hour billing.My site will be live for 24x7. So it will be live for all hours in a day. So what's the benefit of such pay per hour?

Help me understand this.

Solution 1

If your site is running 24x7 you should not use a on demand instance, on demand instances are for temporary jobs that you need a machine for (like load balancing for extra traffic).

What you want is a heavy utilization reserved instance. You pre-pay a one time upfront fee to get a discounted hourly rate on the instance over the lifespan on the contract.

Here is a screenshot from the Simple Monthly calculator

You can see, by paying a upfront cost of $100 for a 3 year contract you get to pay $0.005 per hour for the machine instead of the $0.020 per hour for the on demand. You can see over 3 years you pay a total of $231.76 vs $527.04

Compare that to a machine that you only use 4 hours per month and you will see On-Demand is your cheapest option.

I reccomend going to the simple monthly calculator site, playing around with the settings and putting in your requirements and it should help you figure out what you will need to buy.

Solution 2

Amazon offers a free tier for the micro, so you will find just using a micro will cost you nothing other than going above the data transfer (iirc, it's 15GB)

Otherwise, the hourly rate is exactly what it is, if you run your instances 24x7 you will be charged 744 hours a month. If you normally ran 2 servers to host your site/service and during offpeak you turned one off you would not be charged for that particular instance being in a stopped state. It's a great way to save funds on resources that aren't being fully utilized.

While the Reserved Capacity instances offer significant cost savings you are locking yourself into a 12 month or 3 year contract and you will be locked to your chosen operating system and instance size. Could be worth considering if you are need to scale up in the short/medium turn are aren't looking into Load Balancers and such.