Discount Schemes for the Preemptible Service of a Cloud Platform with Unutilized Capacity

Rapid growth in the cloud industry not only provides tremendous opportunities to cloud providers who have invested heavily in computing capacities, but also leads to low utilization of capacities at times. To alleviate this problem, some providers have launched a low-priority service with the so-called preemptible or spot instances, which allows them to reclaim capacities when necessary. This study focuses on an emerging market segment of customers with fault-tolerant computing jobs, who are the potential users of the preemptible instances. Through an analytical model that captures the underlying supply-demand dynamics, we examine a prevalent discount scheme, which provides all users the same discount, and its impact on key performance measures. Having realized that this is a relatively new market segment and there is room for improvement in discount-scheme designs, we propose an interruption-based discount scheme, which provides compensation to users based on the frequency of interruptions encountered by each of them. Our study suggests that the proposed scheme is fairer than the prevalent scheme from the customers’ perspective and that, in the presence of risk-averse customers, the cloud provider could be better off by adopting the proposed scheme when the supply of the surplus capacity is highly uncertain.