Spotinst Stays on Trend with Kubernetes Support and $35M in New Funding

In the three years since its inception, Spotinst has honed its ability to use low-cost ephemeral instances – called spot instances on AWS, preemptible VMs on Google Cloud Platform, low-priority VMs on Azure, preemptible instances on Alibaba Cloud and transient servers on IBM – together with machine learning to construct highly available and economical compute clusters capable of running production workloads. Spot instances are often priced at discounts of 80% or more versus on-demand rates, but they come with a catch: when the provider needs to reclaim the spare capacity it can terminate the instance, in some cases without warning.

Spotinst uses predictive analytics to forecast when excess capacity is likely to be available, then dynamically pools spot resources with on-demand and reserved instances to create resilient, cost-effective compute clusters that are suitable for production environments, which the company claims results in savings of up to 80% versus on-demand rates.

Few enterprises have the stomach to manage spot pricing manually or with the help of provider tools: 451 Research's recent Voice of the Enterprise: Cloud, Hosting & Managed Services, Organizational Dynamics 2018 survey found that only 9% of enterprises were using spot resources to pay for public cloud services, versus 52% paying for on-demand usage billed in arrears. As Spotinst describes it, the opportunity for customers is 'like money on the floor that we're picking up for them.'

The company has raised $52.6m of venture funding in four rounds, including a $35m series B led by Highland Europe in August.

 

Products

Spotinst takes a customer-centric approach to development, building features, integrations and plug-ins to popular third-party tools based on demonstrated demand. Its longest-running service, Elastigroup, works at the VM level and can manage resources on AWS, Azure or Google Cloud Platform; in 2019 it expects to add support for Alibaba preemptible instances and IBM transient servers. A recent survey by the company found that 70% of its customers are using or plan to use multiple public clouds, with different providers hosting different applications, so Spotinst maintains algorithms wherever spot pricing is available.

Earlier in 2018 Spotinst introduced its Managed Container Service, an enhancement to Elastigroup that hooks into either Amazon ECS or third-party container orchestration platforms (Kubernetes, Docker Swarm, Nomad or Rancher) to provision, manage and scale containerized applications without having to deal with the underlying servers. The service continually monitors CPU, memory and port availability, scaling up infrastructure to handle incoming pods or tasks and scaling down when instances are underused. Spotinst says its Kubernetes footprint has grown over 10x since the beginning of the year.

For lift-and-shift, database or dev/test workloads, Spotinst created an option for running stateful workloads on excess capacity, which is currently supported on AWS but slated to work on other clouds soon. With this service, Spotinst takes periodic backup snapshots of the instance; if the machine is terminated, either by the provider or on a schedule, Spotinst will automatically spin up a replacement and can reattach the root volume, private IP address and EBS volumes to replicate the application and its dependencies. To the customer the switchover looks like a reboot; the company says some enterprises are using the service to periodically refreshdev/test environments during a scheduled maintenance window.

Other tools in the Spotinst portfolio complement the company's focus on optimization and automation. They include the Multai Load Balancer with support for hybrid environments including on-premises, Functions for serverless development, and the Spectrum monitoring service for cross-cloud visibility, analytics and alerts. For DevOps teams, Spotinst supports a variety of provisioning and CI/CD tools including AWS CloudFormation, CloudFoundry BOSH, Terraform and Ansible templates, Chef integration and a Jenkins plug-in.

Spotinst notes that the pure functions-as-a-service market has not grown as fast as expected. Instead, driven in part by the broad success of Kubernetes, the company is working to enable serverless containers – an area where the hyperscalers themselves are rolling out platform-specific offerings. On the roadmap for Q4 2018 is a container scaling service that will alleviate the need to select servers for running containerized applications – it monitors container workloads and automatically and dynamically selects the best instances to host them, similar to AWS Fargate and Azure Container Instances. Another roadmap item, also scheduled for Q4 2018, is an on-premises implementation of Spotinst for VMware environments. The tool is being developed for quick deployment on any Kubernetes cluster to enable real-time dashboards and analytics detailing usage, performance and potential cost savings of on-premises containerized workloads.

 

Business Model

Prior to the recent $35m funding round with Highland Europe, Spotinst hadn't yet touched the $15m invested last summer by Intel Capital. It plans to use the cash for R&D, to execute on its roadmap and to grow aggressively, organically with the addition of marketing and sales personnel and possibly also via acquisition. The company cites Highland as a strategic partner that can help it expand further into Europe and accelerate growth while maintaining its customer focus.

Spotinst uses a pay-as-you-save billing model, taking a 20% share of the savings achieved with Elastigroup versus on-demand rates.

The company has a full complement of technology, MSP and reseller partners. It is an AWS Advanced Technology Partner and is available via the Azure Marketplace. The company says the biggest challenge to working with MSPs is that few are incentivized to save customers money, but it cites Logicworks and Israel's AllCloud as exceptions.

Spotinst has more than doubled its head count since 2017 and now employs over 110 people across four offices in San Francisco, New York, London and Tel Aviv. The company says its customer base has grown rapidly and now numbers over 1,000, primarily in the US and EMEA. We estimate Spotinst's trailing 12-month revenue at around $20m.