October 5, 2016
5 Tips to Minimize Risk and Optimize AWS Reserved Instances
by Greg Howard | VP of Engineering | Cloud Cruiser
Amazon introduced Reserved Instances (RI) as their method for discounting various services like EC2 and other AWS Services for committed users. It is powerful and flexible, but can be difficult and risky to use all its cost savings capabilities.
AWS RIs are in stark contrast to Microsoft Azure, their largest competitor. Azure employs pre-paid Enterprise Agreement (EA) accounts where you pre-purchase the next year in advance and attempt to predict your usage to get a discounted rate up to that cost amount. Azure’s plan is far less flexible, but normally takes less time to optimize. For some customers, AWS does offer an additional similar pre-purchase plan that emulates the Azure EA, but it is not as generous as the Azure EA and not well publicized.
Being able to properly purchase, modify, and sell RIs is the only way to get their promised savings, but the process to optimize them can quickly become a time suck. You can expend so much effort that you will reach a point where much of the savings can be erased by manpower costs used to analyze the RIs. You need to minimize this effort and it really requires far better tools than are delivered natively in AWS. The AWS Trusted Advisor and Cost Explorer, while useful, are normally out of date and can give you erroneous recommendations if your usage fluctuates regularly or has significantly changed recently. AWS Trusted Advisor typically uses the prior month’s consumption, but that fact isn’t clear when using the tool. Blindly following the AWS Trusted Advisor’s recommendations will likely lead to poor choices and could lock you into a burdensome commitment. For this reason, organizations often employ a “RI czar” that tracks current RI purchases and then attempts to optimize the buying, selling and modifications of those RI purchases.
Some key tips to minimize risk and optimize your RIs:
1. The AWS Reserved Instance Marketplace is the most powerful tool to reduce your risk and maintain the ultimate flexibility by selling and buying RIs. A big drawback of the Marketplace is that there are many visibility issues on the transactions, especially with sell and modify orders. This requires you to use the AWS Command Line Interface (CLI) or an app like Cloud Cruiser if you want to track what is being bought or sold.
2. Be aware that buying No Upfront RIs are low risk. Since you are not allowed to sell RIs on the Marketplace for 30 days after purchase, this is the only risk. Because there is no upfront cost on the RI, you can easily sell it for $0 and don’t have to pay the 12% service fee on selling an RI. This makes the market very liquid for No Upfront RIs and you will typically have little trouble selling them quickly.
3. Your first choice should always be to modify your RIs, not to sell or buy. The modify option has zero risk since you can always switch it back quickly if something changes or you make a mistake. Without a tool like Cloud Cruiser it is difficult to recognize the modify opportunities without a tedious manual effort. It is also difficult to track the completion of the transaction without using Cloud Cruiser.
4. Buying 3 Year Upfront RIs to lock in a lower rate may not be cost effective for various reasons. You must commit to an instance size and have no reason to re-size this instance for a long time, reducing flexibility. AWS also periodically reduces rates and your locked in rate will likely be higher than the new rate, cutting into your savings. It is recommended that if you are just starting to use RIs or have a need for any flexibility, you should stick to the one year terms.
5. While a Partial Upfront RI seems like a much better deal than No Upfront because of the lower rate, there is more risk since the breakeven point is further in the future and the RI will be more difficult or even impossible to sell in the Reserved Instance Marketplace, if your needs change.
Cloud Cruiser’s Reserved Instance Advisor™ capability overcomes the numerous inadequacies of the native AWS tools. A partial list of the features included within Cloud Cruiser’s app are:
- Reliable recommendations on the actions you should perform to maximize your cost savings
- Configurable date ranges for viewing your prior usage over any period range from days to years
- Ability to view data in both hourly and daily increments to get the most accurate view on utilization
- Ability to modify, buy or sell RIs directly from Cloud Cruiser
- Charts to illustrate the breakeven point comparing the benefit timelines for potential Partial Upfront or Full Upfront purchases
- Transaction history to clearly show modify, buy and sell activities and most importantly, tell you whether your actions succeeded
If you get nothing else from reading this, it is that you should really understand and take advantage of the option to buy and sell RIs in the RI Marketplace. It is often overlooked, but it is the single most important tool to remove risk and optimize your environment with the least effort. Committing to RIs can be a scary commitment, especially in a large, complex environment, so why not leverage all the tools at your disposal. These tools will very quickly pay for themselves with reduced effort and better optimized resources in AWS. Find out what RI recommendations Cloud Cruiser has for your AWS cloud with a free 14-day trial.
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