Managed Service Providers, Cloud Solution Providers and Resellers, need to identify opportunities to increase profits while adding value to their customers. One way to boost margin is through arbitrage. Arbitrage is the purchasing of a reserved instances with the intention of selling them at a higher price. Since an RI can cost 50% (or less) of the On Demand price, not only can a reseller recognize large profits, but the risk is small. A reseller could buy two RIs and as long as one is used, at On Demand rates, the reseller would break even. If three are used, they made a nice profit. If all four are used, they made a great profit!
So you’re convinced that arbitrage is a good opportunity to enhance profits. Now, where do you start? First, look at CloudCheckr’s Reserved Instance Purchase Recommendations. Focus on the largest regions and the instances with the largest quantities being recommended. The larger the sample size, the more accurate the data and more opportunities to redistribute RIs. You should probably start with Linux-based Flexible RI families first as they have the most options in how they are apportioned. Next, determine your risk tolerance. If you’re just getting started, take it slow. Many companies start at 30% coverage as they work out how to best manage and report on their arbitrage investments. You can target 50-60% as a future goal, depending on your business model. You might be limited by cash flow or tax ramifications that might help you decide between all upfront, partial upfront and no upfront payments.
Reserved Instance Purchase Recommendations
Service Providers and Resellers looking to maximize profits, automatically generate invoices, and control where charges and discounts are applied will find that CloudCheckr fits the bill!