Blog Cost Management December 5, 2019

Review Your RI Business Strategy and Plan Cloud Computing Costs for Next Year

Get Started on Your Annual Reserved Instance (RI) Review

 
With only a few weeks left in the year, it’s important to take stock of what was (or wasn’t) accomplished and to plan for the year to come. For IT decision-makers, this analysis should include a critical review of cloud computing costs with the goal of streamlining expenses even further next year.
One way to reduce cloud computing costs is with Reserved Instances (RIs); keep reading to find out the advantages and challenges of RIs. 
 

Create a comprehensive saving strategy for multi-cloud and beyond with CloudCheckr. Learn how we support AWS Savings Plans as an alternative way to invest in cloud. 

 

Why Use Reserved Instances (RIs)?

AWS first introduced Amazon Elastic Compute Cloud (EC2) Reserved Instances (RIs) as a way of providing discounts to customers who were prepared to make a long-term, prepaid commitment for computing instances. AWS treats the specified RI as a credit line on the customer’s AWS billing account. When a machine is launched that matches the RI specifications (instance family, platform, scope, and tenancy), the credit is applied to the running instance instead of the regular on-demand rate.
The main reason to purchase RIs is to save on cloud computing costs. Like all AWS pricing, RI prices will differ according to instance type, OS, and region. However, the following factors determine the depth of the discount (up to 75%) that can be achieved with RIs:
 

  • Length of contract: The choice is one-year or three years, and the longer term provides a bigger discount.
  • Pre-purchasing options: RIs can be purchased with no, partial, or all upfront payments. The more you pay upfront, the greater the discount.
  • Standard vs. Convertible RIs: Although some parameters (such as instance size) can be modified during the term of contract, a Standard RI cannot be exchanged for instances with other specifications. A Convertible RI, on the other hand, can be exchanged for another Convertible RI throughout the contract (as long as the exchanged RI is of equal or greater value). Standard RIs provide a slightly higher discount than Convertible RIs.

 
Another reason to purchase RIs is to guarantee computing capacity. If an RI is purchased for a specific Availability Zone (AZ), the computing capacity is reserved—which can be particularly useful, for example, in disaster recovery situations. Regional RIs provide more flexibility in that they apply to instances running in all AZs within the region, but they do not provide a capacity reservation.
 

We’re offering free demos with a CloudCheckr expert to assess if and how your enterprise can leverage what’s left of your annual budget to take advantage of current and future RI opportunities. 

 

The Biggest RI Pitfall and How to Avoid It

Despite the many advantages of RIs, it’s not always easy to understand their true impact on a consolidated monthly bill. Often, we see businesses unaware of RI purchasing opportunities, which puts them at risk of wasting money and losing value on RIs.
The #1 pitfall our team sees is companies paying for RIs they are not using. Often, this arises from insufficient strategic business planning. RI purchasing decisions should always be made by someone in the organization with a clear overview of the company’s cloud infrastructure usage and needs. 
RI purchasing decisions should also be data-driven, by properly identifying the instances that have the kind of constant and high usage rates that make them good RI candidates. It is also important to have a strategic understanding of what your future usage patterns will be, so you can determine the appropriate RI term (one year or three years).
Another big contributor to RI underutilization is ineffective management. RIs need to be audited on a regular basis in order to catch those that are idle or seldom used. An easy way to audit RIs yourself is by taking a closer look at your monthly AWS bills throughout the year. If your underutilized RIs are convertible, you can exchange them for instances that better serve your needs. If your RIs are standard, don’t forget that you can try to sell them on the AWS RI Marketplace. In any case, the careful auditing will increase your enterprise’s understanding of its RI opportunities and support better RI purchasing decisions in the future. 
 

CloudCheckr Can Help Optimize Cloud RIs

December is one of the best times for you to make RI purchasing decisions that can lower your cloud computing costs the following year. Schedule a demo with a CloudCheckr expert to help you assess your current and future RI opportunities.