With some careful planning, AWS resellers, MSPs, SIs, and other professional service providers (often collectively referred to as channel sellers) can use AWS consolidated billing and Reserved Instance (RI) Arbitrage to increase profitability. Channel sellers represent one of the fastest growing segments of the Amazon Partner Network (APN) program.
This leads to the inevitable question: how can channel sellers best capitalize on AWS services for channel business?
When it comes to maximizing margin, there are three key strategies:
- Use AWS consolidated billing
- Analyze utilization within and across linked accounts
- Properly organize your AWS account structure
Use AWS Consolidated Billing
Consolidated billing is the critical feature for AWS channel sellers. It enables them to house multiple internal and customer accounts within a single paying account. This ‘Paying’ account is able to qualify for volume discounts based upon the combined billing of the ‘Family’ accounts. As channel business grows, these discounts and volume credits can become a significant source of profitability.
Importantly, Amazon applies RIs both within and across the linked accounts. This means that any RI residing within a linked account will, if it is unused by its ‘home’ account, be applied to a matching EC2 instance in another linked account. This ensures the maximum application of purchased RI for all linked accounts. It also presents a second potential profit stream for AWS channel sellers.
RI hourly rates are dramatically discounted from On-Demand rates. For an upfront fee, savings of 60-70% is possible. Channel sellers can purchase RIs and resell the capacity to their customers who choose not to purchase their own RIs. Customers make this decision for myriad of reasons, including uncertainty over consistent usage, unease with the upfront cost, and uncertainty over restrictions like platform or region. This is an opportunity for AWS channel sellers with linked accounts to step-in, assume the costs and risks of purchasing RIs, and profit by reselling the capacity. This is known as Arbitrage.
Analyze utilization within and across linked accounts
Purchasing RIs with the hope of reselling capacity is not risk-free. The channel partner is assuming the risk that the RI sits idle—paid for by the partner, but not used (or paid for) by the customer. This risk of sitting idle is often the primary reason these customers do not purchase the RI themselves. However, as noted earlier, while the customer benefits from personal usage, the channel partner is able to resell the RI capacity to every linked account. This capability, spreading the risk of idleness, greatly changes the balance of the equation.
To capitalize upon this opportunity, users need to accurately track their customers’ concurrent usage across linked accounts. Keep in mind that if the channel partner buys too many RIs, they will take the loss. Conversely, if they buy too few, they will miss out on easy profits. Therefore with the concurrent usage information, the channel partner can perform a usage analysis to determine the optimal RI purchasing strategy for the entire AWS consolidated bill. Without this, channel sellers are merely guessing the right RI purchase.
CloudCheckr’s utilization and RI recommendations across multiple AWS accounts helps to remove the guesswork. AWS channel sellers can link accounts and receive custom purchase recommendations based on the aggregation of their customers’ usage. Custom rate sheets, RI Unsharing, and reallocating of credits and discounts ensure that profitability and ROI are maximized.
Properly organize your AWS account structure
Proper organization makes it much easier to accurately bill customers and track Reserved Instance purchases. Amazon’s application of RIs across linked accounts (which is fantastic from a profitability perspective) tends to make customer billing and ROI calculations a bit complex because AWS provides a summary blended bill, but channel customers require an unblended version and must then normalize it to appropriate list prices.
This type of information is not readily available. It can only be accessed by first parsing and processing the Cost and Usage Report and then comparing usage to the reported list pricing data. By segregating that S3 bucket into a separate account (at a cost of a few dollars per month), channel sellers can avoid mixing their own and/or customer usage into the total bill. This is an important ‘first step’ to facilitate compilation and tracking.
CloudCheckr automates the filtering process. This ‘second step’ enables users to accurately reflect and report customer billing. CloudCheckr’s Consolidated Billing reports provide all of the relevant information in both blended and unblended formats. As noted, the unblended cost reports enable the channel partner to accurately bill their customers for resources at the proper provisioned (list) price.
CloudCheckr goes even further by supporting sorting and filtering by account, stack, group, resource, tag, and more. Channel sellers can either present billing reports in a self- branded PDF format or, using our sophisticated account permissioning, channel sellers can safely provide their customers direct access to raw usage data in either blended or unblended format within the Family accounts. CloudCheckr ensures that the data type and content is properly controlled. This allows access while removing the fear of compromising proprietary cost information.
CloudCheckr also recommends segregating RI intended for capacity resale within a single account. This facilitates easy inventorying and tracking of purchases and ROI. The cost of this account should be measured and compared to the differential between CloudCheckr’s full deployment blended and list price adjusted, unblended cost reports. This differential reflects the total return of reselling capacity and allows ROI calculations based upon the up-front costs of RI purchases.
CloudCheckr also enables channel sellers to instantly assess profitability on a per account basis. The overall segregation of billing data and RI intended for capacity resale allows users even greater visibility into account profitability. Using our reporting, Channel sellers should contrast each individual account’s blended and list price adjusted, unblended costs. This provides a granular view of under and over performing accounts both in absolute terms and relative to overall deployment profitability.
How to get started
AWS offers a multitude of opportunities to build a successful channel relationship. To maximize profitability, partners must carefully purchase AWS Reserved Instances for capacity resale. To that extent, they must also translate the native AWS billing from blended to List prices and properly allocate bills to their customers.
That’s why AWS channel sellers rely on CloudCheckr. Our SaaS platform performs the services you need to reduce billing complexities and improve profitability, even implementing insight-driven automation so partners can efficiently scale their businesses.
Find out how CloudCheckr can simplify your channel operations with a free Cloud Check Up.