3 Reasons You Can No Longer Afford to Ignore AWS Reserved Instances

05.31.17
Rachel Dines
Director of Product Marketing

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I hope by now everyone with a significant AWS footprint knows that one of the most impactful ways to reduce your spend is to purchase reservations. Reservations can save you as much as 75% compared with On-Demand pricing. That’s a huge discount! AWS offers reservations for many different asset types: EC2, RDS, DynamoDB, Elasticache, and Redshift, to name a few. For the purpose of this blog, let’s drill down on EC2 Reserved Instances (RIs), since we find that among our customers EC2 is typically the biggest driver of cost.

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"AWS is notorious for their constant price drops and innovation. However, one of the best kept secrets about the new Convertible RIs is that they can take advantage of these changes."

Despite the big opportunities for savings, I still see many large AWS users with a very low On-Demand to reserved ratio. You can calculate this by looking at the total number of EC2 reservation hours in a month and dividing it by the total number of On-Demand hours. Best practice is to get to 60% reserved capacity, or higher. I’ve seen some very large AWS users who get into the mid 90% range! What are you waiting for? Let’s look at three reasons you can no longer afford to ignore RIs:

1. Get over your commitment-phobia: RIs are more flexible than ever

AWS introduced the concept of RIs back in 2011. The concept was simple: Tell AWS what capacity you will need, and get a benefit for giving them a “heads up.” When they were first introduced, RIs were admittedly not very flexible: you committed to a specific instance type, with a specific OS, in a specific zone, and you could not extend the price or capacity benefit elsewhere. Today, RIs are an entirely different beast. With Size Flexible Regional RIs, you essentially only need to make a commitment to a family type, a Region, and an OS. Throw Convertible RIs in the mix and you are only committing to using capacity in a Region. That’s it! Now look into your crystal ball. Do you see your company needing some EC2 capacity in a Region for the next three years? Then Convertible RIs are likely a good investment for you.

2. Stop having FOMO: Convertible RIs can now take advantage of EC2 price drops and new instance types

Back in the olden times, one of the common objections to purchasing RIs was “what if Amazon drops the price after I’ve purchased the RI?” Or, “What if AWS comes out with a faster and cheaper generation of my instance type after I purchased the RI?” These were valid concerns for many, as AWS is notorious for their constant price drops and innovation. However, one of the best kept secrets about the new Convertible RIs is that they can take advantage of these changes. If you bought an M4 Convertible last fall, you can take advantage of the price drops that AWS recently announced. If you have a R3 and want to upgrade it to a R4, you can! This only applies to Convertible Reservations, which are slightly more expensive than Standard Reservations, but offer the greatest levels of flexibility.

3. Don’t get left behind: Your peers and competitors are leveraging reservations

In the dog-eat-dog world we call IT infrastructure today, you cannot overlook competitive edge. Your ability to drive down your cloud spend, thus improving margins or enhancing the bottom line, can be a significant advantage. Looking across the CloudHealth customer base, our average direct customer is currently operating at 34% reserved EC2 capacity. The top 10%, however, operate at almost 95% reserved EC2 capacity! With thousands or millions of dollars on the line, you can’t ignore this any longer.

Make it simple, with help from CloudHealth

The CloudHealth platform is the only solution on the market today that can help you model, purchase, and manage your RIs across all EC2 RI types (including the new Size Flexible Regional Scope and Convertible types). Take the guesswork, spreadsheets, and anxiety out of buying RIs, with simple solutions like our RI Optimizer, which looks at your historical utilization and current reserved footprint, and recommends the optimal RI buy for you. Three clicks and you are enjoying up to 75% off On-Demand pricing. And when your usage drifts from your original purchase, CloudHealth will alert you and make recommendations for actions to remediate.

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Ready to learn more?

Join our webinar on June 8th to find out how to take advantage of the new, more flexible RIs.

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