Amortizing AWS Reserved Instances

by Joe Kinsella

Several years ago after making my first reserved instance (RI) purchase with AWS, I was confronted by a series of questions from finance about amortization.  While I was familiar with the amortization of capital expenditures for physical equipment, I’d never given much thought to amortizing a virtual asset such as an RI. But the concept seemed simple enough: divide the purchase price of the RI by the number of months in the term, and I had the amortization per month. Easy right?

Over the next year, as my company purchased many more reservations - all at different times, for different amounts, and with different terms - the problem started to take on an unexpected complexity. Then in the fall of 2012, Amazon launched the Reserved Instance Marketplace, allowing users to sell reservations before the completion of their term and purchase new ones with variable terms. This was followed in 2013 by support for reserved instance modifications, allowing users to change the availability zone, VPC and the instance type of a reservation. It was now possible to make an RI purchase with a non-standard term from the marketplace, modify it into multiple reservations, sell parts of one or more of the resulting new reservations, modify others, and so on. Suddenly the history of a reserved instance purchase looked more like a multi-generation genealogical family tree than a capital expenditure.

When I started CloudHealth, we quickly found other customers struggling with the same amortization challenge, and so added this as a core feature of the product. The initial version was launched in the last year, but has undergone several changes since then to account for the incredible flexibility offered by AWS (e.g. full and partial sales, partial months, instance type modifications, early RI cancellation, etc…). With a single click in our product, you can see your current or historical costs with amortization. For example, the below report shows you your current month to date costs with amortization.

 

This report can be customized to report by account, region, service item, a custom business perspective (e.g. environment, product, application, department) and more. You can also run reports on your amortization over time, such as the below chart:

 

 

 

This chart is also customizable, so you can report on amortization by account, reservation type, region, instance type, time (e.g. monthly, weekly, daily), a custom business perspective, and more. You can send these reports automatically to you or members of your team on a schedule by clicking on the Subscribe button, and can export as both a graphic and CSV.

The amortized costs reported fully account for all aspects of managing your RIs, including purchasing, modifying and selling RIs both from Amazon and the open marketplace. The information reported is calculated down to an hourly basis, so is absolutely accurate.

If you have questions about general amortization or our product, please contact us at info@cloudhealthtech.com.

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