According to the man credited with inventing modern business management, Peter Drucker, “If you can’t measure it, you can’t improve it.” This quote illuminates why businesses spend so much time talking about Key Performance Indicators, or KPIs.
Savings Plans (SPs) and Reserved Instance (RI) management can be complicated, as it’s easy to get lost in analyses, while forgetting to take a step back and look at the bigger picture: “How am I doing with Savings Plans? and, “Is all of the time we spend forecasting and planning for discount purchases helping us achieve our business goals?”
To keep a pulse on how businesses measure their success with Savings Plans, we surveyed a small group of our customers (n=30) to find out their preferred KPIs.
We asked them:
- How do you measure your goals around Savings Plans or RIs?
- What are the key business metrics or Key Performance Indicators (KPIs) you drive towards in your decision of how much to commit and when?
- How do you characterize your goals and measure whether your RI/SP strategy was successful?
Our questions were open-ended, and we coded the responses as follows:
Top 5 KPIs for measuring success with AWS Savings Plans
Not surprisingly, Savings was reported as the number one indicator of success with Savings Plans. After all, it makes sense that savings would be a good way to measure how well you’re doing with a plan designed to save you money!
Not far behind Savings was Coverage. Many businesses are measuring how much of their compute spending is covered by Savings Plans; the more coverage the better because that means you’re spending less money for the same compute power. We typically recommend that our customers aim for at least 70% of their compute usage to be covered by reservation discounts (Savings Plans and/or Reserved Instances).
About a third of the customers who responded told us that Utilization is a key performance indicator for them. This also makes sense, as Savings Plans are a “use-it-or-lose-it” kind of deal. Let me explain: let’s say you commit to spending $10 per hour on compute services, but you only spend $8 in any given hour. The unused $2 is lost – it doesn’t accumulate for usage in the next hour. So, it’s important to make sure you’re utilizing as close to 100% of your Savings Plan purchases as possible.
On the flip side of Utilization is Waste. In the example above, the unused $2 is considered waste. Just as you want to maximize utilization, you want to minimize wasted spending. So, measuring waste is another great way to see how you’re doing with Savings Plans.
5. Dollars Spent on Compute
The fifth most important KPI reported was Dollars Spent on Compute. Businesses want to reduce the amount of money they spend per unit of compute power, and Savings Plans help you accomplish this. So, seeing a trend toward cheaper compute power—or consistently cheap compute power—is another indicator that you’re succeeding with Savings Plans. This metric is akin to Coverage, as the more you are covered by SPs and RIs, the cheaper your cost will be per unit of compute.
For a deep dive into AWS Savings Plans, check out this webinar replay where two CloudHealth Product Managers discuss everything you need to know about AWS Savings Plans with Amazon’s EC2 Principal Product Manager, Pranesh Ramalingam.