The Ultimate Guide to AWS Reserved Instances, Part 5: Reserved Instance Accounting, Amortization, and Chargeback

Author:
Rachel Dines Sr. Director of Product Marketing
Published: December 20, 2017
3 Min Read

In the first four parts of this blog series, we walked through the process of planning your Reserved Instance (RI) purchase, rightsizing, making your RI buy, and ongoing modification and monitoring. There is still one more step you must take: RI accounting, amortization, and chargeback.

 

One of the critical steps associated with RI management that is often overlooked or brushed aside as being too time consuming or too complicated -- the process of holding teams accountable. This challenge isn’t new, in fact, I revisited a blog from 2014 from our founder, Joe Kinsella, which outlines many of the challenges he faced when it comes to RI amortization. Why is this task so complex? There are a few reasons:

  • Reserved Instances will float across accounts. One of the least understood, and least predictable, parts of Reservations is the float. Did you know that if you purchase an RI in one account, that the RI can (and will) float to other linked accounts? Before you get mad, this is actually a benefit of Reservations. The float will occur when there is no matching usage in the purchasing account. An RI will always remember which account it was purchased under and favor that account.
  • Some Reserved Instances will flex. Not only do RIs float across accounts, but some RI types can also flex across sizes and zones. See my earlier post for a complete breakdown of when this happens and how.
  • You continuously purchase new Reserved Instances. Not only are you trying to account for float and flexibility, but now you have overlapping terms of Reservations, each with their own expiration dates and purchase dates. And with the advent of the RI Marketplace, they aren’t restricted to 1 or 3 year terms.
  • RIs can be modified and exchanged. The last factor that makes RI accounting a chore is the ability to modify and exchange RIs, which can change almost every dimension of the RI, and even reset the term!

If you primarily purchase All-Upfront or Partial-Upfront RIs, you likely want to spread the expense of the RI purchase evenly throughout the year, rather than account for all of it in the month when you made the purchase. Additionally, you likely want to understand which departments actually got the benefit of the Reservation, and chargeback appropriately based on benefit and usage. Amazon publishes all of this information in the CUR -- down to the second -- including which accounts and instances got the benefit of the RI. However, for many organizations, this is simply information overload. One option is to use CloudHealth to help you analyze which business groups received the benefit of the Reservation so you can do appropriate chargeback.

The example above demonstrates why it’s critical to be able to look at RI amortization by usage, not just purchase. The original purchase of the RIs was made by two individuals: Vikram and Anton. However, over time, the RIs floated and benefited several other people: Ege, Anton, Steve, and Madolyn. Using this information, I can make sure that we appropriately chargeback (or allocate costs) these individuals or teams based on the benefit they received.

Another valuable metric to track is how much you are saving by using Reserved Instances, especially broken down by team. You can use this information to help incentivize groups to be more aggressive in their RI purchasing. One of our customers, Trimble, discussed this in a recent webinar, and showed the reports that they use to help drive teams towards greater RI coverage.

That wraps up the last part of our blog series on Amazon Reserved Instances. You now have all the tools needed to effectively plan, purchase, manage, and account for RIs.

To learn more about how you can cut down your AWS spend with Reserved Instances, check out our The Ultimate Guide to Amazon EC2 Reserved Instances eBook!

 
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Headshot Rachel Dines
Rachel Dines, Sr. Director of Product Marketing

Rachel Dines leads product marketing for CloudHealth by VMware. Previously, Rachel held positions leading cloud storage product marketing at NetApp and Riverbed. Prior to that, Rachel was an industry analyst at Forrester Research covering cloud resiliency, DRaaS and backup as a service.

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