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Strategies For Long-Term Savings With AWS Reserved Instances

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1. Overview of RI Buying Cycle

2. Understanding Reservations

3. Building an architecture optimized for cost savings

4. Speeding up your reservation buying process

Toban Zolman VP, Product Development

TODAY’S SPEAKER

Introduction

Today’s Topics

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Our SolutionHow It Works

1 2 3

4 5

Spend Management Spending visibility via monthly forecasts, dash-board, budget alerts, and daily email digests.

Cost Analytics Dig into your operating costs with detailed costs by tag, service, and usage type. !

EC2 Usage Analytics Spot under-utilized resources w/ instance level usage metrics. !!

RI Purchase Analytics Understand the exact combination of Reserved Instances that will maximize your savings. !

Enterprise Enablement Organizational group views/filtering/rollups, multi-user access. !

$1B+ of cloud spending under management • 13,000 users

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Overview of RI Buying Cycle

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Intro

What Drives Infrastructure Changes?• Application needs

Apps change, scale, and become more sophisticated needing more compute, memory or storage

• Price changes As Amazon drives down prices it changes the cost profile of existing infrastructure

• New optimized instance types Leverage optimized instances to be more efficient

The goal is to anticipate these items and constantly tweak reservations to maximize coverage (and thus savings)

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Intro

RI Buying Cycle

Infrastructure Changes

RI Purchases

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Understanding Reservations

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Anatomy of a Reservation

What Makes Up a ReservationReserve a particular type of infrastructure:

Instance Family Size OS Location

m1 large Linux us-east-1a

r3 8xlarge RHEL us-west-2b

1 year 3 yearOR

light medium heavyOR OR

Instance type

Term

RI type

For a particular time:

With an expected usage level

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Anatomy of a Reservation

Each combination is a different price!

There are 2,000+ different reservation configurations

๏ Each with their own upfront fee

๏ Each with their own unit price

๏ Each with their own “break-even” points.

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Anatomy of a Reservation

Break Even Points

Break Even

Up front cost

Savings

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Anatomy of a Reservation

Break Even Points

The goal is to drive unit cost down as close as possible to RI hourly cost

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Building an Architecture Optimized for Cost Savings

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1. Consolidate instance families

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Reserved-Instance-friendly architecture

Why Instance Families Matter

• RI modifications can only happen within a family Reservations can be changed at any time from one size to another within a family

• RIs can apply across consolidated billing accountsReservations can apply across linked accounts if the original account is not using it. Fewer families means more spots an RI can be applied.

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Understanding Modifications

Modifying Reserved Instances

• Instances with Linux OS • Instance type (within family) • Availability Zone (within region) • Network (VPC or Classic)

• Instances with a licensed OS or without a family • Availability Zone (within region) • Network (VPC or Classic)

• Reservations cannot be moved between accounts

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Understanding Modifications

We Are Family

M1 M2 M3 C1 C3 R3 i2 t2

small medium large xlarge

xlarge 2xlarge 4xlarge

medium large xlarge 2xlarge

medium xlarge

large xlarge 2xlarge 4xlarge 8xlarge

large xlarge 2xlarge 4xlarge 8xlarge

xlarge 2xlarge 4xlarge 8xlarge

micro small medium

LEGACY FAMILY

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Understanding Modifications

Instance types without a family

• t1.micro !

• cr1.8xlarge !

• cc2.8xlarge !

• cg1.4xlarge !

• cr1.8xlarge !

• hi1.4xlarge !

• hs1.8xlarge !

• g2.2xlarge

LEGACY FAMILY

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Understanding Modifications

Changing Instance Type

Instance Size Normalization Factor

micro 0.5

small 1

medium 2

large 4

xlarge 8

2xlarge 16

4xlarge 32

8xlarge 64

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Understanding Reservations

Modifying Instance Type

2xlarge 16 PTS=

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Understanding Reservations

Modifying Instance Type

2xlarge

xlarge xlarge

168 8+ =

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Understanding Reservations

Modifying Instance Type

2xlarge

xlarge xlarge

large large large large

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Understanding Reservations

Modifying Instance Type

2xlarge

xlarge xlarge

large large large large

medium medium medium medium medium medium medium medium

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Understanding Reservations

Modifying Instance Type

2xlarge

xlarge xlarge

large large large large

medium medium medium medium medium medium medium medium

small small small small small small small small small small small small small small small small

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Understanding Reservations

Modifying Instance Type

2xlarge

xlarge xlarge

large large large large

medium medium medium medium medium medium medium medium

small small small small small small small small small small small small small small small small

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Reservations represent sunk cost. Modifications let you move those reservations to maximize savings as your infrastructure changes

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2. Migrate to modern instances

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Reserved-Instance-friendly architecture

Cost Savings

m1.medium m3.medium

On Demand $0.087 $0.07

Heavy RI upfront $247 $222

Heavy RI hourly $0.02 $0.018

Annual Cost (100% util) $762 $613

Save $150 year20% savings

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Reserved-Instance-friendly architecture

Instance Type Migration Paths

Legacy Instance Type Modern Instance Type

T1T2

M1

M1 M3

C1 C3

H1 I2

M2R3

CR1

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Reserved-Instance-friendly architecture

Migration Strategy

• Proactively plan instance type migrationsFinance and Ops have to talk on this one to understand when upgrades should happen and what impact it has on reservations

• Tactically renew reservations on legacy instances If you’re going to run a legacy instance for a while you might as well cover it with an RI, but only renew what you have to

High frequency reservation purchases make this transition easier

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The Financial Impact of Frequent Purchases

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1. Increases your savings

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Go all in on 1 or 2 large buys each year

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RESULT: Infrequent buys misalign reservations to infrastructure

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RESULT: Annual cliffs in reservation levels

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RESULT: Infrastructure lock-in

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The Financial Impact of Frequent Purchases

Scenario: Growing Instance Volume

0

12.5

25

37.5

50

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

m3.large us-east

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The Financial Impact of Frequent Purchases

Scenario: Growing Instance Volume

m3.large End of Year Savings Rate End of Second Year

1 year RI - Purchased Annually 4% 17%

1 Year Heavy RI - purchased quarterly 29% 34%

1 Year Heavy RI - purchased monthly 33% 36%

$25k savings

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2. Aligns reservations to actual infrastructure

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The Financial Impact of Frequent Purchases

How to Structure Monthly Changes

1. Start with modificationsGet the most out of what you already have

2. Focus on high confidence purchasesBuy reservations for instances that are (almost) always running

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The Financial Impact of Frequent Purchases

Structuring Monthly Buys

8 instances running 75% of the hours Break even 68.09% 25.87%

SAVINGS RATE

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Reserved-Instance-friendly architecture

Cost Savings

8 @ 75%

5 @ 100%

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The Financial Impact of Frequent Purchases

Structuring Monthly Buys

5 instances running 100% of the hours Break even 68.09% 34.38%

SAVINGS RATE

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Reserved-Instance-friendly architecture

Cost Savings

Usage Rate Instance Count Savings Rate

100% 5 34%

94% 1 30%

70% 2 12%

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The Financial Impact of Frequent Purchases

How to Structure Monthly Buys

1. Start with modificationsGet the most out of what you already have

2. Focus on high confidence purchasesBuy reservations for instances that are (almost) always running

3. Spread purchases horizontally across infrastructurePurchase tactically across all instance families to avoid cliffs and lock-in

4. Monitor cost per hour to measure effectiveness Unit cost should go down as reservation volume goes up

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Recap

1. Reduce the number of instance families that you use

2. Have clear migration plans for legacy instances

3. Do monthly modifications and RI buys

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Thank You

For more info

Or contact me

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toban@cloudability.com