The Science Behind
Choosing Reserved
Instances

@cloudability
Introduction

Today’s Topics
1. Purchasing Pitfalls

TODAY’S SPEAKER

2. Understanding
Reservations
3. How to calculate RI...
WARNING: Math ahead.

@cloudability
About Us

Cloud Infrastructure Analytics

Infrastructure analytics for scaled web businesses and enterprises.
650M+ in tra...
How It Works

Our Solution

1

Spend
Management
Spending visibility via
monthly forecasts, dashboard, budget alerts, and
d...
How It Works

No Software to Install

You Access

We Collect

You log into
cloudability.com to
access analytics.

We pull ...
Purchasing Pitfalls

@cloudability
Is your company currently
purchasing AWS reservations?

@cloudability
What we’ve learned:

Most companies over simplify
reservation purchasing

@cloudability
RESULT: RI purchases misalign
to your needs reducing ROI
@cloudability
Go all in on 1 or 2 large buys each year

@cloudability
Result: Large cliffs in
reservation levels

@cloudability
How frequently are you
purchasing reservations?

@cloudability
Understanding
Reservations

@cloudability
Understanding Reservations

What is a reservation?
Reservations allow you to reserve resources/capacity for one or
three y...
Understanding Reservations

Why make reservations?
1. Lower the cost of resources you are already using

Reservations prov...
Understanding Reservations

RI Cost Savings vs. On-Demand
There are 2,000+ different reservation types each with their own...
Understanding Reservations

Why make reservations?
1. Lower the cost of resources you are already using

Reservations prov...
Why are you purchasing
reserved instances?

@cloudability
Reserved Instance Pricing
Components
Reservation Type

Upfront Fee

Hourly Usage Fee

Minimum Usage Level

None
Light

Yes...
Understanding Reservations

How are reservations applied?
• Reserved Instances are purchased for an instance
type (m1.xlar...
Understanding Reservations

Modifying Reserved Instances
• Amazon allows companies to apply to transfer a
reservation from...
Understanding Reservations

Changing Instance Type
Instance Size

Normalization Factor

small

1

medium

2

large

4

xla...
Understanding Reservations

Instance types without a family
• t1.micro
!

• cc1.4xlarge
!

• cc2.8xlarge

• cr1.8xlarge
!
...
Understanding Reservations

The Fine Print
• Transfers do not happen automatically

• Transfers are not guaranteed and are...
A Simplified RI
Calculation

@cloudability
A Simplified RI Calculation

Overall utilization can be misleading

@cloudability
A tale of three instances

m1.large linux us-east-1a
1

30%

t
h
ig
L
3
2

30%

3

30%

30% is greater than the break even...
A tale of three instances

When were the instances running?

Remember: Reservations are applied every hour

@cloudability
A tale of three instances

Instances running at the same time
Sun

Mon

Tue

Wed

Thu

Fri

Sat

1

2

3

4

5

6

7

8

9...
A tale of three instances

3 Light reservations cost savings
On-demand hourly cost

$0.240

RI hourly cost

$0.136

RI upf...
4.8

%

SAVINGS RATE

@cloudability
A tale of three instances

Instances running at different times
Sun

Mon

Tue

Wed

Thu

Fri

Sat

1

2

3

4

5

6

7

8
...
A tale of three instances

Instances running at different times

y
av
e
H
3

1

2

Collectively the 3 instances cover 90% ...
A tale of three instances

1 Heavy reservation cost savings
On-demand hourly cost

$0.240

RI upfront fee

$676

RI hourly...
41

%

SAVINGS RATE

@cloudability
A tale of three instances

1 Heavy vs. 3 Lights
1 Heavy
Total Savings
Total upfront fees

3 Lights

$774.65

$90.93

$676
...
Applying what we’ve learned:

You have to understand how many
instances are running each hour to
know how many RIs to purc...
Running Instances by Hour of the
Month
(example assumes 10 hours in the month)
Hour of month

Running Instances
1

4

2

6...
Hourly Frequency Distribution of
Instance Levels
Running Instance Count

Frequency of Occurrence

Frequency %

0

1

10%

...
Put it into practice!
(demo time)

@cloudability
Purchasing
Recommendations

@cloudability
Purchasing Recommendations

Implications for savings
• Base purchase decisions on hourly instance
counts of each instance ...
Thank You
For more info
Or contact me
Download

cloudability.com
toban@cloudability.com
some url

@cloudability
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The Science Behind Choosing AWS Reserved Instances

2,838 views

Published on

Buying AWS Reserved Instances can cut your AWS costs by up to 65%. But if you don't buy the right reservations, you might end up in the red.

In this deck, Cloudability's VP of Product Development, Toban Zolman, shows you the science and math of choosing the right AWS Reserved Instances for your company.

Learn more at http://cloudability.com

Published in: Technology, Business

The Science Behind Choosing AWS Reserved Instances

  1. 1. The Science Behind Choosing Reserved Instances @cloudability
  2. 2. Introduction Today’s Topics 1. Purchasing Pitfalls TODAY’S SPEAKER 2. Understanding Reservations 3. How to calculate RIs 4. Recommended RI purchase approach Toban Zolman VP of Product Development @cloudability
  3. 3. WARNING: Math ahead. @cloudability
  4. 4. About Us Cloud Infrastructure Analytics Infrastructure analytics for scaled web businesses and enterprises. 650M+ in tracked cloud costs. 8,000+ Users @cloudability
  5. 5. How It Works Our Solution 1 Spend Management Spending visibility via monthly forecasts, dashboard, budget alerts, and daily email digests. 2 Cost Analytics Dig into your operating costs with detailed costs by tag, service, and usage type. ! 4 RI Purchase Analytics Understand the exact combination of Reserved Instances that will maximize your savings. ! 5 3 EC2 Usage Analytics Spot under-utilized 
 resources w/ instance level usage metrics. ! ! Enterprise Enablement Organizational group views/filtering/rollups, multi-user access. ! @cloudability
  6. 6. How It Works No Software to Install You Access We Collect You log into cloudability.com to access analytics. We pull data directly from public cloud provider APIs. ! We Store We warehouse your historical data. @cloudability
  7. 7. Purchasing Pitfalls @cloudability
  8. 8. Is your company currently purchasing AWS reservations? @cloudability
  9. 9. What we’ve learned: Most companies over simplify reservation purchasing @cloudability
  10. 10. RESULT: RI purchases misalign to your needs reducing ROI @cloudability
  11. 11. Go all in on 1 or 2 large buys each year @cloudability
  12. 12. Result: Large cliffs in reservation levels @cloudability
  13. 13. How frequently are you purchasing reservations? @cloudability
  14. 14. Understanding Reservations @cloudability
  15. 15. Understanding Reservations What is a reservation? Reservations allow you to reserve resources/capacity for one or three years in a particular availability zone in exchange for a lower overall unit price. COMPUTE Amazon EC2 DATABASE DynamoDB CDN CloudFront RDS Redshift Elasticache @cloudability
  16. 16. Understanding Reservations Why make reservations? 1. Lower the cost of resources you are already using
 Reservations provide substantial cost savings versus “ondemand” pricing. @cloudability
  17. 17. Understanding Reservations RI Cost Savings vs. On-Demand There are 2,000+ different reservation types each with their own “break-even” points. LINUX m1.xlarge instance - over 3 years Annual Utilization Rate Light RI Savings Rate Medium RI Savings Rate Heavy RI Savings Rate 20% 25% -7% -77% 40% 40% 33% 11% 60% 45% 46% 41% 80% 48% 52% 56% 100% 49% 59% 65% @cloudability
  18. 18. Understanding Reservations Why make reservations? 1. Lower the cost of resources you are already using
 Reservations provide substantial cost savings versus “ondemand” pricing.
 2. Lock-in future capacity in the same Availability Zone
 Very useful if you experience bursts/spikes in usage
 3. Reserve capacity in another region just in case...
 Outages could cause a run on capacity. Reservations ensure you get seat at the table. @cloudability
  19. 19. Why are you purchasing reserved instances? @cloudability
  20. 20. Reserved Instance Pricing Components Reservation Type Upfront Fee Hourly Usage Fee Minimum Usage Level None Light Yes Yes If the instance is not used during the hour, there is no charge. None Medium Yes Yes If the instance is not used during the hour, there is no charge. Yes Heavy Yes Yes Billed a full month’s worth of hours at the start of each month. @cloudability
  21. 21. Understanding Reservations How are reservations applied? • Reserved Instances are purchased for an instance type (m1.xlarge) with a specified OS (LINUX) in a particular Availability Zone (us-east-1a)
 • Reservations are applied each hour.
 • If an instance is running in a “linked account”, it can inherit an unused reservation from a different linked account under the consolidated billing payer account
 • Capacity reservation stays with the linked account. @cloudability
  22. 22. Understanding Reservations Modifying Reserved Instances • Amazon allows companies to apply to transfer a reservation from one Availability Zone to another
 • Trade-in existing Reserved Instances for a different size in the same family @cloudability
  23. 23. Understanding Reservations Changing Instance Type Instance Size Normalization Factor small 1 medium 2 large 4 xlarge 8 2xlarge 16 4xlarge 32 8xlarge 64 1 xlarge g 2 large 1 large g 4 small @cloudability
  24. 24. Understanding Reservations Instance types without a family • t1.micro ! • cc1.4xlarge ! • cc2.8xlarge • cr1.8xlarge ! • hi1.4xlarge ! • hs1.8xlarge ! • cg1.8xlarge ! @cloudability
  25. 25. Understanding Reservations The Fine Print • Transfers do not happen automatically
 • Transfers are not guaranteed and are based on available capacity @cloudability
  26. 26. A Simplified RI Calculation @cloudability
  27. 27. A Simplified RI Calculation Overall utilization can be misleading @cloudability
  28. 28. A tale of three instances m1.large linux us-east-1a 1 30% t h ig L 3 2 30% 3 30% 30% is greater than the break even point for a light reservation @cloudability
  29. 29. A tale of three instances When were the instances running? Remember: Reservations are applied every hour @cloudability
  30. 30. A tale of three instances Instances running at the same time Sun Mon Tue Wed Thu Fri Sat 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 26 27 28 29 30 If the instances are running at the same time you need multiple RIs @cloudability
  31. 31. A tale of three instances 3 Light reservations cost savings On-demand hourly cost $0.240 RI hourly cost $0.136 RI upfront fee $243 Effective hourly rate @ 30% utilization $0.228 Hourly Savings $0.011 Total Savings for this example $90.93 @cloudability
  32. 32. 4.8 % SAVINGS RATE @cloudability
  33. 33. A tale of three instances Instances running at different times Sun Mon Tue Wed Thu Fri Sat 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 26 27 28 29 30 @cloudability
  34. 34. A tale of three instances Instances running at different times y av e H 3 1 2 Collectively the 3 instances cover 90% of the hours of the month @cloudability
  35. 35. A tale of three instances 1 Heavy reservation cost savings On-demand hourly cost $0.240 RI upfront fee $676 RI hourly cost $0.056 Effective hourly rate @ 90% utilization $0.141 Hourly Savings $0.098 Total Savings for this example $774.65 @cloudability
  36. 36. 41 % SAVINGS RATE @cloudability
  37. 37. A tale of three instances 1 Heavy vs. 3 Lights 1 Heavy Total Savings Total upfront fees 3 Lights $774.65 $90.93 $676 $729 Buying 3 lights would have wasted $486 in upfront fees @cloudability
  38. 38. Applying what we’ve learned: You have to understand how many instances are running each hour to know how many RIs to purchase @cloudability
  39. 39. Running Instances by Hour of the Month (example assumes 10 hours in the month) Hour of month Running Instances 1 4 2 6 3 0 4 5 5 7 6 8 7 5 8 3 9 12 10 3 @cloudability
  40. 40. Hourly Frequency Distribution of Instance Levels Running Instance Count Frequency of Occurrence Frequency % 0 1 10% 1 9 90% 2 9 90% 3 9 90% 4 7 70% 5 6 60% 6 5 50% 7 4 40% Break even point for Medium 8 2 20% Break even point for Light 9 1 10% 10 1 10% 11 1 10% 12 1 10% Break even point for Heavy @cloudability
  41. 41. Put it into practice! (demo time) @cloudability
  42. 42. Purchasing Recommendations @cloudability
  43. 43. Purchasing Recommendations Implications for savings • Base purchase decisions on hourly instance counts of each instance type per Availability Zone 
 (not aggregate data) • Frequent reservation purchases help maximize cost efficiency • Don’t over purchase heavy reservations. Utilize Light and Medium reservations to handle volatility • If capacity reservations are important, utilize light reservations to hold capacity in specific Availability Zones @cloudability
  44. 44. Thank You For more info Or contact me Download cloudability.com toban@cloudability.com some url @cloudability

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