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

1. The Science Behind
Choosing Reserved
Instances
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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. WARNING: Math ahead.
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4. About Us
Cloud Infrastructure Analytics
Infrastructure analytics for scaled web businesses and enterprises.
650M+ in tracked cloud costs. 8,000+ Users
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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.
!
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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.
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7. Purchasing Pitfalls
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8. Is your company currently
purchasing AWS reservations?
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9. What we’ve learned:
Most companies over simplify
reservation purchasing
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10. RESULT: RI purchases misalign
to your needs reducing ROI
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11. Go all in on 1 or 2 large buys each year
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12. Result: Large cliffs in
reservation levels
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13. How frequently are you
purchasing reservations?
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14. Understanding
Reservations
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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
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16. Understanding Reservations
Why make reservations?
1. Lower the cost of resources you are already using
Reservations provide substantial cost savings versus “ondemand” pricing.
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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%
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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.
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19. Why are you purchasing
reserved instances?
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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.
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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.
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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
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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
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24. Understanding Reservations
Instance types without a family
• t1.micro
!
• cc1.4xlarge
!
• cc2.8xlarge
• cr1.8xlarge
!
• hi1.4xlarge
!
• hs1.8xlarge
!
• cg1.8xlarge
!
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25. Understanding Reservations
The Fine Print
• Transfers do not happen automatically
• Transfers are not guaranteed and are based on
available capacity
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26. A Simplified RI
Calculation
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27. A Simplified RI Calculation
Overall utilization can be misleading
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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
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29. A tale of three instances
When were the instances running?
Remember: Reservations are applied every hour
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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
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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
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32. 4.8
%
SAVINGS RATE
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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
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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
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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
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36. 41
%
SAVINGS RATE
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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
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38. Applying what we’ve learned:
You have to understand how many
instances are running each hour to
know how many RIs to purchase
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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
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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
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41. Put it into practice!
(demo time)
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42. Purchasing
Recommendations
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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
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44. Thank You
For more info
Or contact me
Download
cloudability.com
toban@cloudability.com
some url
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