"As your infrastructure grows, managing your portfolio of Reserved Instances can present new challenges. You’ll need the right tools, metrics, and strategies in place to make sure you’re maximizing coverage and minimizing the risk of those Reserved Instances going unused. In this session, you’ll learn how scaled organizations have optimized their portfolios of Reserved Instances to cover most of their infrastructure. Attendees will walk away with strategies and tools for choosing Reserved Instances, making sure they get used, and showing the real impact on the company’s AWS bill. Topics include choosing the right Reserved Instances to buy and modify; centralizing and streamlining the buying process; and tracking key metrics to show ROI.  Session sponsored by Cloudability."

1. ๏ @cloudability
1. © 2015, Amazon Web Services, Inc. or its Affiliates. All rights reserved.
J.R. Storment
Chief Customer Officer
Cloudability
October 2015
ISM208
The Science of Saving with
Reserved Instances

2. @cloudability

3. Cloud infrastructure analytics

4. @cloudability@cloudability
How many of you have bought RIs?

5. @cloudability
Story: The (RI) hangover

6. ๏ @cloudability
0
45
90
135
180
225
Dev/test
POC
App#1
App#3
App#2
Exec team starts
really caring
“Loadtest”
How one company came to buy RIs

7. Reserved cost
60% drop in spending

8. @cloudability
Just bought… a bunch of
RIs

9. ๏ @cloudability
0
45
90
135
180
225
The next month the bill went up anyway…

10. @cloudability
What did I do?!

11. @cloudability
1. Wrong people – didn’t involve business stakeholders
2. Wrong data – didn’t use billing data
3. Wrong time – bought based on future plans
They bought the wrong RIs due to:
What went wrong

12. @cloudability
1.Who should be responsible for the purchase?
A. Engineering
B. Ops
C. Product Owners
D. Finance / Procurement
E. All of the above

13. ๏ @cloudability
With RIs there’s a technology decision to make as well as a
financial one
- Tech commits to using a certain type of instance at least until the
break-even point
- Business commits to spending a certain amount of money and
decides how to deploy capital (now or later)
Bought all upfront RIs, increasing cash outlay and removing
ability to do intramonth waste reporting
1. Didn’t involve business/finance stakeholders
What went wrong

14. @cloudability
RIs are a billing construct, they are not a technology
Tech knew they were running RHEL
... but they brought their own licenses so were actually being
billed from vanilla Linux by AWS
As a result their new RHEL RIs weren’t applied
2. Didn’t use billing data for RI planning
What went wrong

15. @cloudability
RIs applied each hour and can be changed rapidly
Tech team expected to move from m3s to c3s in a few
weeks so bought c3 RIs
... but the move was delayed by several months
As a result their new c3 RIs weren’t applied
3. Bought based on future plans, not actual
What went wrong

16. @cloudability@cloudability1. 1
6
Cloud is designed for “Just in time purchasing”

17. ๏ @cloudability
The stakes were too high

18. @cloudability
It was time for a new
process and new
players…

19. Buy
MeasureLearn
PurchaseAlign
ROI
RI buying cycle

20. ๏ @cloudability
RI Czar (n) A person or team focused on looking at the AWS billing data
each month to identify opportunities to increase Reserved Instance
coverage
Introducing the RI Czar
Why appoint one?
1. Proper purchasing of RIs can save 30–60% on your AWS bill
2. Assuming a $1 M/yr spend, there’s a potential savings of $300 K+ year.
3. Usually is a technically minded person in finance, procurement, or vendor
management

21. @cloudability
Before we talk process,
let’s go back to the
basics…

22. @cloudability@cloudability
Cost savings Capacity reservation
Reservations have two parts

23. @cloudability@cloudability
Reservations give you 744 hourly coupons that
can applied each hour of the month

24. @cloudability
RI mechanics
What makes up a reservation?
Instance
RI term RI type
Instance family Size OS Location (AZ)
m1 large Linux us-east-1a 1 year No upfront
r3 8xlarge RHEL us-west-2b 3 years Partial upfront
m3 medium Windows ap-northeast-1b 1 year All upfront

25. @cloudability
RI mechanics
The difference is in the payment structure
Upfront fee Monthly fee Savings
No upfront NO YES 28.6%
Partial upfront YES YES 38.1%
All upfront YES NO 39.4%
m3.medium:us-east:linux
All RI types are a commitment to pay for full utilization
(even if you don’t use it)

26. Reservations Infrastructure

27. @cloudability
RI “affinity” between
linked accounts

28. @cloudability
Reservations in linked accounts
Understanding reservations
Master
Payer
Linked
Acc’t
Linked
Acc’t

29. @cloudability
Reservations in linked accounts
Understanding reservations
Master
Payer
Linked
Acc’t
Linked
Acc’t RI
RI

30. @cloudability
Reservations in linked accounts
Understanding reservations
Master
Payer
Linked
Acc’t
Linked
Acc’t
$ c
$ c
$ cSavings Capacity

31. @cloudability
Reservations in linked accounts
Understanding reservations
Master
Payer
Linked
Acc’t
Linked
Acc’t
$ c

32. @cloudability
Reservations in linked accounts
Understanding reservations
Master
Payer
Linked
Acc’t
Linked
Acc’t
c
$$

33. @cloudability
Reservations in linked accounts
Understanding reservations
Master
Payer
Linked
Acc’t
Linked
Acc’t RI

34. @cloudability
Reservations in linked accounts
Understanding reservations
Master
Payer
Linked
Acc’t
Linked
Acc’t
c
$
$

35. Buy
MeasureLearn
PurchaseAlign
ROI
Minimize time
through loop

36. @cloudability
Instrumentation
Two primary metrics
Green line:
Percentage of hours that are covered by
reservations
Red line:
Amount of unused (but paid for) RI hours

37. Start with the green line
Green are hours that are
running under
reservations
Blue are on-demand

38. Start with the green line Monitor your RI coverage
throughout the month

39. Total Hours
Keep tabs on the “red” line = Amount of unused RI hours
Month over month total spending on Ris vs. Unused Ri hours

40. Buy
Measure
Learn
PurchaseAlign
ROI

41. @cloudability
RI management
Buying Reserved Instances
1.Walk before you run:
First buy should be small and uncontroversial
2.Focus your budget on high confidence purchases first
3.Focus on the highest savings first

42. @cloudability@cloudability
Plan based on the master if possible
Date range is key

43. @cloudability@cloudability
Look at each class of instance

44. @cloudability@cloudability
Start with low-hanging fruit

45. @cloudability@cloudability
Also look at high confidence (high usage)…

46. @cloudability@cloudability
Confirm the math behind each purchase
When will you start
saving?
Why is the purchase needed?

47. Buy
MeasureLearn
PurchaseAlign
ROI

48. Track impact of buys against goals with green line
Green are hours that are
running under
reservations
Blue are on-demand
Many organizations strive for 80%+ coverage

49. How many of our
prepaid RI hours
have we used?
“Red Line” = Number of unused RI
hours
Total Hours

50. @cloudability@cloudability
Wait. We made a “good” RI purchase last month.
Why didn’t my bill go down?

51. @cloudability@cloudability
Remember: An effective RI purchase
drives hourly rates down, but increasing
usage may overshadow the savings

52. Get granular with specific RI classes to see how rates were affected…

53. Buy
MeasureLearn
PurchaseAlign
ROI

54. @cloudability@cloudability
Decrease red line (unused RI hours)
by making RI “modifications"

55. @cloudability
You can modify
within a family…

56. @cloudability
Modifying instance type
Understanding reservations
2xlarge
16PTS=

57. @cloudability
Modifying instance type
Understanding reservations
2xlarge
xlarge xlarge
168 8+ =

58. @cloudability
Modifying instance type
Understanding reservations
2xlarge
xlarge xlarge
large large large large

59. @cloudability
Modifying instance type
Understanding reservations
2xlarge
xlarge xlarge
large large large large
medium medium medium medium medium medium medium medium

60. @cloudability
Modifying instance type
Understanding reservations
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

61. @cloudability
Modifying instance type
Understanding reservations
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

62. @cloudability
You can also modify
within a region…

63. @cloudability
Us-east-1a RIs can modify to: us-east-1b
us-east-1c
us-east-1d
us-east-2a
us-west-1a
ap-northeast-1c

64. @cloudability@cloudability
Calculate modifications before purchases

65. @cloudability@cloudability
Modifications utilize underused reservations
Underused
RIs
Currently on-
demand

66. @cloudability@cloudability
Sunk cost of unused RIs = $744/mo
($0.25/hr * 744) * 4 RIs
Savings from modifications are twofold
r3.2xlarge hourly pricing
RI 3-year all-upfront = $0.25/hr
on-demand = $0.70/hr
On-demand savings assumes 100% usage
Unnecessary on-demand charge = $2,080/mo
($0.70/hr * 744) * 4 equivalent units
Total savings = $2,824/mo

67. @cloudability@cloudability
Increase modification opportunities
by focusing on common families and regions

68. Plan by
family
Plan by
region

69. Buy
MeasureLearn
PurchaseAlign
ROI
Repeat as often
as you can
Minimize time
through loop

70. @cloudability
Reserved Instance strategy
Typical RI buying schedule
24th of the month:
Modifications executed
25th of the month:
RI recommendations pulled from Cloudability
26th to 27th of the month:
Data is reviewed with stakeholders
28th of the month:
Purchase is made

71. @cloudability
Reserved Instance strategy
Who does what?
RI Czar
• Monitors billing data
for buy
opportunities
and makes
recommendations
COE
• Cross-functional
team reviews buy
recommendations
and efficacy of
past purchases
Tech
• Evaluates and
approves
recommendations
against immediate
plans
Business
• Determines how to
deploy capital with
all, partial, no
upfront RIs
RI Czar
• Executes
purchases and
modifications

72. ๏ @cloudability
1. RIs are frequently misunderstood: Train everyone on the fundamentals
2. RI coverage changes constantly: Start tracking your green line (percentage of
hours covered by an RI) and red line (cost of unused RI hours) closely
3. Modifications are powerful and free: Make modifications to maximize use of RIs
(easy) when your infrastrucrure changes
4. It’s easy to get distracted: Appoint an RI Czar and schedule monthly RI
management meetings to ensure changes happen
5. Manage iteratively: Make small, uncontroversial purchases with future
modification in mind to keep up with infrastructure changes
6. Drink lots of water.
Things to remember (and do) after re:Invent

73. @cloudability
Start a free 14-day trial at
cloudability.com

74. ๏ @cloudability
Thank you!
Want to learn more?
Visit Cloudability in booth #412

75. ๏ @cloudability
Remember to complete
your evaluations!