aws reserved instances: turn your recommendations into purchases
DESCRIPTION
See how Cloudability can streamline your Reserved Instance buying process with answers to common questions like: - Is this a “good” Reserved Instance recommendation? - Will changes in our usage affect how much we save? - Will we lose money if AWS changes their pricing? - Should we buy 1-year or 3-year Reserved Instances?TRANSCRIPT
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@cloudability
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@cloudability
Turning Recommendations into Purchases
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@cloudability
1. Understanding Reservations
2. Defining a successful reservation
3. Risk Reduction Strategies
4. Key TakeawaysTodd Meyer
Senior Product Manager
TODAY’S SPEAKER
Introduction
Today’s Topics
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@cloudability
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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@cloudability
Poll
Is your company currently purchasing AWS reservations?
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@cloudability
Understanding Reservations
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@cloudability
Anatomy of a Reservation
Why Make Reservations?
1. Lower the cost of resources you are already using Reservations provide substantial cost savings versus “on-demand” 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... Demand spikes could cause a run on capacity. Reservations ensure you get seat at the table.
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@cloudability
Anatomy of a Reservation
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
RDS
Redshift
Elasticache
CDN
CloudFront
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@cloudability
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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@cloudability
Anatomy of a Reservation
How a Reservation is Priced
1. An upfront feePaying to lock in the capacity and a rate lower than the On Demand price
2. The unit priceYou still pay for the usage, but at a lower rate
3. The Term and the RI type influence the above e.g. For a heavy, you pay more upfront for a steeper discount in the unit rate A 3 year term will cost more upfront, but you can lock in your rate for longer.
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@cloudability
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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@cloudability
Anatomy of a Reservation
Break Even Points
Up front cost
Break Even
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@cloudability
Anatomy of a Reservation
RI Type Break Even Points
m1.xlarge LINUX us-east-1a 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%
The best RI type is dictated by the expected usage rate of the instance
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@cloudability
Reservations are applied each hour
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@cloudability
Defining a Successful Reservation
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@cloudability
Poll
Biggest cause of RI purchase delay in your company?
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@cloudability
Defining a Successful Reservation
What makes a reservation successful?
๏ Meets the needs of the organization
๏ Saves money
๏ Reserves capacity in the right places
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@cloudability
Defining a Successful Reservation
Define a basis for analysis
๏ Find a period of time that represents “expected usage”
๏ Can you move the newest RI types (e.g. m1 to m3)? If so, how long will that take?
๏ Leverage consolidated billing accounts to combine usage
๏ Make sure you have all AWS accounts
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@cloudability
Defining a Successful Reservation
Analyze the data by hour
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@cloudability
Defining a Successful Reservation
Evaluate the break even and Savings
SavingsBreak Even
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@cloudability
Defining a Successful Reservation
What makes a reservation successful?!
๏ It is an Instance the company needs now and for the period beyond the break even point !
๏ Hourly analysis matches the usage level of the RI (light, medium, heavy) !
๏ Analysis predicts a savings
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@cloudability
Risk Reduction Strategies
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@cloudability
Common Fears๏My usage will change and I will be stuck in a contract
๏AWS pricing is dropping so fast I shouldn’t lock in pricing right now
๏3 year RIs will result in over-paying in the future
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@cloudability
My usage will change and I will be stuck in a contract
FEAR ONE:
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@cloudability
My usage will change and I will be stuck in a contract
What could change in a Year?!
๏ Could move to new technology or instance types
๏ Customers could dramatically change how they use the product
๏ Could be locked in to instances that we don’t want to use
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@cloudability
My usage will change and I will be stuck in a contract
What you need to know!
๏ How fast do things change in your business, week to week, or does it take months?
๏ Is your technical operations team planning to move to new instance types?
๏ How will usage likely change?
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@cloudability
My usage will change and I will be stuck in a contract
Analyze and understand break even points for RIs
Break even
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@cloudability
My usage will change and I will be stuck in a contract
Reducing Instance families can improve economies of scale
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
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@cloudability
My usage will change and I will be stuck in a contract
Maximize use of Modifications
!
Modify existing RIs into different sizes and AZs
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@cloudability
My usage will change and I will be stuck in a contract
Purchase Strategies
๏ Understand RI break even points to use to your advantage
๏ Reduce the number of instance families to maximize flexibility.
๏ Analyze usage often to maximize modifications
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@cloudability
AWS pricing is dropping so fast I shouldn’t lock in pricing right now
FEAR TWO:
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@cloudability
AWS pricing is dropping so fast I shouldn’t lock in pricing right now
How the press portrays cloud prices
$0.00
$0.25
$0.50
$0.75
$1.00
3/1/09 12/1/09 9/1/10 6/1/11 3/1/12 12/1/12 9/1/13 6/1/14
1 Year RI 3 Year RI On Demand
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@cloudability
AWS pricing is dropping so fast I shouldn’t lock in pricing right now
Actual AWS price history:
$0.00
$0.25
$0.50
$0.75
$1.00
3/1/09 12/1/09 9/1/10 6/1/11 3/1/12 12/1/12 9/1/13 6/1/14
1 Year RI 3 Year RI On Demand
On Demand Still higher than RIs
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@cloudability
AWS pricing is dropping so fast I shouldn’t lock in pricing right now
Analyze the worse caseWhat if we bought an RI the day before a price change?
Old Price New Price Change
On Demand $0.26 $0.208 20%
1 Year RI $0.096 $0.084 13%
• February 2013 price change (m1.large medium RI 80% usage):
Total Cost
1 Year RI before change $1145
On Demand after change $1226
• Total cost before and after New On Demand price still higher than old RI price
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@cloudability
AWS pricing is dropping so fast I shouldn’t lock in pricing right now
Cost of waiting for a changeWhat if you wait for the next price drop (estimate 4 month wait)
Old Price New Price Change
On Demand $0.26 $0.208 20%
1 Year RI $0.096 $0.084 13%
• February 2013 price change:
Total Cost
Extra cost for 4 months of OD $424
Savings from locking in new price $313
• If you spent 4 months paying On-Demand before the price drop:
$111=
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@cloudability
AWS pricing is dropping so fast I shouldn’t lock in pricing right now
Purchase Strategies
๏ History shows that AWS is changing pricing rationally
๏ Even RIs bought very close to AWS price drops can result in savings for your company
๏ Don’t chase price drops, it could cost you more
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@cloudability
3 year RIs will result in over-paying in the future
FEAR THREE:
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@cloudability
3 year RIs will result in over-paying in the future
3 Year Reservations don’t require 3 years of use
m1.large us-east-1a
Break even
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@cloudability
3 year RIs will result in over-paying in the future
Historical Analysis
Type OS Zone purchase date usage
m1.large Linux US-east July 2011 90%
Assumptions:
Analysis:Scenario Cost
On Demand for 3 year $5,724
3 consecutive 1-year RIs $4,933
Single 3-year RI $4241
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@cloudability
3 year RIs will result in over-paying in the future
Total Cost by Usage m1.Large medium bought in July 2011
$0
$1,750
$3,500
$5,250
$7,000
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
3 1-year RI 3-year RI On Demand
On Demand cheaper below this usage level
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@cloudability
3 year RIs will result in over-paying in the future
Total Cost by Usage m1.Large Heavy bought in April 2013
$0
$1,500
$3,000
$4,500
$6,000
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
3 1-year RI 3-year RI On Demand
On Demand cheaper below this usage level
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@cloudability
3 year RIs will result in over-paying in the future
3 year cost for each month since 2009
0
2500
5000
7500
10000
3/1/2009 1/1/2010 11/1/2010 9/1/2011 7/1/2012 5/1/2013 3/1/2014
1 year RIs 3 Year RIs On Demand
Based on 80% usage rate
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@cloudability
3 year RIs will result in over-paying in the future
Purchase Strategies
๏ Understand the break even period of 3-year RIs
๏ AWS 3-year pricing has shown to provide significant savings in the long term despite price changes over time
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@cloudability
Summary of Strategies
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@cloudability
Summary
Take Aways๏ History shows that AWS has rational price drops that continue
savings to costumers already with reservations (Don’t chase price drops, it could cost you more)
๏ Reduce the number of instance families to maximize flexibility.
๏ Analyze usage often to maximize modifications
๏ Understand RI break even points to use to your advantage even for instances that might not need the whole reservation term
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@cloudability
1. A Simplified RI Calculation
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@cloudability
1. A tale of three instances
1. 30% 1. 30% 1. 30%
1. 30% is greater than the break even point for a light reservation
1 2 3
1. 3 Light
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@cloudability
1. A tale of three instances
1. Remember: Reservations are applied every hour
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@cloudability 1. If the instances are running at the same time you need multiple RIs
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
1. A tale of three instances
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@cloudability
1. A tale of three instances
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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@cloudability
1. 4.8%1. SAVINGS RATE
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@cloudability
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
1. A tale of three instances
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@cloudability
1. A tale of three instances
1. Collectively the 3 instances cover 90% of the hours of the month
1. 21. 1
1. 3
1. Hea
vy
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@cloudability
1. A tale of three instances
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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@cloudability
1. 41%1. SAVINGS RATE
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@cloudability
1. A tale of three instances
1 Heavy 3 Lights
Total Savings $774.65 $90.93
Total upfront fees $676 $729
1. Buying 3 lights would have wasted $486 in upfront fees
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@cloudability
1. Applying what we’ve learned:
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@cloudability
1. What we’ve learned:
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@cloudability
RESULT: RI purchases misalign to your needs reducing ROI
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@cloudability
Go all in on 1 or 2 large buys each year
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@cloudability
Result: Large cliffs in reservation levels
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@cloudability
How frequently are you purchasing reservations?
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@cloudability
Why are you purchasing reserved instances?
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@cloudability
๏ Amazon allows companies to apply to modify a reservation to change:
๏ Instance type (within family)
๏ Availability Zone (within region)
๏ Network (VPC or Classic)
1. Understanding Reservations
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@cloudability
Instance Size Normalization Factor
small 1
medium 2
large 4
xlarge 8
2xlarge 16
4xlarge 32
8xlarge 64
1. Understanding Reservations
1. 1 xlarge g 2 large 1 large g 4 small
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@cloudability
๏ t1.micro !
๏ cc1.4xlarge !
๏ cc2.8xlarge !
๏ cg1.8xlarge !
1. Understanding Reservations
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@cloudability
๏ Modifications do not happen automatically
๏ Modifications are not guaranteed and are based on available capacity
1. Understanding Reservations
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1 2 3 4 5 6 7 8 9 101. 90%1. 1 INSTANCE
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1. 5 2. Heavy
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