Science Of Saving With AWS Reserved Instances - 9/11/14

@cloudability
The Science Of Saving With
AWS Reserved Instances

@cloudability
Introduction
Today’s Topics
1. Purchasing Pitfalls
2. Anatomy Of A Reservation
3. A Simplified Calculation
4. Reservation Purchasing
Recommendations
TODAY’S SPEAKER
Aaron Kaffen
Director of Marketing

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Poll
Is your company currently purchasing AWS
reservations?

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WARNING: Math ahead.

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About Us
Cloud Infrastructure Analytics
Over $1B in tracked cloud costs across 10,000+ users

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How It Works
Our Solution
1 2 3
Spend
Management
Spending visibility via monthly
forecasts, dash-board, budget
alerts, and daily email digests.
4 5
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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How It Works
No Software to Install
We Collect
We pull data directly from
public cloud provider APIs.
We Store
We warehouse your
historical data.
You Access
You log into
cloudability.com to access
analytics.
!

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Purchasing Pitfalls

Most companies over-simplify
reservation purchasing
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RESULT: RI purchases misalign
to your needs reducing ROI
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Go all in on 1 or 2 large buys each year

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Result: Large cliffs in
reservation levels

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Poll
How frequently is your company purchasing
reservations?

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Anatomy of a Reservation

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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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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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Reservations are applied each hour

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What Makes Up a Reservation
Reserve a particular type of infrastructure:
Instance Family Size OS Location
m1 large Linux us-east-1a
r3 8xlarge RHEL us-west-2b
1 year OR 3 year
light OR medium OR heavy
Instance class
Term
RI type
For a particular time:
With an expected usage level

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Pricing Components
Reservation Type Upfront Fee Hourly Usage Fee Minimum Usage Level
Light Low Highest
None
If the instance is not used
during the hour, there is
no charge.
Medium Higher Higher
None
If the instance is not used
during the hour, there is
no charge.
Heavy Highest Low
Yes
Billed a full month’s worth
of hours at the start of
each month.

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Break-even Points
There are 2,000+ different reservation classes each with their own “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%

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Poll
Why is your company purchasing reservations?

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A Simplified Calculation

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A Simplified Reservation Calculation
Overall utilization can be misleading

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A tale of three instances
1 2 3 3 Light
30% 30% 30%
30% is greater than the break even point for a light reservation

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Remember: Reservations are applied every hour

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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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On-demand hourly cost $0.240
RI hourly cost $0.136
RI upfront fees $729
Effective hourly rate @ 30% utilization $0.228
Hourly Savings $0.011
Total Savings for this example $90.93

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4.8%
SAVINGS RATE

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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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3 Heavy
2
1
Collectively the 3 instances cover 90% of the hours of the month

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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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41%
SAVINGS RATE

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Intro
1 Heavy 3 Lights
Total Savings $774.65 $90.93
Total upfront fees $676 $729
Buying 3 lights would have wasted $486 in upfront fees

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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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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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Example break-even points
RI Type Utilization Rate
Light 20%
Medium 30%
Heavy 60%

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Running Instances by Hour of the Month
12
9
6
3
0
1 2 3 4 5 6 7 8 9 10

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Running Instances by Hour of the
12
9
6
3
0
1 2 3 4 5 6 7 8 9 10
1 INSTANCE
90%

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12
9
6
3
0
1 2 3 4 5 6 7 8 9 10
2 INSTANCES
90%

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12
9
6
3
0
1 2 3 4 5 6 7 8 9 10
3 INSTANCES
90%

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12
9
6
3
0
1 2 3 4 5 6 7 8 9 10
4 INSTANCES
70%

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12
9
6
3
0
1 2 3 4 5 6 7 8 9 10
5 INSTANCES
60%

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12
9
6
3
0
1 2 3 4 5 6 7 8 9 10
5
Heavy

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12
9
6
3
0
1 2 3 4 5 6 7 8 9 10
7 INSTANCES
30%
5
Heavy

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12
9
6
3
0
1 2 3 4 5 6 7 8 9 10
2
Medium
5
Heavy

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12
9
6
3
0
1 2 3 4 5 6 7 8 9 10
8 INSTANCES
20%
2
Medium
5
Heavy

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12
9
6
3
0
1 2 3 4 5 6 7 8 9 10
1
Light
2
Medium
5
Heavy

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Put it into practice!
(demo time)

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Purchasing
Recommendations

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Purchasing Recommendations
Putting It To Work At Your Company
• 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

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Thank You!
For more info
Presentation cldy.co/ri-deck
Or contact us
cloudability.com
sales@cloudability.com

Science Of Saving With AWS Reserved Instances - 9/11/14

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Science Of Saving With AWS Reserved Instances - 9/11/14