Finding underutilized assets in the cloud in a timely manner isn’t easy or automatic. Bills from cloud providers only come on a monthly basis, and may contain more than a hundred million lines of charges for a large enterprise with a sizable cloud estate. If you wait until you get the bill to act, you may find steep charges for VMs and other services that have been idle for 30 days and should have been shut down or downsized long ago.
It’s even harder when you have to manage multiple clouds with multiple accounts each. The good news is that you can usually pull billing information from your cloud providers electronically on a daily basis; the bad news is that you may need to license or develop new tools to manage your cloud estate.
One way to reduce spending on cloud resources that you expect to use for one or more years is to pre-purchase your base capacity at a discount. Each cloud provider does this a little differently, and changes its billing policies periodically. Be warned: This is a confusing area, even when the provider claims to be transparent about pricing.
Amazon explains its pre-purchase plan as such:
“Reserved Instances provide you with a significant discount (up to 75%) compared to On-Demand instance pricing. In addition, when Reserved Instances are assigned to a specific Availability Zone, they provide a capacity reservation, giving you additional confidence in your ability to launch instances when you need them.
“For applications that have steady state or predictable usage, Reserved Instances can provide significant savings compared to using On-Demand instances.”
Amazon recommends Reserved Instances for:
- Applications with steady state usage
- Applications that may require reserved capacity
- Customers that can commit to using EC2 over a 1- or 3-year term to reduce their total computing costs
As a concrete example, consider a compute-optimized c4.8xlarge VM instance in the N. Virginia zone running Linux, which costs $1.591 per hour on-demand and offers 36 virtual CPUs and 60GB of memory. If you reserve the instance for a year and pay entirely up-front, your rate goes down to $0.947 per hour, a 40% savings. Do the same for a standard 3-year term, and the rate goes down to $0.621 per Hour, a 61% savings. For a convertible 3-year term, which allows you more flexibility, the rate is $0.739 per Hour, a 54% savings. Pay less up front, and the effective rate goes up a little, but the difference is roughly in line with the time cost of money.
|AWS c4.8xlarge Linux (36 CPU, 60GB)||Cost||Savings|
|Reserved Instance (1 year)||$0.947/hr||40%|
|Reserved Instance (3 years)||$0.621/hr||61%|
|Reserved Instance (3 years, convertible)||$0.739/hr||54%|
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