AWS Reserved Instances and Savings Plans: Challenges and Solutions
When Amazon Web Services got started way back in 2006, EC2
On-Demand pricing was an immediate success with developers. They loved the ease
of spinning up a wide variety of AWS EC2 instance types whenever they needed
them, all for a reasonable price, and then terminate them when done. This was a
great improvement on waiting and waiting for IT to order new machines,
configure them, or more critically, not even being able to do tests on machines
that were far too expensive for short-term projects.
In this article, we will discuss how the new-found cloud
freedoms quickly spawned a whole host of challenges, what AWS did to address
these issues, and how the current overabundance of options has, in turn,
created a unique set of challenges and potential solutions.
To dive deeper into these challenges and how to solve them,
join Spotinst VP of Cloud Services, Patrick Gartlan, and Cloud Academy’s AWS
Content & Security Lead, Stuart Scott on February 26 for AWS Cost Savings:
Ending Decision Paralysis When Trying to Optimize Spend with Reserved Instances
and Savings Plans.
AWS Cost Savings: Ending Decision Paralysis When Trying to
Optimize Spend with Reserved Instances and Savings Plans
Reserved Instances to the rescue for runaway EC2 costs
While EC2 On-Demand adoption was massive, the cost of
running instances On-Demand for long periods — whether intentionally or by
accident — was also quite massive, and most organizations were surprised by how
quickly their cloud bill became a very significant part of their IT spend.
To address the intentional part of the rising costs,
specifically steady-state, long-term usage, AWS introduced Reserved Instances
(RIs) in 2009, where one could make an upfront payment for a 1- or 3-year
commitment, and in exchange, receive ~70% discount for On-Demand pricing.
Reserved Instances Characteristics
Challenge: Reserved Instance lock-in blocks adoption
As RIs initially were quite rigid in their pricing
structure, customers with dynamic environments were very hesitant to use them, with
the legitimate concern that they would get locked-in to a pricing structure
that offered no flexibility for change.
Some customers who bought RIs and then had unexpected
changes in their workload requirements would get stuck with a sunken
investment, and even negative return on investment (ROI). As a result, many AWS
customers who could have benefited from RIs stayed away.
AWS continuously increases reserved flexibility
To remedy this issue with RIs, over the years AWS introduced
various services and new pricing structures that allowed for more flexibility
for more potential customers:
In 2012 AWS Marketplace was opened as a secondary market
where one could buy and sell RIs from other AWS customers. This potentially
mitigates the risk of getting stuck with an unused RI.
In 2014 AWS allowed RI users to manually modify unused RI
and re-apply them within the same instance family, based on their normalization
factors (this was done either by combining two RIs into a larger one, or
breaking an RI down into two or more smaller instances).
In 2016 AWS introduced:
Convertible RIs which allow users to manually modify RIs
across different family types, OS, and sizes.
Regional RIs automatically apply unused RIs to any other
running EC2 instances within that same family (for Linux) or to exact same
instance size (for all other OSs), with the added flexibility of being
transferable to any availability zone within that region.
In 2017 Instance Size Flexibility was introduced to allow
for automatic application of an unused RI to other EC2 instances within the
same family that match up, based on the normalization factor.
In 2019 AWS introduced Savings Plans (“EC2 Savings Plans”
and “Compute Savings Plans”) where customers can commit to spend a desired
amount per hour, e.g. $35/hour, for either 1 or 3 years. In this example,
anything spent up to $35 will be charged in accordance with Savings Plans rates
(between 66-72% savings). Any spend above the committed amount will be charged
at On-Demand rates.
Reserved Instances vs. Savings Plans
With the introduction of AWS Savings Plans, the obvious
question is whether RIs will remain relevant. For the time being there are
sufficient differences between the two pricing options, creating pros and cons
for AWS customers depending on their specific use case.
So now in early 2020, when planning your cloud finances,
here are some points to keep in mind:
Savings Plans can only be applied to EC2 and Fargate, while
Reserved Instances have broader applications for EC2, RDS, Redshift, and
ElastiCache.
Convertible Reserved Instances allow for the increase of
commitment (e.g., add additional reservations to cover more EC2 Instances)
during the contracted term, without the need to increase the term. This is
especially helpful when needs change and committing to a new 1- to 3-year term
doesn’t make sense. With Savings Plans,
any addition to the original contract is done with a new contract that starts
from day 0.
EC2 Instance Savings Plans will apply usage across any given
instance family, regardless of OS or tenancy. Standard Reserved Instances can
also apply to usage across any given instance type family, but require the
instances to be Linux and default tenancy.
Standard Reserved Instances can be bought and sold on the
AWS Marketplace allowing for greater flexibility, while Savings Plans cannot,
requiring you to keep your committed spend at the level you defined.
Convertible Reserved Instances are scoped to a specific
instance type, OS tenancy, and region while Compute Savings Plans will apply
across all of your usage types in multiple regions.
Solution: The paradox of choice
One might think that all these different AWS pricing options
would guarantee fully optimized cloud spend. But all too often, having so many
choices can lead to “decision paralysis,” especially when handling large,
complex deployments that require rigorous capacity planning, and cost-benefit analysis
by DevOps and Finance teams.
In our experience enterprises invest a huge amount of human
resources for a few weeks every quarter or two, just for RIs and Savings Plans
planning and procurement.
First, various project or application teams need to give an
estimate of how much compute resources they require for the upcoming period.
This then needs review by the TechOps or DevOps teams to confirm that the
planned project(s) indeed requires the requested compute power. Finally, the
finance team needs to review the specific flavors of RIs or Savings Plans being
suggested and ensure that the recommended reserved capacity will truly deliver
a positive ROI.
Much of this is often done working with cumbersome
spreadsheets, with tedious review historical cloud usage and performing complex
projections of expected compute capacity needs.
Fortunately, Spotinst
Eco has an incredible track-record helping companies completely streamline the
process of identifying when to buy AWS reserved capacity, and what type as
well. Not stopping there, Spotinst Eco fully handles ongoing management of the
reserved capacity, ensuring maximum utilization and ROI with the minimum amount
of financial lock-in possible. Check out a few snapshots of the analysis
dashboard using Spotinst
Eco.[Source]-https://cloudacademy.com/blog/aws-reserved-instances-and-savings-plans-challenges-and-solutions/
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