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November 12, 2014 | Las Vegas

ENT203

Iterating Your Way to 95% Reserved

Instance UsageToban Zolman, Cloudability

Today’s topics

• Introduce a Reserved Instance purchasing

methodology

• Understand how RIs are applied

• Learn the best metrics to measure RI

effectiveness

• How to adjust reservations and infrastructure to

achieve 95% coverage Toban Zolman

VP, Product Development

Cloudability

toban@cloudability.com

@cloudabilit

y

Cloud cost analytics

Cloudability

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 underutilized

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

RI buying methodology

Why RIs? And why 95% coverage?

• RIs can be the easiest way to control costsAs a Product & Engineering head, I’d much rather use RIs to reduce cost than work

on other efficiencies

• Every dollar spent on on-demand could be 50% cheaper with an RIWith the exception of unplanned or short-lived usage you should be running almost

everything under a reservation

• With scalable architecture its not practical to have full 100% coverageA monthly buying and modification cycle can net you at about 95% coverage over

the course of a year

What drives infrastructure changes?

• Application needsApps change, scale, and become more sophisticated needing more compute,

memory, or storage

• Price changesAs Amazon drives down prices, it changes the cost profile of existing infrastructure

• New optimized instance typesLeverage optimized instances to be more efficient

The goal is to anticipate these items and constantly tweak

reservations to maximize coverage (and thus savings)

Bet the house on reactionary purchases

too little too late

BURNING MONEY

How is your company structuring RI buys?

Reservation management

methodology

Reservations Infrastructure

Buy

MeasureLearn

PurchaseAlign

ROI

Minimize time

through loop

Buy

Topics

• Understanding reservations

• Purchasing strategies

Understanding reservations

Cost savings Capacity reservation

Reservations have two parts

Reservations are applied each hour

What makes up a reservation?

InstanceRI term RI type

Instance family Size OS Location (AZ)

m1 large Linux us-east-1a 1 year Light

r3 8xlarge RHEL us-west-2b 3 years Medium

m3 medium Windows ap-northeast-1b 1 year Heavy

Source: http://docs.aws.amazon.com/AWSEC2/latest/UserGuide/reserved-instances-fundamentals.html

Each combination has a different price

There are 2,000+ different reservation configurations

• Each with their own up-front fee

• Each with their own hourly usage price

• Each with their own “break-even” points

Source: http://aws.amazon.com/ec2/pricing/

Purchasing strategies

Buy early and often

Fear, uncertainty, doubt stalls decisions

• Should I wait until prices drop?

• What if our usage changes?

• What if I don’t want to be in a contract for three years?

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

Actual AWS price history (effective rate)

$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

Total price 3 years of use

• Prices drop, but not fast enough to erode saving

• If usage is greater than 50% 3 year RIs saved money

Source: http://blog.cloudability.com/cloud-cost-war-shouldnt-stop-buying-reserved-instances/

Analyze worst case scenarioWhat 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 $0.064 $0.056 12.5%

February 2013 price change (m1.large medium RI 80% usage):

Total cost

1 Year RI before

change$1,201

On demand after

change$1,458

New on-demand price still

higher than old RI price

Total cost before and after

Source: http://blog.cloudability.com/cloud-cost-war-shouldnt-stop-buying-reserved-instances/

Cost of waiting for a change

Extra cost for 4 months of OD Savings from locking in new price Amount over paid

$387 $154 $233

Source: http://blog.cloudability.com/cloud-cost-war-shouldnt-stop-buying-reserved-instances/

It doesn’t pay to waitCONCLUSION

Scenario 2: Purchase frequency

0

13

25

38

50

1 3 5 7 9 11 13 15 17 19 21 23

On-demand Annual Quarterly Monthly

Total cost $309,053 $205,209 $134,900 $95,854

Discounted hours 0% 48% 90% 95%

Savings 0% 34% 63% 69%

$40k savings

Scenario 2: Purchase frequency

Source: http://blog.cloudability.com/why-you-need-to-buy-aws-reservations-more-than-once-year/

Purchase RIs as frequently as possibleCONCLUSION

Buy

MeasureLearn

Minimize time

through loop

How to structure monthly purchases

1. Cover as many hours as you can as quickly as you can

The faster you can get coverage the more you will save over time

2. Focus your budget on high confidence purchases

Buy reservations for instances that are (almost) always running

3. Focus on the highest savings first

Buy reservations for instances that have a rapid ROI

Identify instances with high

savings and heavy utilization

How to structure monthly purchases

1. Cover as many hours as you can as quickly as you can

The faster you can get coverage the more you will save over time

2. Focus your budget on high confidence purchases

Buy reservations for instances that are (almost) always running

3. Focus on the highest savings first

Buy reservations for instances that have a rapid ROI

4. Spread purchases horizontally across infrastructure

Purchase tactically across all instance families to avoid cliffs and

lock-in

Measure

Instance coverage

Focus measurement on two factors:

Instance coverage & reducing hourly cost

Learn

Migrate, modify, or mature

Migrate

Migration is about building an

RI friendly architecture:

Increase flexibility & maximize cost savings

1. Consolidate instance families

Why instance families matter

• RI modifications can only happen within a family

Reservations can be changed at any time from one size to another

within a family

• RIs can apply across consolidated billing accounts

Reservations can apply across linked accounts if the original account

is not using it. Fewer families means more spots an RI can be

applied.

2. Migrate to modern instances

Cost savings

m1.medium m3.medium

On demand $0.087 $0.07

Heavy RI upfront $247 $222

Heavy RI hourly $0.02 $0.018

Annual cost (100% util) $762 $613

Save $150 yr20% savings

Source: http://aws.amazon.com/ec2/pricing/

Instance type migration pathsLegacy instance type Modern instance type

T1T2

M1

M1 M3

C1 C3

H1 I2

M2R3

CR1

Source: http://aws.amazon.com/ec2/previous-generation/

Migration strategy

• Proactively plan instance type migrations

Finance and Ops have to talk on this one to understand when

upgrades should happen and what impact it has on reservations

• Tactically renew reservations on legacy instances

If you’re going to run a legacy instance for a while, you might as well

cover it with an RI but only renew what you have to

High frequency reservation purchases make this transition easier

M1 reservations can still be a good deal

Buy RIs on legacy instance types if you are still going to be using

them in 6 months (or shop in the marketplace for shorter term RIs)

savings

Modify

Modifying Reserved Instances

• Instances with Linux OSInstance type (within family)

Availability Zone (within region)

Network (VPC or Classic)

• Instances with a licensed OS or without a familyAvailability Zone (within region)

Network (VPC or Classic)

• Reservations cannot be moved between accounts

We are family

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

* LEGACY FAMILY

Instance types without a family

• t1.micro*

• cr1.8xlarge*

• cc2.8xlarge*

• cg1.4xlarge*

• cr1.8xlarge*

• hi1.4xlarge*

• hs1.8xlarge

• g2.2xlarge

* LEGACY FAMILY

Modifying instance type

Instance size Normalization factor

micro 0.5

small 1

medium 2

large 4

xlarge 8

2xlarge 16

4xlarge 32

8xlarge 64

2xlarge

Modifying instance type

=16PTS

2xlarge

xlarge xlarge

Modifying instance type

168 8+ =

2xlarge

xlarge xlarge

large large large large

Modifying instance type

medium medium medium medium medium medium medium medium

2xlarge

xlarge xlarge

large large large large

Modifying instance type

small small small small small small small small small small small small small small small small

medium medium medium medium medium medium medium medium

2xlarge

xlarge xlarge

large large large large

Modifying instance type

small small small small small small small small small small small small small small small small

medium medium medium medium medium medium medium medium

2xlarge

xlarge xlarge

large large large large

Modifying instance type

Reservations represent sunk costModifications let you move those reservations to

maximize savings as your infrastructure changes

Amazon EC2 Reserved Instance Marketplace

If you simply can’t use existing reservations then selling them

on the marketplace is a viable option

Mature

Coverage is king

Conclusion

Buy

MeasureLearn

PurchaseAlign

ROI

Take aways

• Buy RIs early and often

• Focus budget on “high confidence” purchases

• Measure RI coverage and cost-per-hour metrics

• Migrate, modify, and mature reservations to achieve 95%

coverage

http://bit.ly/awsevals