The first part of this series presented 15 tips for optimizing your AWS costs. In this section, we will talk about ways you can optimize your AWS costs by using Reserved EC2 Instances service.

Newvem Cloud Usage Analytics  RI Recommendation - Hourly Utilization (last 30 days)

Introduction

In case you aren’t familiar with the AWS Reserved Instance concept, AWS public cloud provides an option to optimize your cost by paying a one-time upfront fee and save in hourly instance running costs.
For example, if you are using a small Linux on-demand instance you might be paying $0.08/hour, whereas if you purchase a Reserved Instance by paying a one-time fee of $69 you will get same instance at running cost of $0.039/hour.

Reserved Instances can be purchased for 1-year or 3-year terms; each term has a different one-time (upfront) fee and running cost. Reserved Instances comes in three categories, Light, Medium and Heavy.

It’s commonly believed that if you are going to run your EC2 instance continuously for 6-7 months, purchasing a Reserved Instance will be a cheaper option.  In this post, we compare the different types of Reserved Instances and provide some guidelines and tips for determining when you should buy Reserved Instances.

Top 5 things to look for when you are using Reserved Instances

1. There are three categories of Reserved Instances: Light Utilization, Medium Utilization, and Heavy Utilization. You can select the right category based on hours you are going to run your instance in a year. Select the right type based on your monthly or yearly usage.
2. The Heavy Utilization Reserved Instance will cost you, even if you are not using it. Use it only when you are going to use it 24×365.
3. Reserved Instances are eligible for volume discounts, which can save you an additional 10% when you spend more than $250,000 on Reserved Instances or an additional 20% when you spend more than $2,000,000 on Reserved Instances.
4. Reserved instances are zone specific. If you have purchased a Reserved Instance for particular zone, try to launch new instance in same zone unless you have some high availability requirement. This will help save cost in the future because when one of the instances is terminated, the other can still get benefit of Reserved Instances.
5. See the cost comparison guide below.  Then calculate along similar guidelines for your instance size and type.

Based on above example:

• If you plan to run a small instance between 2150–6100 hours in a year, purchase a Light Utilization Reserved Instance.
• If you plan to run a small instance between 6100–7300 hours in a year, purchase a Medium Utilization Reserved Instance.
• If you plan to run a small instance for more than 7300 hours in a year, you should purchase a Heavy Utilization Reserved Instance.

Ref: http://aws.amazon.com/ec2/reserved-instances/

As previously discussed, Reserved Instances can result in to 30-40% of cost savings if used according to your usage pattern. In the next part of this series, we will discuss how consolidated billing can help you save on costs.

Check out Newvem’s AWS cloud best practive insight on the Reserved Instance Utilization

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About the Author

Taral Shah

Cloud architect for more than 2 years with around 12 years of IT Experience. His area of focus is Amazon Cloud and I have written a couple of White papers using AWS. Responsible for designing or migrating HA, scalable application on Cloud. In his past worked as Consultant, Developer, Technical Leader, Project Leader and Account Manager with various global clients.

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Keywords: Amazon web services, Amazon AWS console, Amazon AWS instances, EC2 Service, Amazon cloud computing, EC2 EBS, S3 Storage, AWS elastic IP, AWS cloud cost savings, Reserved instances utilization, Cloud cost efficient, EC2 CPU Utilization, AWS Infrastructure Elasticity, Amazon EC2 capacity, Cloud overspend