Both AWS and Azure offer reserved instances, enabling you to receive significant discounts in exchange for making commitments to use particular instance profiles over one or three years. We’ll share the ins and outs of how AWS and Azure reserved instances work and help you lay out the best strategies for buying them.

1. MASTERING AWS AND AZURE
RESERVED INSTANCES FOR SAVINGS

2. • Kim Weins
• VP Cloud Cost Strategy, RightScale
Presenter

3. • RI overview
• How to buy/manage RIs
• Special considerations for AWS
• Special considerations for Azure
• Comparing AWS and Azure
• Takeaways
Agenda
2

4. Two Ways to Manage Cloud
3

5. • AWS
• Reserved Instances (RIs)
• Enterprise Discount Program (EDP)
• Azure
• NEW: Reserved Instances (RIs)
• Enterprise Agreement (EA)
• Google
• Sustained Use Discounts (SUD)
• Committed Use Discounts (CUD)
• “Negotiated” Discount
Discounts by Cloud Provider

6. In exchange for the
discount you must:
• Commit for 1 year or 3 years
• Agree to specific parameters
that limit where the discount
can be applied
• Pay up front and/or agree to
pay for the RI monthly even if
you don’t use it
It’s like buying a gym membership -
you pay even if you don’t go.
What is a Reserved Instance (RI)
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A discount “coupon” that will
be applied to a running cloud
instance that meets the
parameters of the RI you
purchased

7. RIs Are Not Always the Best Way to Save
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Savings for RI based on
m5.large running Linux
in US East.
RI avings will vary based
on instance type and
region

8. AWS RIs Azure RIs
Buying Parameters
Region or AZ
Instance family or size
Operating system
Network type (VPC, Classic)
Region
Instance family
Instance size
Scope (Subscription, Shared)
Exchangeable
Convertible RIs: Yes
Standard RIs: No
Yes
Changeable
Standard RIs: AZ (if Regional), Network,
Instance size (if Regional and Linux)
Yes, by exchanging or
you can just change Scope
Returnable
Can sell on Marketplace
(often impossible to find buyers)
Yes - return fee is 12% of
remaining value
Payment Options
No Upfront
Partial Upfront
All Upfront
All Upfront
AWS vs Azure RIs: Key Differences

9. • We know I can save, BUT:
• I don’t have time to analyze it
• I know I have underutilized instances, so I don’t want to buy RIs on
them
• I’m implementing Docker and that will change what I need
• We have Dev instances that are changing all the time
• I need to re-architect that system
• I may need to change my instance sizes
• There may be new instance types coming
• ….and more
The “Buts” of “Committment” Discounts

10. Seven Principles of Managing Discounts
Think “coverage”
% of instances that are covered by discounts
Understand usage
How will usage change in future?
Select right coverage level
More variability = lower % coverage
Track utilization
Track utilization at least monthly
Make adjustments
Modify , reassign, or sell
Select right type of discounts
Balance length vs. savings vs. flexibility
Regular purchases
Evaluate at least quarterly

11. Example Usage/Cost Pattern
Production and 24x7 dev usage
Weekday dev usage
* Data from real (anonymous) customer use cases

12. Example Coverage
x% coverage of steady-state
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13. Example: Target Coverage by Usage Model
Target Coverage: 75-85%
Production
Instances
Target Coverage: 40-50%
Dev
Instances

14. Example: Reserved Instance Utilization

15. AWS RIs Azure RIs
AWS provides both unblended and blended cost
in the bill and you choose which one to use.
Unblended cost:
AWS first applies the RI to the account where it
was purchased. Then if unused, the RI is applied
to other accounts under the same payer account
Blended cost:
Discount is proportionally shared across all
instances of the appropriate type.
For Azure you choose a Scope of
Subscription or Shared for each RI.
You can change the scope.
Subscription scope:
The RI will only be applied in the
specified subscription.
If unused in that subscription,
you have wasted the RI.
Shared scope:
Can be applied to any instance in any
subscription. It may be applied to different
accounts over time.
How RIs are Applied to Instances/VMs

16. AWS RIS

17. Sharing RIs Across Accounts in AWS
AWS Payer
Account
Linked
Account
Linked
Account
Linked
Account
Independent AWS
Account
RI
Unblended costs
1. RI will be applied in account where purchased first
2. If no matching instances, it will be allocated to other
accounts in the family
Blended costs
• The savings from the RI gets shared proportionally
based on usage of instances that match the RI.
RIs will be shared = more flexibility = higher coverage RIs NOT shared
Set up
consolidated
billing

18. AWS Reserved
Instances:
Standard, AZ
AWS Reserved
Instances:
Standard, Regional
AWS Reserved Instances:
Convertible
(lower discount)
Buying
Parameters
Region + AZ
Instance family
Instance size
OS
Network Type
Region
Instance family
Instance size
OS
Network Type
Region
Instance family
Instance size
OS
Network Type
Automatic
changes
None
Applies to any AZ
Instance size flexibility: applies
to any size in the same family
(vanilla Linux only)
Same as Standard
Manual changes
(on request)
AZ
Instance size
Network Type
Network Type
Exchange for equal value
of RIs
Three Types of AWS Reserved Instances

19. How Instance Size Flexibility Works
xlarge
large
large
medium medium
medium medium
large
medium medium
Original
footprint Option 1 Option 2 Option 3
Within the same instance family (eg m3)
…

20. Instance size Normalization Factor
nano .25
micro .5
small 1
medium 2
large 4
xlarge 8
2xlarge 16
4xlarge 32
8xlarge 64
10xlarge 80
32xlarge 256
Instance Size Flexibility: Normalization Factor
Regional RIs for vanilla Linux have
Instance Size Flexibility and can be
applied to any size instance in the same
family based on the following
normalization factor.
Example: You buy a RI for m4.xlarge. If no
m4.xlarge is running in the region, the RI
can be applied to 2 m4.large instances.

21. Example: RI Coverage for
Low Instance Utilization
100 medium instances
100 large instances
RI Coverage 40%
Today
50% of instances
have low utilization
Later
We’ve downsized
instances
RI gets applied to 2x medium instances, coverage now 80%

22. • Cannot be modified or sold on marketplace
• Can exchange for other Convertible RIs with different
configurations
• End date for the RI does not change
• Exchange is based on the prorated list value of the RI
• Must exchange for the same or higher payment option
• Ex: Partial Upfront can be exchanged for Partial Upfront or All Upfront.
• Must exchange for equal or higher value
• True up for the difference
Understanding Convertible RIs
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23. Convertible RIs: Convert to Other Families
RI value
$100
RI value
$50
RI value
$50
RI value
$30
RI value
$30
RI value
$30
RI value
$30
RI value
$50
RI value
$30
RI value
$30
Prorated
value of RI
Equal
trade
Pay $20
true up
Convert RIs to other families based on value
Pay $10
true up

24. AZURE RIS

25. Azure RI and EA Discounts are Not Additive
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Your realized savings
from an RI is the
difference between
EA and RI price, not
the published RI
discount off of list.
Your EA price could
be lower than RI
price -- if so, DON’T
BUY the RI.

26. RIs and Azure Hybrid Use Benefit (AHUB)
2
Infrastructure
portion of
cost
No OS
portion of
cost
Vanilla Linux
Infrastructure
portion of
cost
Windows
portion of
cost
Windows
Infrastructure
portion of
cost
Premium OS
portion of
cost
Premium OS
RI discount
applies here
AHUB
discount
applies here

27. • There’s no such thing as a free ride
• You paid for that Windows license
• For Standard Edition you can use Windows license on-prem OR in
Azure
• For Datacenter Edition you can use Windows license on-prem AND in
Azure
• Each 2-processor license or each set of 16-core licenses are entitled
to two instances of up to 8 cores, or one instance of up to 16 cores.
(use fully so you don’t waste the benefit)
• You have to run a Windows Server image from marketplace
or use Site Recovery to migrate to AHUB-enabled image
• Once that’s setup, you can flip switch on a VM to apply AHUB or not
About Azure Hybrid Use Benefit
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28. • Like Convertible RIs
• Not an “automatic” exchange or adjustment
• Make a request from console, it opens a support ticket
• Can exchange for other RIs
• Exchange is based on the prorated value of the RI
Exchanging Azure RIs
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29. The Challenges of RI Allocation on Azure
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You want to buy RIs centrally and share
across your Business Units
Use: Shared scope
Cons:
● You can’t control which
subscriptions get the RIs
● It may change who gets the RIs
from day today
● It’s hard to “sell” the idea to BUs
because they don’t know how much
benefit they will get.
● You can only figure out how to
allocate out the Upfront costs after
each month is over once you see
how RIs were allocated
You want BUs to buy and get the
benefit of their own RIs
Use: Subscription scope
Cons:
● If a BU has multiple subscriptions,
you need to buy RIs for each
subscription separately.
● If that subscription can’t use the RI,
you can move it or exchange it.
● You have to track RI utilization for
each subscription and make
changes as needed.

30. SUMMARY

31. VM Type
US
Linux
AWS
1Y Convertible RI
Annual
Azure
1Y RI
Annual
AWS
1Y Convertible RI
Annual
/GB RAM
Azure
1Y RI
Annual
/GB RAM
Standard
2 vCPU
w Local SSD
$597 $508 $75 $64
Standard
2 vCPU
no Local disk
$578 $508 $72 $64
Highmem
2 vCPU
w Local SSD
$885 $683 $59 $43
Highmem
2 vCPU
no Local disk
$788 $683 $52 $43
Highcpu
2 vCPU
w Local SSD
$519 $543 $130 $136
Highcpu
2 vCPU
no Local disk
$499 $543 $125 $136
AWS vs. Azure with 1 Year “All Upfront” RIs
Source: RightScaleAs of Nov 17, 2017

32. AWS
Pros
• Choice of payment options
• Convertible and Standard RIs
• Better allocation options
• Instance size flexibility (vanilla
Linux)
• Convertible RIs are changeable
Cons
• Can be more expensive
• Not returnable
Pros and Cons
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Azure
Pros
• Lower price in more use cases
• Fully changeable
• Returnable
Cons
• Must pay All Upfront
• Allocation options not good

33. • RI recommendations from your cloud sales rep will be self-
serving
• They want you locked into their cloud
• Consider other savings opportunities
• Consider future changes in cloud use
• Think coverage %
• 100% coverage is almost never right
• Carefully plan your RI purchases
• Track utilization and adjust RIs as you go
• Plan for how you will allocate costs
Final Takeaways
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34. Contact sales@rightscale.com for more info
Q&A
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