Managing Your Cost Savings with Amazon Reserved Instances

By Erin Carlson, AWS Product Marketing Manager

Introduction by Mark Schwartz

One of the advantages of the cloud is that it allows you to right-size your infrastructure continuously—to add infrastructure when you need it and release infrastructure and stop paying for it when you don’t. This gives enterprises new degrees of freedom in managing their IT capabilities and their budgets, and the freedom the cloud brings increases business agility.

Often, over time,  enterprises develop a good sense of how much infrastructure they will need, or at least a minimum they expect to use. They are then able to reduce their infrastructure costs substantially with Reserved Instances (RIs). The enterprise still retains the flexibility to add more instances if necessary, but gains in predictability and cost savings. In this guest post, Erin Carlson, the Product Marketing Manager for the AWS Billing and Cost Management experience, discusses RIs and the tools AWS offers for gaining transparency into RI usage and spending, and how to use that information to manage costs.

– Mark

Monitoring Your AWS Reserved Instance (RI) Savings and Utilization Using AWS Cost Explorer and AWS Budgets

Cloud technology provides opportunities to increase your business’s operational agility and pace of innovation, as well as to lower your total cost of ownership. Organizations who develop and adopt a well-defined cost management strategy tend to be more successful at navigating the nuances of the consumption-based model of using the cloud. One of the key areas where organizations can unlock significant savings is by purchasing Reserved Instances (RIs) and other reservation-based offerings, which are currently offered by Amazon EC2, Amazon RDS, Amazon Redshift, Amazon ElastiCache, and Amazon OpenSearch Service. (For the sake of simplicity, I’ll refer to these offerings as reservations throughout this blog.)

Reservations offer you a discounted hourly rate (sometimes up to 75%)  compared to on-demand usage in exchange for committing to a one- or three-year term of service usage, which can translate into significant savings. AWS provides a number of cost management tools to help your finance, DevOps, and other business users access information about the savings your organization has received by purchasing reservations. AWS also provides specialized tooling that allows your organization to monitor the utilization associated with your RI portfolio. These tools include AWS Cost Explorer, AWS Budgets, and the AWS Cost & Usage Reports, as well as the ability to access RI purchase recommendations via AWS Cost Explorer. You can learn more about these tools on the AWS Cost Management web pages.

This post will focus on how you can use the RI utilization monitoring and alerting capabilities, available via the AWS Cost Explorer and AWS Budgets interfaces, to further optimize your reservation-related savings. Additional aspects of the RI cost management life cycle (e.g., RI coverage, purchase recommendations, etc.) will be covered in separate posts. Please also note that all RI utilization and savings information is also available programmatically via the AWS Cost Explorer and AWS Budgets APIs, allowing your team to quickly and easily build custom RI management and monitoring applications.

Analyzing Your RI Savings and Utilization Using AWS Cost Explorer

AWS Cost Explorer allows you to visualize your AWS costs and usage, and provides detailed information about your reservation-related savings, utilization, coverage, and more. To better understand your savings, it is helpful to dive deep into your reservation utilization. Reservation utilization is defined as the percentage of purchased hours that received the discounted hourly rate over a user defined period of time. Therefore, the more reservation hours you use, the greater your savings, so it is important to keep an eye on your reservation utilization.

To get started monitoring your reservation utilization, you can access the RI Utilization report, which is available via AWS Cost Explorer. This report provides a summary of your reservation-related savings as compared to on-demand prices, while also helping you to visualize your utilization at a high level (e.g., your average utilization across all of your Amazon EC2 RIs). From there, you can drill down further into your utilization data using the available filters. You can also set a custom utilization target to see how you are tracking toward your utilization goals.

For example, in the screenshot below the report has been filtered to track the savings and utilization of all size-flexible reservations in the m4 instance family, and a utilization target of 80% has been set. (You can learn more about size-flexible reservations here.)

Using this report, you can analyze the savings and utilization associated with one or more reservations, allowing you to compare and contrast patterns across your Amazon EC2 reservation portfolio. You can also adjust the report’s sort order to reflect subscriptions with the most unused hours rather than simply using the percent utilization. This will help you and your team identify reservations that have the most unused hours, which often translates into the most potential savings. From there, you can use information about your net savings to better contextualize the subscriptions you’ve highlighted for potential follow-up, as well as to better understand your reservation-related savings as a whole.

(Please note that a subscription represents one or more reservations of the same spec that were purchased at the same time.)

You can download a CSV extract of your table data at any time to access detailed information about your subscriptions, including additional information about your effective RI costs and potential savings for each subscription. (You can learn more about accessing and understanding your reservation-related savings information here.)

Once you have identified which reservations could benefit from greater usage efficiency, you can partner with your team to act (e.g., work with your IT team to modify the RI types being purchased or shift existing workloads so that they match the attributes of active reservations).

Receiving Proactive RI Utilization Alerts via AWS Budgets

Once you and your team have gained greater visibility into your RI savings and utilization, you can use AWS Budgets to monitor your reservation utilization by setting an RI utilization budget. An RI utilization budget allows you to track your utilization both in aggregate (e.g., receive an alert if your average Amazon RDS reservation utilization drops below 80%) or for a particular set of reservation specifications (e.g., Amazon RDS RIs scoped to a particular region). RI utilization budgets can track Amazon EC2, Amazon RDS, Amazon Redshift, or Amazon ElastiCache reservations.

In the two screenshots above, I have created an RI utilization budget that will alert me via email when the average utilization across all Amazon EC2 size-flexible m4.large reservations in my organization drop below 85%.

(Please note that each RI utilization alert can be sent to up to ten email recipients and can be configured to publish updates to an Amazon SNS topic.)

An additional benefit of setting up reservation utilization email alerts (see screenshot above) is that each email alert includes a list of the top three underutilized subscriptions, which can help highlight new areas for your organization to focus on in your cost optimization journey. This can also help create partnerships between the finance and IT sides of the organization as resource provisioning is balanced against netting the most savings possible for your business.

(Please note that AWS Budgets is available to both master and member accounts. While master (payer) accounts are able to set up RI utilization budgets for all reservations within their organization, budgets created by member (linked) accounts track only their own utilization of the subscriptions that they own.)

Optimizing Your RIs Using AWS Cost Management Products

Reservations are a powerful tool in your cost management arsenal, often helping you achieve greater savings. In order to maximize your savings, it is crucial to understand and optimize the utilization of your RI portfolio. Using AWS Cost Explorer’s RI utilization report, you can access savings and utilization information, which can identify under-utilized reservations and empower you to take action to modify your workloads and usage accordingly. Using AWS Budgets, you can alert key members of your organization when your reservation utilization falls below your user-defined thresholds so that you and your team can take action to maximize your reservation-related savings.

To learn more about tools that can help you and your organization better manage your costs, please visit the AWS Cost Management web pages. To learn how you can access RI purchase recommendations based on your AWS usage using AWS Cost Explorer, please visit the Reserved Instance Reporting web page.

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Note: This blog has been updated on September 8, 2021 for the renaming of Amazon Elasticsearch Service to Amazon OpenSearch Service.

Erin Carlson is a Product Marketing Manager for the AWS Billing & Cost Management experience. She works with customers to provide helpful guidance and resources around accessing, analyzing, and optimizing their AWS costs and usage.