Reserved Instances: The Best Way to AWS Cost Optimization

Reserved Instances_ The Best Way to AWS Cost Optimization


The world of cloud computing is ever-changing, and organizations of all sizes are increasingly relying on the cloud to power their operations. Amazon Web Services (AWS) is one of the leading cloud providers, with a wide range of services and features that can be used to create powerful applications and services. However, with all the features and benefits that come with AWS, it can also be expensive.

To help organizations save money on their AWS deployments, Amazon offers a feature called Reserved Instances. Reserved Instances are a way to purchase compute capacity at a discounted rate, allowing organizations to reduce their AWS costs while still taking advantage of the many benefits of the AWS platform.

In this article, we’ll take a closer look at Reserved Instances, including what they are, how they work, and the benefits they offer. We’ll also provide some tips on choosing the right Reserved Instances for your organization.

What Are Reserved Instances?

Reserved Instances are a way for customers to purchase compute capacity on AWS at a discounted rate. By committing to a certain amount of compute capacity for a specified period of time, customers can save up to 75% over the normal on-demand rate.

Reserved Instances are available for Amazon EC2, Amazon RDS, Amazon ElastiCache, Amazon Redshift, and Amazon ElastiSearch. They can be purchased for either a one-year or three-year term, and the longer the term, the greater the discount.

The discount offered by Reserved Instances depends on the size of the instance, the region it’s in, and the type of instance. For example, a one-year reserved instance may offer a 10% discount, while a three-year reserved instance may offer a 15% discount.

When purchasing a Reserved Instance, customers can choose between a Standard or Convertible option. The Standard option offers a greater discount while the Convertible option offers flexibility in switching the RI discount to  be applied to different instance types.

How Do Reserved Instances Work?

When purchasing a Reserved Instance, customers are required to make a commitment to a certain amount of compute capacity for a specified period of time. This commitment is known as the “reservation” and is the basis for the discounted rate.

Once the reservation is made, customers are then able to launch instances that match the reservation. This means that customers can launch instances of any size, type, or region that match the reservation, as long as there is capacity available.

For example, if a customer makes a reservation for a m4.large instance in the US East (N. Virginia) region, they can launch any m4.large instance in that region and it will automatically receive a discounted rate.  

The reservation will remain active until the end of the term, regardless of how many instances are launched or how much compute capacity is used. This means that it is possible to overprovision or ‘waste’ an RI, by purchasing it and not running a matching instance. 

What Are the Benefits of Using Reserved Instances for Saving Money?

The first step to saving money with Reserved Instances is to analyze your current cloud usage and determine which resources are being used the most. This will help you decide which Reserved Instances are best suited for your needs. For example, if your usage is concentrated in a specific region, you should consider purchasing a Reserved Instance in that region.

Next, you should assess your cloud usage and determine the length of the Reserved Instance term you want to commit to. Longer terms are generally more cost-effective, since the discounts are larger. However, it’s important to consider how quickly your usage may change over time.

Finally, you should compare the various Reserved Instance purchase options and determine which one offers the best value. There are several options available, including upfront payments, partial upfront payments, and no upfront payments. The best option will depend on your budget and usage patterns.

In summary, Reserved Instances are an effective way to save money on cloud computing costs. To get the most out of Reserved Instances, customers should analyze their current usage, assess their usage patterns, and compare the different purchase options. 

How can nOps help with Reserve Instance Management?

You can employ rightsize RIs, auto-scaling, and spot instances to adapt your computing requirements. Extensive planning and forecasting are needed for this. Plus, anticipating future utilization without any proper metrics stands near impossible. Thus, the nOps ShareSave model can be a game-saver if you want your metrics sorted. Also, even if the chosen pricing model is not helping you save appropriately, with our ShareSave solution, you can consolidate cloud accounts into a single pricing model and offer ongoing visibility to change requests. This helps you easily manage cloud costs and save more money.