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Cutting through the noise around AWS Reserved Instances

By Toban Zolman on July 8, 2014
PLEASE NOTE: As of December 2nd 2014, there has been a major change to the Reserved Instance model. As a result, some of the information in this blog post may be incomplete. We invite you to read our Reserved Instances 101 for up-to-date information.

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Reserved Instances are an incredibly valuable tool to any business looking to maximize their cost efficiency on AWS. As such, we want our customers to navigate the world of RIs comfortably and confidently— that’s why we built our Reserved Instance Planner, which facilitates perfect Reservation planning for all of our customers by offering instantly calculated RI recommendations. But it’s also important to us that our customers understand why our Planner makes the recommendations that it does, and how the Reservations which it recommends will work within your infrastructure.

Unfortunately, there’s a lot of misinformation out there regarding how Reserved Instances work— and the technical documentation can be overwhelming. That’s why we’ve put together our list of five facts about Reserved Instances that everyone should know— so that you can be informed and confident about your RI purchasing decisions.

1) The billing discount provided by a reservation works across linked accounts

If no instances within a purchasing account qualify for a reservation during a given hour, the cost savings
will be applied to a qualifying instance within a linked account. Reservations purchased by a master account will be applied with equal preference throughout the linked child accounts.

2) The capacity reservation provided by a reservation does not work across linked accounts

There is more to a reservation than a billing discount; an RI also serves to reserve capacity within the AZ for which it is purchased. However, unlike the billing discount, the reserved capacity cannot be shared by sibling accounts. Capacity reservations are exclusive to the owning account.

3) The AZ label is the only factor in determining whether a reservation location matches an instance location

Sometimes, an instance in us-east-1a for account 123 is in a different physical location than an instance in us-east-1a for account 456. us-east-1a for one account may map physically to us-east-1b in another account. However, the only factor in determining whether a reservation location matches an instance location is the availability zone label: in this case, “us-east-1a.” Any instance within a set of linked accounts that matches the reservation’s criteria of instance type, operating system, and shares the same AZ label will qualify for that reservation’s reduced billing regardless of physical location.

4) Reserved Instance modifications allow for more than just AZ changes

Although Reserved Instance modifications are most commonly used to move reservations between Availability Zones in the same Region, that is not your only option. When modifying a reservation on any Linux OS instance, you can also modify its size and change between VPC and Classic in addition to moving between Regional AZs. You may change any or all of these elements of your reservation so long as the AZ is in the same Region, and the size is within the same instance family. For example, an m1 large in us-east-1a can be modified into two m1 mediums in us-east-1b. Similarly, you can modify two m1 mediums on VPC into a single Classic m1 large. Since m1 larges cost exactly twice as much as m1 mediums, neither of these modifications would result in any change to your bill.

5) You can not calculate RI needs based on aggregate data

Calculating your reservation needs correctly is central to seeing a positive ROI, and basing your calculations on aggregate data is a potentially costly misstep. This is because calculating your needs based on aggregate data discounts the fact that your instances aren’t all running on the same schedule.

If three instances are each running at 30% utilization, then purchasing based on aggregate utilization rates would result in the purchase of three Light Reservations. However, if these three instances are all running at different hours of the day, then a single Heavy Reservation can be applied to each instance during its hours of utilization—this would result in a 90% utilization for the reservation, and a considerable cost savings on your part. The only way of knowing whether such a reservation would be appropriate is to look at utilization rate based on an hourly basis.

More information

Reserved Instances should be a tool for cost savings, not a source of confusion or frustration. We hope that this blog post has clarified some of the nuances of using RIs, but we’re also happy to provide more information. Watch the recording of our popular webinar, The Science of Choosing Reserved Instances, for a deeper look into the science of RIs, and check out this blog post for some commonly asked questions.

Still want to clear a couple things up? No sweat. We’re always eager to answer any questions that our customers have about Reserved Instances or otherwise— send us an email and let’s chat.

Being in the know feels great