Companies of all sizes can take advantage of AWS Reserved Instances (RIs) to save money on the price of standard Amazon EC2 On-Demand instances. To receive the discounted rate associated with AWS Reserved Instances, you must commit to a year or three years of usage.
In exchange, you can save up to 75% off the On-Demand price. Your discount amount will depend on several factors; instance type, shared or single tenancy, usage term, the region where you purchase the RIs, the amount of upfront payment you make, whether you choose Convertible or Standard RIs, and your operating system.
You can still purchase extra computing power to meet increased demands, for example, when your website traffic increases. You can also utilize Reserved Instances together with AWS Savings Plans, but not in the same instance configuration. This means you can save more, especially when you know when, where, and how to optimize your instances.
In reality, few organizations realize the full 75% in savings on Reserved Instances. So, we’re sharing how to optimize your RIs in this guide. We will also share ways to automate it, so you can reduce RI purchase mistakes, lock-in risk, and free up your time.
Table Of Contents
What Is Reserved Instance Optimization?
Reserved Instance Optimization refers to continuously maximizing the value you get from utilizing Convertible Reserved Instances and Standard Reserved Instances. The goal is to optimize your RI usage and related charges as your AWS environment and computing needs change throughout your subscription period.
Now picture this. There are over 2,000 Reserved Instances available, with each offering different savings, break-even points, and suitability to your needs. Additionally, Standard RIs and Convertible RIs offer different benefits.
For example, Convertible RIs provide a high degree of flexibility because you can exchange or modify them at any time during your term commitment. But Standard RIs provide additional discounts, even if you can only modify them, not exchange them for other instance types during the contract.
Nevertheless, Reserved Instances are a better choice if you need constant compute power, such as for an application that will run for a year or more.
Hence, you need to know what trade-offs to make in order to maximize cost savings without sacrificing customer expectations or your system’s performance.
Credit: PropsperOps
Consider this. The AWS system will often try to match your launched instances to your current Reserved Instance discount, according to specific criteria.
Where there is a match, it applies the cost-benefit. Some teams believe they are launching instances that meet all the criteria, but they are not, resulting in underutilized contracts. It then takes until the end of the month for you to find out what matches the system made.
Clearly, optimizing your RIs can feel like a lot of work. Fortunately, it doesn’t have to be a nightmare when you can automate it.
One robust Reserved Instance Optimization tool you can use is ProsperOps. ProsperOps uses AI-powered Reserved Instance Optimization algorithms, techniques, and AWS discount instruments to automate lifecycle management for Amazon EC2 commitments.
As ProsperOps continuously scans your reservations and usage, it programmatically maintains an optimal Reserved Instances and Savings Plans portfolio. This is what that looks like in one image:
How ProsperOps programmatic management adjusts EC2 commitments in production informed by your environment’s capacity demands.
ProsperOps leverages Convertible RIs to operate differently. As opposed to planning RIs around individual instances, ProsperOps plans RI commitments based on EC2 aggregate spending. Instead of deferring RI savings so that an app can be rightsized, it immediately uses Convertible RIs for savings and exchanges them as needed in the future.
Combining Convertible RI flexibility with algorithmic management can make AWS cost optimization more efficient. Instead of manually managing RIs periodically, you can automate the entire Convertible RI lifecycle in real-time against user-controlled constraints.
ProsperOps enables you to:
- Enjoy guaranteed savings on RIs and Savings Plans from Day 1.
- Reduce the risk of commitment lock-in
- Achieve continuous RIs optimization without human supervision.
- Adapt your Amazon EC2 commitments to meet your environment’s capacity demands in real-time.
- Optimally utilize commitments and reduce Amazon EC2 costs.
- Reduce the need to supervise unused RI commitments constantly.
ProsperOps is now an official CloudZero partner. It is also a founding member of the FinOps Foundation, a FinOps Certified Platform, a 2021 Gartner Cool Vendor in Cloud Computing, and an AWS Advanced Technology Partner.
With ProsperOps and CloudZero, you’ll be able to automate your discounting process, freeing up your engineering team to innovate — instead of monitoring RIs or Savings Plans. You can then see the outcomes on a single pane of glass, as we’ll explain below.
How Can You Better Understand Your Reserved Instances Usage?
With CloudZero, you can see all your discounts in one place, ensuring that you maximize your savings, whether you use your own tools, cloud provider tools, or third-party platforms.
As with all CloudZero dashboards, you can easily derive actionable insight on AWS discounting, like this:
With this granular view, you can answer questions like:
- Are we on track to hit our goals?
- What is our Effective Savings Rate for Reserved Instances and Savings Plans?
- What are all my active reservations? When do they expire?
- What does our On-Demand spend look like by service, instance type, OS, region, tenancy, and more?
- Are we maximizing our reservation discounts on compute instances such as Amazon EC2, AWS Lambda, and AWS Fargate?
You can also view, analyze, and understand your Reserved Instance Optimization efforts without increasing your FinOps workload. That way, you won’t spend hours or days deciding how much or what you should commit to.
Taking advantage of partnerships with platforms like ProsperOps will let you optimize your AWS costs programmatically. If you choose not to work with CloudZero partners, you can still access the dashboard through CloudZero. Still, the savings that the optimization function will bring you will entirely pay for the solution, so it is virtually risk-free.
Want to see how the CloudZero Reserved Instances optimization solution works? Schedule a demo here to get started optimizing your RIs and Savings Plans today.
What Are Some Reserved Instance Best Practices?
You can use the following checklist to optimize Reserved Instance usage and associated costs in AWS.
- Running resource utilization reports can identify EC2 Instances for downsizing, terminating, modernizing, or putting on automated schedules can help you optimize your environment.
- Work with engineers deploying workloads to the cloud on choosing the right instance type, reservation term, Availability Zone, etc., to balance cost optimization and performance.
- You can then present your case for buying the appropriate RIs to the people who approve cloud resource purchases. Present this in context; how RI usage and discounting impact the overall AWS bill.
- Take advantage of the Cost Explorer Reserved Instance Recommendation tool to experiment with discounting options and gauge potential outcomes. You’ll find it in your account console.
- Automate Reserved Instance Optimization with proven tools for optimal utilization. Remember that you lose discounts every time you do not use your RIs.
- Track your AWS discounts in a single dashboard to see whether you’re maximizing your savings and what you can do about it.
Put Your AWS Discounts Into Context And Discover How To Optimize Them Hassle-Free
CloudZero helps you monitor, analyze, and understand Reserved Instances, AWS Savings Plans, and Spot Instances from a single pane of glass. CloudZero’s cloud cost intelligence platform enables you to precisely tell how you utilize your discounts by breaking down the cost data into actionable insights.
With CloudZero, you’ll be able to put your entire AWS costs into context for all stakeholders, including engineers, finance, CTO/CFO, the board, and investors.
You’ll also get Cost Intelligence Analyst to evaluate your spend and offer Reserved Instance Optimization recommendations through Slack. 
and start maximizing your Reserved Instances hassle-free.
The Modern Guide To Managing Cloud Costs
Traditional cost management is broken. Here's how to fix it.
