AWS Cost Optimization with Reserved Instances

Amazon Web Services (AWS) is one of the most popular cloud service providers. However, it can be expensive to run workloads on AWS if you don’t optimize your usage. One way to reduce your AWS bill is by using AWS Reserved Instances (RIs). In this blog, we will discuss AWS Convertible Reserved Instances, their advantages, limitations, and how to leverage their functionality to achieve AWS cost optimization in different scenarios.

Understanding the variations of RIs

AWS offers three variations of Reserved Instances: 

• Standard RIs
• Convertible RIs
• Scheduled RIs

Standard RIs are the most common type of AWS Reserved Instances, offering the highest discount rates but locking you into a specific instance type, region, and operating system. 

Scheduled RIs allow you to reserve instances for specific time periods.

Convertible RIs offer greater flexibility than Standard RIs, allowing you to modify your reservations as your usage patterns change.

Advantages & Limitations of Convertible RIs over Standard RIs

Convertible RIs offer several advantages over Standard RIs. For example, Convertible RIs allow you to change the instance type, region, or operating system of your reservations. This flexibility is especially useful if you are unsure about your future usage patterns or if you want to try out new instance types. Convertible RIs also offer higher discounts than Standard RIs if you commit to a longer term, up to a maximum of three years.

However, Convertible RIs also have some limitations. They are more expensive than Standard RIs if you commit to a shorter term. Convertible RIs also offer lower discounts than Standard RIs if you commit to a shorter term or if you need to change your reservations frequently.

How to leverage the Convertible functionality of RIs?

To leverage the Convertible functionality of Reserved Instances, you need to understand your usage patterns and future needs. You should consider the following factors when purchasing Convertible RIs:

Usage patterns: How much do you expect to use AWS resources in the future? Will your usage increase or decrease?

Instance types: Which instance types are suitable for your workloads? Are you willing to try out new instance types in the future?

Regions: Which regions do you expect to use? Are you willing to switch regions in the future?

Operating systems: Which operating systems are suitable for your workloads? Are you willing to switch operating systems in the future?

Once you have identified your AWS RI utilization patterns and future needs, you can purchase Convertible RIs with the appropriate term length, instance type, region, and operating system. You can then modify your reservations as your needs change.

Examples of savings achieved in different scenarios

Let’s look at some examples of AWS savings achieved by using Convertible RIs in different scenarios:

Scenario 1: You expect to use AWS resources for the next two years, but you are unsure about your instance type and region needs. You purchase Convertible RIs with a two-year term and a 50% upfront payment. You can change your instance type and region if your needs change. You save 40% compared to On-Demand instances.

Scenario 2: You expect to use AWS resources for the next three years, and you are sure about your instance type and region needs. You purchase Standard RIs with a three-year term and a 50% upfront payment. You save 60% compared to On-Demand instances.

Scenario 3: You expect to use AWS resources for the next two years, but you are unsure about your instance type and region needs. You purchase Convertible RIs with a two-year term and a 50% upfront payment. You change your instance type and region after one year. You save 30% compared to On-Demand instances.

Therefore, utilizing AWS Reserved Instances is an effective strategy to achieve significant AWS cost savings. By understanding usage patterns and future needs, businesses can leverage Convertible RIs to adapt to changing requirements, resulting in smarter AWS cost management.

Did you know that you can now get on-demand EC2 resources at 3-year RI pricing with a buy back-back guarantee of unused RIs without any commitment or additional cost? Check out automated cloud resource management, an AI-based platform for AWS RI management. Book a demo today to accelerator your cloud cost optimization journey and achieve big savings.