The cornerstone of cloud resource consumption is the on-demand model, where resources incur cost only when used, and priced by the hour in the case of virtual instances e.g. EC2 services. No upfront commitments required–pay only for what you use, when you use it.
AWS offers an alternative, unique pricing model for its EC2 (and other) services – the Reserved Instance (RI). This pricing model guarantees users the capacity which they reserved, whenever they need it (during the RI duration), and offers significant price discounts over on-demand pricing. In return, users make an upfront commitment for the usage of a virtual instance, bound to a specific family, size, availability zone (AZ) and operating system (OS), over the commitment period (1 or 3 years). This allows AWS to efficiently plan future capacity as well as customer commitment to its services. AWS also offers three payment options for RIs, which are all-upfront - bulk sum at day 0, offering the highest discount; no upfront - in which the cost of RI is paid in monthly installments over the duration of the RI, offering the lowest discount; and partial upfront, in which ¼ - ½ of the price is paid up front, and the rest in monthly installments, with a discount rate which is lower, but close, to the all-upfront rate.
For the customer, using Reserved Instances holds great promise in reducing the cloud bill and streamlining IT operations. At the same time, it introduces new challenges which can make the task of managing your cloud deployment complicated and tedious. In this white paper, we will address the top 3 challenges in Reserved Instance Management and offer a solution for overcoming these challenges.