Do you ever get the impression that procuring public cloud is not quite as straightforward as the salespeople make out? Do you ever wonder what is hidden behind the surface?

In theory, a corporate user of AWS can just whip out a credit card, create an account, and then spin up cloud resources to create their very own cloud infrastructure. Even better, a corporate can allow each of its development teams to do this independently, benefitting from the self-service elastic nature of the cloud.

And in practice, that is all true, up to a certain scale, beyond which you suddenly realise that you are paying a big premium for flexibility that you are not using, so you start looking at cloud cost engineering – trying to find ways to reduce the spend, so that you can continue to get approval to migrate more services onto this wonderfully convenient platform.

You now enter the world of committed usage – Reserved Instances in AWS-speak.  If you can both pre-commit, and pre-pay for 3 year’s of continuous usage, you can access pricing that is 25% of the default On-Demand price – a 75% saving, if you can assume no price drops, zero cost of finance, and 100% utilisation over the entire commitment period.  If that is a bit daunting (it is for most AWS users), then there are 12 month commitments, and commitments that are “convertible” and commitments that are specific to whole Regions, instead of to the Availability Zones within an AWS Region.

These different “Reserved Instances” each have different commitments, where the user gives up aspects of the flexibility of expensive on-demand usage, in return for a lower effective price.

Finally, for each type of commitment, there is a choice of 3 financing options, where you can either pay all upfront, partially upfront or nothing upfront.  But again, there is a premium to pay for the financing, so the nothing upfront is more expensive than the partial upfront, which in turn is more expensive than the all upfront.

In case you were hoping that there are rules of thumb for all these different flexibility premiums between the different types of Reserved Instances, then you’ll be disappointed as there is so much variability between prices across regions, instance families and Operating Systems.

Any generalisation is very dangerous to assume.

Procuring Public Cloud

Welcome to the part of the cloud procurement iceberg that does not show above the water.

This is the realm of cost engineering, procurement, financing and risk management.

If you operate in this realm, you should be talking to Strategic Blue.