The next step in Reserved Instance and Commitment Management

With Savings Plans and Reserved Instances you can access discount rates up to 72% in exchange for commitments to use resources for up to 3 years. To make good use of this potential means:

• You need to accurately forecast what you’ll need. You should hope that a high proportion of what you forecasted will be used in the next 1 or 3 years.
• Match your forecast with the appropriate commitment and strategy to ensure reliable savings.
• Continuously managing and evaluating your usage to gauge the effectiveness of your commitments, allowing for necessary adjustments as reality inevitably diverges from initial forecasts.

Forecasting

To accurately forecast, you need to consider the following:

• Ownership: Who will do it? What input will they need from others? Who will be accountable for the outcome?
• Data and tools: How much can historical trends guide future predictions? How will you combine trend analysis with your organization’s future plans?

This is notoriously difficult and the result is often a conservative approach that misses out on savings or restrictive micro-management.

Matching Forecast With Commitments

Generally, the more specific the definition of a service or resource, the longer its term (1 / 3  years), the less flexibility you have to change it, and the more money you pay in advance, the greater the discount will be.

To make the best savings you’ll need to be able to match your forecast with the best type of Reserved Instance or Savings Plan for each of your cloud workloads, the services they use (by region) and your level of confidence in your forecast. (Our blog on understanding AWS commitments is useful if you want to explore this further).

It can be tempting to take shortcuts because this task takes time and competes with other priorities. But if you do, you might miss out on savings or get locked into a usage profile that doesn’t suit you.

Ongoing Management

There are two main parts to this:

What should you monitor? When should you act?

• What benchmarks will you use to track how well your commitments are working for you? Some benchmarks to consider are coverage, utilization, average discount rate, and overall dollars saved. How will you decide what changes are significant enough to make a change to the commitments you have?

Actioning insights

• There’s no point in monitoring anything if you can’t act on the insights it brings. It’s important to have the flexibility to act and be able to react quickly.
• If you’ve covered all your usage with a Savings Plan and later your usage decreases, there’s nothing you can do but wait. You can’t sell it or change it, so you just have to hope your usage increases again or accept that you’ll be wasting money until the end of its term. 
• To avoid this, you’ll need a more sophisticated approach (commitment management strategies) that uses all the different commitment types, bought in smaller, but more frequent increments.

Many organizations don’t have the resources or tools to do this. This not only leads to missed savings but also starts costing money that wouldn’t have been spent otherwise.

Final Thoughts

You cannot answer any of the questions above quickly or easily on your own. 

We understand that organizations are under pressure to reduce spending, allocate more budget for investment, and free up teams for innovation. Our “Automate” approach saves money without any long-term commitment or extra management work. Our Savings Review is fast, simple, and secure, and it provides clear benchmarks to help you evaluate your current approach.