RightScale Webinar: Decoding AWS Reserved Instances (RIs) What It Means for Cloud Pricing

•  Hassan Hosseini •  Product Manager, Cloud Analytics

•  Kim Weins •  VP Marketing

Speakers

•  Understanding the New AWS Reserved Instances •  Comparing AWS to Google •  Breakeven Analysis •  Factoring in Future Price Drops

Agenda

What Happened •  Quick recap: What is a Reserved Instance

•  A commitment from you to AWS to use a resource for a given period of time •  For that commitment, you get a discounted price (between 20% - 75%) •  You also get a capacity reservation •  It is not a VM. It is not a dedicated machine.

•  What changed: •  Light, Medium and Heavy RIs were discontinued (you could see it coming) •  All Upfront, Partial Upfront and No Upfront RIs were introduced – discounts based on timing of payment •  All the new RIs are billed 24 hours a day – regardless of whether they are used

•  What hasn’t changed: •  You still have to commit to an instance type, platform (OS), and Availability Zone •  You can request modifications to move AZs or change instance sizes within a family •  Terms are 1 and 3 years •  Your current RIs

RI Savings Vary

5

RI price points and discounts are different for every region, instance type on OS!!!

No Upfront Partial Upfront All Upfront

Terms Available

1 year 1 year or 3 year 1 year or 3 year

Savings for 1-Year RIs

(Linux)

20-50% 25-58% 27-58%

Savings for 3-Year RIs

(Linux)

N/A 41-74% 45-75%

Hours Billed

24 hrs a day 24 hrs a day 24 hrs a day

Effective Hourly Rate for RIs

On!Demand!

All!Upfront!

$$$!$!

Partial!Upfront!

!

Medium! No!Upfront!

Effective hourly rates of 1-year RIs Linux in US-East

Assumes 100% utilization

________!Heavy!

m3.medium! $.0700!$.0500!

Light!

$.0433!$.0425! $.0477! $.0766!

39% savings

38% savings

29% savings

RI price points and discounts are different for every region, instance type on OS!!!

•  You are now committing to the minimum number of instances used. •  You are charged hourly rate 24x7 regardless if you are using it •  The Effective Hourly Rate and the discounts published by AWS are based on 24x7 usage •  If you scale up and down, or turn off instances during weekends and holidays, you need to look closely at

breakeven points. •  Example: There are 251 working days in 2014. If you turn off an instance on weekends or after hours, No

Upfront is not worth it. •  Combine historic analysis with your knowledge of the future

•  Can you commit to an instance type in a specific Availability Zone? •  Is you application’s architecture changing? (Dev/Ops team can help here)

•  Instance type consolidation is more important •  Have a planned approach across your company on instance types and sizes •  Consolidation will make it easier to buy and use Ris to get highest discount and minimize waster

•  Analysis on underutilized RIs (waste) becomes much more important

Purchasing New AWS RIs

7

•  Analyze past usage trends with Cloud Analytics

What and How Many to Buy

8

•  Forecasts future usage with Cloud Analytics

What-if Scenarios

9

•  How they are applied can be different to how you show/charge back •  Here is how they are applied:

•  In Consolidated Billing, the purchasing account gets priority •  If you have bought the RI at the payer level, then: •  The oldest instance gets the reservation till it stops using it, then it goes to the next oldest •  The cheapest price is applied from all your reservations

•  Here is how you can show/charge back •  Un-Blended rate: Show the costs as they are applied (instance 1 in account 1 used it for 3

hours, instance 1 in account 2 used it for 5 hours etc). Deal with the upfront cost too. •  Blended rate: Regardless of who used RIs or On-Demand instances, split sum based on

usage.

How RIs are Applied by AWS

10

•  Volume Discounts •  $500K and above, you will get 5% discount •  $4M and above, you will get 10% discount •  These are within a region only (e.g. US-East). Discounts do not include Windows with SQL Server.

•  Spot •  AWS selling their unused servers on an hourly bid price. •  If your application can handle an instance suddenly disappearing with no warning, this is an option.

•  RI Marketplace •  Sell your unwanted Reserved Instances (US only). •  You set the upfront fee. This is what you will get if sold (minus 12% service charge). •  Cannot sell RIs that you have got volume discounts on. •  How long will it take to sell on the marketplace?

•  Median of 14-19 days according to Jan 2014 analysis by http://blog.supplyframe.com •  RightScale customer – sold all RIs (primarily Heavy) within 2-4 weeks at residual value

•  Buy shorter-term RIs

Other Ways to Save on AWS Pricing

11

AWS VS GOOGLE PRICING

12

About Google Sustained-Use Discounts

•  No commitment. The more you use an instance family during the month, the higher the discount.

•  Hourly rate tiers down as you hit 25%, 50% and 75% of the time in a month.

Usage Level % of Billing Cycle

Incremental Rate % of On-Demand Baseline

Sample Rate n1-standard-1 Total Cost

0-25% 100% $0.07 $13.02

25-50% 80% $0.056 $10.42

50-75% 60% $0.042 $7.81

75-100% 40% $0.028 $5.21

Monthly Cost at 100% usage $36.46

Google SUD uses “Inferred Instances”

14

Source: Google!

•  AWS No Upfront RIs vs. Google 100% SUD is closest to apples-to-apples •  Comparisons based on:

•  US-East Region •  Linux operating system •  Assumes instances are running 24x7 •  No volume discount tiers

•  Keep in mind that this is a price comparison only. The specific performance

of each instance might vary. •  AWS high-memory and high-CPU instances have more memory along with an SSD, that

balances Google’s lower price. Depending on workload, the high-CPU c3 series from AWS could provide a better price/performance option.

AWS vs Google

15

16

Google Instance Type

CPU Cores RAM AWS

Instance Type CPU

Cores RAM Google New On-Demand

(per hour)

AWS On-Demand

(per hour) AWS Price vs.

Google

n1-standard-1 1 3.75 m3.medium 1 3.75 $ 0.063 $ 0.070 +11.11%

n1-standard-2 2 7.5 m3.large 2 7.5 $ 0.126 $ 0.140 +11.11%

n1-standard-4 4 15 m3.xlarge 4 15 $ 0.252 $ 0.280 +11.11%

n1-standard-8 8 30 m3.2xlarge 8 30 $ 0.504 $ 0.560 +11.11%

n1-highmem-2 2 13 r3.xlarge 2 15 $ 0.148 $ 0.175 +18.24%

n1-highmem-4 4 26 r3.2xlarge 4 30.5 $ 0.296 $ 0.350 +18.24%

n1-highmem-8 8 52 r3.4xlarge 8 61 $ 0.592 $ 0.700 +18.24%

n1-highcpu-2 2 1.8 c3.large 2 3.75 $ 0.080 $ 0.105 +31.25%

n1-highcpu-4 4 3.6 c3.xlarge 4 7.5 $ 0.160 $ 0.210 +31.25%

n1-highcpu-8 8 7.2 c3.2xlarge 8 15 $ 0.320 $ 0.420 +31.25%

n1-highcpu-16 16 14.4 c3.4xlarge 16 30 $ 0.640 $ 0.840 +31.25%

Google vs. AWS On-Demand Pricing!

Source: RightScale After GCE price cuts of October 1, 2014

17


CPU Cores RAM AWS

Instance Type CPU

Cores RAM Google New 100% Usage

( per year)

AWS 1-year No Upfront RI

(per year) New AWS Price

vs. Google

n1-standard-1 1 3.75 m3.medium 1 3.75 $394 $438 +11.11%

n1-standard-2 2 7.5 m3.large 2 7.5 $780 $876 +12.36%

n1-standard-4 4 15 m3.xlarge 4 15 $1,551 $1,752 +12.99%

n1-standard-8 8 30 m3.2xlarge 8 30 $3,094 $3,504 +13.25%

n1-highmem-2 2 13 r3.xlarge 2 15 $911 $964 +5.77%

n1-highmem-4 4 26 r3.2xlarge 4 30.5 $1,822 $1,927 +5.77%

n1-highmem-8 8 52 r3.4xlarge 8 61 $3,635 $3,854 +6.02%

n1-highcpu-2 2 1.8 c3.large 2 3.75 $491 $639 +30.36%

n1-highcpu-4 4 3.6 c3.xlarge 4 7.5 $981 $1,279 +30.36%

n1-highcpu-8 8 7.2 c3.2xlarge 8 15 $1,962 $2,558 +30.36%


Google Sustained-Use vs. AWS 1-year No Upfront Reserved Instance Pricing!

Source: RightScale After AWS RI model change of December 2, 2014

18


CPU Cores RAM AWS

Instance Type CPU


( per year)

AWS 1-year Partial Upfront

RI (per year)

New AWS Price vs. Google

n1-standard-1 1 3.75 m3.medium 1 3.75 $394 $379 -3.78%

n1-standard-2 2 7.5 m3.large 2 7.5 $780 $767 -1.57%

n1-standard-4 4 15 m3.xlarge 4 15 $1,551 $1,534 -1.07%

n1-standard-8 8 30 m3.2xlarge 8 30 $3,094 $3,051 -1.33%

n1-highmem-2 2 13 r3.xlarge 2 15 $911 $830 -8.85%

n1-highmem-4 4 26 r3.2xlarge 4 30.5 $1,822 $1,660 -8.89%

n1-highmem-8 8 52 r3.4xlarge 8 61 $3,635 $3,320 -8.67%

n1-highcpu-2 2 1.8 c3.large 2 3.75 $491 $554 +12.86%




Google Sustained-Use vs. AWS 1-year Partial Upfront Reserved Instance Pricing!


19


CPU Cores RAM AWS

Instance Type CPU


( per year)


RI (per year)




n1-standard-4 4 15 m3.xlarge 4 15 $1,551 $1,503 -3.05%

n1-standard-8 8 30 m3.2xlarge 8 30 $3,094 $2.989 -3.34%




n1-highcpu-2 2 1.8 c3.large 2 3.75 $491 $542 +10.54%




Google Sustained-Use vs. AWS 1-year All Upfront Reserved Instance Pricing!


20


CPU Cores RAM AWS

Instance Type CPU


( per year)


RI (per year)




n1-standard-4 4 15 m3.xlarge 4 15 $1,551 $974 -37.18%

n1-standard-8 8 30 m3.2xlarge 8 30 $3,094 $1,948 -37.00%




n1-highcpu-2 2 1.8 c3.large 2 3.75 $491 $362 -26.25%

n1-highcpu-4 4 3.6 c3.xlarge 4 7.5 $981 $733 -25.27%

n1-highcpu-8 8 7.2 c3.2xlarge 8 15 $1,962 $1,466 -25.31%

n1-highcpu-16 16 14.4 c3.4xlarge 16 30 $3,924 $2,931 -25.31%

Google Sustained-Use vs. AWS 3-year Partial Upfront Reserved Instance Pricing!


Things to Remember

•  For AWS: •  High-CPU and high-mem have more memory and SSD •  You can get volume discounts (5% starting at $500K annual RI spend) •  You can choose Spot Pricing to save more •  You can use RI Marketplace to buy/sell RIs

•  For Google: •  No commitment •  No lock-in to instance types or regions •  It’s automatic - no RI purchase decisions •  Per-minute pricing (minimum of 10 minutes) •  When on-demand price goes down, you get the benefit.

•  They’ve lowered On-Demand prices 38% so far in 2014

BREAKEVEN ANALYSIS

22

Calculating Breakeven for AWS RIs

•  Breakeven Defined •  How long do I need to use an RI for it to be cheaper than On-demand? •  This is not a cash-flow analysis, but a cost analysis

•  The Impact Upfront Commitment •  For all the new-style AWS Ris, you are committing to the full price of the RI upfront – the

only difference is when you actually pay •  Unlike old Light and Medium RIs, with new AWS Ris you can’t stop paying the hourly fee

even if you stop using the RI – no walkaway option

$-

$100.00

$200.00

$300.00

$400.00

$500.00

$600.00

$700.00

Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

On-Demand 1yr No Upfront RI = 261 days to breakeven (72%) 1yr Partial Upfront RI = 226 days to breakeven (62%) 1yr All Upfront RI = 222 days to breakeven (61%)

Breakeven Analysis for m3.medium (US-East, Linux) for NEW 1-year RIs !


$-

$200.00

$400.00

$600.00

$800.00

$1,000.00

$1,200.00

$1,400.00

$1,600.00

$1,800.00

$2,000.00

Mon

th 1

Mon

th 2

Mon

th 3

Mon

th 4

Mon

th 5

Mon

th 6

Mon

th 7

Mon

th 8

Mon

th 9

Mon

th 1

0 M

onth

11

Mon

th 1

2 M

onth

13

Mon

th 1

4 M

onth

15

Mon

th 1

6 M

onth

17

Mon

th 1

8 M

onth

19

Mon

th 2

0 M

onth

21

Mon

th 2

2 M

onth

23

Mon

th 2

4 M

onth

25

Mon

th 2

6 M

onth

27

Mon

th 2

8 M

onth

29

Mon

th 3

0 M

onth

31

Mon

th 3

2 M

onth

33

Mon

th 3

4 M

onth

35

Mon

th 3

6

On-Demand 3yr Partial Upfront RI = 435 days to break even (40%) 3yr All Upfront RI = 409 days to breakeven (37%)

Breakeven Analysis for m3.medium (US-East, Linux) for NEW 3-year RIs !


$-

$100.00

$200.00

$300.00

$400.00

$500.00

$600.00

$700.00

$800.00

Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

On-Demand 1yr Heavy RI = 226 days to breakeven (62%) 1yr Medium RI = 175 days to breakeven (48%) 1yr Light RI = Light COSTS MORE

Breakeven Analysis for m3.medium for OLD 1-year RIs !


IMPACT OF PRICE DROPS

27

$0.58 $0.50

$0.45

$0.28 $0.28

Oct 2012 Feb 2013 Nov 2013 Mar 2014 Dec 2014

Cloud Price Drops

28

AWS On-Demand Price Drops m3.xlarge US-East Linux

Drop of 51.7% in 26 months Averages out to 23.9% in a year

-10%!

-38%!

-13.8%!

No chg!

Launch!

Are we close to another price

cut?

$-

$100.00

$200.00

$300.00

$400.00

$500.00

$600.00

$700.00

Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

On-Demand- 261 days to breakeven OD 24% cut in M7 - 286 days to breakeven OD 24% cut in M1 - 346 days to breakeven 1yr No Upfront RI

Impact of Price Drops on Breakeven Analysis for m3.medium for 1-year RIs !


29% savings

19% savings

6% savings

$-

$200.00

$400.00

$600.00

$800.00

$1,000.00

$1,200.00

$1,400.00

$1,600.00

$1,800.00

$2,000.00

Mon

th 1

Mon

th 2

Mon

th 3

Mon

th 4

Mon

th 5

Mon

th 6

Mon

th 7

Mon

th 8

Mon

th 9

Mon

th 1

0 M

onth

11

Mon

th 1

2 M

onth

13

Mon

th 1

4 M

onth

15

Mon

th 1

6 M

onth

17

Mon

th 1

8 M

onth

19

Mon

th 2

0 M

onth

21

Mon

th 2

2 M

onth

23

Mon

th 2

4 M

onth

25

Mon

th 2

6 M

onth

27

Mon

th 2

8 M

onth

29

Mon

th 3

0 M

onth

31

Mon

th 3

2 M

onth

33

Mon

th 3

4 M

onth

35

Mon

th 3

6

On-Demand OD -24% yearly M7 - 515 days to breakeven OD -24% yearly M1 - 638 days to breakeven 3yr Partial Upfront RI - 435 days to breakeven

Impact of Price Drops on Breakeven Analysis for m3.medium for 3-year RIs !


60% savings

42% savings

33% savings

•  New instance types are introduced ocassionally •  List some •  What happens to prices and price/performance •  What it means for RIs

What About New Instance Types?

31

•  T2 launched Jul 2014 •  R3 launched Apr 2014 •  I2 launched Dec 2013 •  C3 launched Nov 2013 •  M3 launched Oct 2012

What about New Instance Types?

32

$0.58

$0.50 $0.45

$0.28 $0.28

0.68 0.64

0.52 0.48

0.35

Oct 2009 Sep 2012 Oct 2012 Feb 2013 Nov 2013 Mar 2014 Dec 2014

Pricing on Instance Family Changes

33

AWS On-Demand Price Drops m1.xlarge to m3.xlarge US-East Linux

Takeaways

•  New AWS RIs can save you money, but… •  Future On-Demand price cuts can erode the differential •  Do your breakeven analysis! •  Try to consolidate instance families •  Consider selling RIs you can’t use

•  Breakeven periods can be significant, so… •  Work with your IT team to understand future usage •  Think about upcoming instance type changes

•  In the Google vs AWS price wars… •  Google is getting more aggressive in cuts, backed by deep pockets •  It’s unclear if/how AWS will respond over time •  Longer commitments to AWS (3 yr RIs) can save you more

Q&A

Try Cloud Analytics 60-day Free Trial www.rightscale.com/analytics Read our blogs on AWS price changes and other cloud pricing topics www.rightscale.com/blog/cloud-cost-analysis

RightScale Webinar: Decoding AWS Reserved Instances (RIs) What It Means for Cloud Pricing

Technology