AWS EC2 Pricing and Best Practices: The Complete Factsheet on Price Reduction and Cost Optimization

For the uninitiated, AWS recently announced a price reduction on its compute instances.  The most significant part of the announcement is the new three-year no-upfront Standard RI.  As an AWS user, you must understand the price reduction completely and learn how to make better use of reduction in AWS EC2 pricing and reap the most of it.

However, before we directly get the price reduction, let’s start with the AWS EC2 pricing with the real fact sheets.  

AWS EC2: Four-way Pay and Usage

“Pay-as-you-go” is the fundamental of AWS pricing and this applies very well to the AWS EC2 pricing. You use the computing resources as you want, and pay only for what you use. This unique proposition has been the win-win for both the customer and AWS making it the market leader in cloud computing infrastructure.

There are four ways to pay for AWS EC2 instances: On-Demand, Reserved Instances, Spot Instances, and Dedicated Hosts.

Let’s analyze these offerings in detail before we start price reduction and optimal usage of the various AWS EC2 products.

On-Demand instances

AWS EC2 On-Demand instances enable you to pay for computing capacity by the hour. There are no long-term commitments or upfront payments. You pay only for the specified hourly usage of the instances you have opted for, and can increase or decrease your computing capacity depending on the demands of your applications.

On-Demand instances are highly recommended if:

  • You prefer the low cost and flexibility of AWS EC2 without any upfront payment or long-term commitment.
  • You have applications with short-term, spiky, or unpredictable workloads that cannot be interrupted.
  • Your applications being developed or tested on AWS EC2 for the first time.

On-Demand Pricing

On-Demand instances let you pay for compute capacity by the hour with no long-term commitments.

If you really want to free yourself from the costs and complexities of planning, purchasing, and maintaining hardware, you must go for AWS EC2 On-Demand instances. This offering transforms large fixed costs into much smaller variable costs.

For complete AWS EC2 On-Demand instances pricing, visit the AWS EC2 On-Demand Pricing page.

Spot Instances

AWS EC2 Spot instances allow you to bid on spare AWS EC2 computing capacity for up to 90% of the On-Demand price.  You get access to unused AWS EC2 instance capacity at discounts relative to On-Demand instance prices. It’s like a bid where, the Spot instance price fluctuates based on the supply and demand of available unused AWS EC2 capacity.

Spot instances are recommended if:

  • You have applications that have flexible start and end times.
  • You have applications that are only feasible at very low compute prices.
  • You need compute capacity urgently for large amounts of additional capacity.

Spot Pricing

In a Spot instance bid, you specify the maximum Spot price you are willing to pay. Your Spot instance is launched when the Spot price is lower than the price you specified, and will continue to run until you choose to terminate it or the Spot price exceeds the maximum price you specified.

You will never be charged more than the maximum price you specified and while your instance runs, you are charged the Spot price that is in effect for that period.  If the Spot price exceeds your specified price, your instance will receive a two-minute notification before it is terminated, and you will not be charged for the partial hour that your instance has run.

For complete AWS EC2 Spot Instance pricing, visit the AWS EC2 Spot Instances Pricing page.

Reserved Instances

AWS EC2 Reserved instances provide you with a significant discount (up to 75%) compared to On-Demand instance pricing. Reserved instances also provide a capacity reservation, if assigned to a specific Availability Zone, thereby ensuring your ability to launch instances when you need them.

AWS EC2 Reserved instances come handier when you have applications that have steady state or predictable usage, and provide significant savings compared to using On-Demand instances.

Reserved Instances are recommended if:

  • You have applications with steady state usage.
  • You have applications that may require reserve capacity.
  • You are a committed customer for a one year or three year term.

Reserved Pricing

There are two types pricing models for AWS EC2 Reserved Instances: Standard Pricing and Convertible Pricing.

The Standard pricing model enables you to purchase reserved instances for a one-year or three-year term and offers significant discounts (up to 75%) compared to On-Demand instances. You have the flexibility to change the Availability Zone, the instance size, and networking type of your Standard Reserved Instances.

The Convertible pricing model suits best if you need additional flexibility, such as the ability to use different instance families, operating systems, or tenancies over the Reserved Instance term. Convertible Reserved Instances provide you with a significant discount (up to 45%) compared to On-Demand and can be purchased for a 3-year term.

Reserved Instance Payment Options

There are three payment options for you to choose when you purchase Standard or Convertible Reserved Instance:

  • No Upfront—discounted hourly rate for every hour within the term, regardless of usage. No upfront payment is required. For Standard Reserved Instances, this option is only available as a 1-year reservation. For Convertible Reserved Instances, the option is available as a 3-year reservation.
  • Partial Upfront—pay a portion of the cost upfront and the remaining hours in the term are billed at a discounted hourly rate, regardless of usage.
  • All Upfront—Full payment is made at the start of the term, with no other costs incurred for the remainder of the term regardless of the number of hours used. This option provides you with the largest discount compared to On-Demand instance pricing.

For complete AWS EC2 Reserved Instance pricing, visit the AWS EC2 Reserved Instances Pricing page.

Dedicated Hosts

A Dedicated Host is a physical AWS EC2 server dedicated for your use. Dedicated Hosts address your compliance requirements and reduce costs by allowing you to use your existing server-bound software licenses.

You can purchase Dedicated Hosts on hourly on-demand basis and as a reservation for up to 70% off the On-Demand price.

Dedicated Hosts are recommended if:

  • You have to launch AWS EC2 instances on physical servers that are dedicated for your use.
  • You require additional visibility and control over how instances are placed on a physical server.
  • You have to consistently deploy your instances to the same physical server over time.
  • You have existing server-bound software licenses that need to be deployed on physical server and you have to address corporate compliance and regulatory requirements.

Dedicated Hosts Pricing

The price for Dedicated Hosts vary based on the instance family, region, and payment option that you choose. However, you pay only hourly for each active Dedicated Host, regardless of the quantity or the size of instances that you choose to launch on a particular Dedicated Host.  You are not billed for the usage of your instances!

You must choose and instance type configuration for the host, when you allocate a Dedicated Host. This selection defines the number of sockets and physical cores per host, the type of instance and the number of instances you can run on each host. A Dedicated Host can support only one instance type at a time.

There are two pricing models for Dedicated Hosts: On-Demand Pricing and Reservation Pricing.

On-Demand Dedicated Hosts Pricing

In the on-demand pricing model for Dedicated Hosts, you pay for each hour that the Dedicated Host is active or allocated in your account. When you release the on-demand Dedicated Host, you also terminate the billing.

On-Demand gives you the flexibility to scale up or down without long-term commitments.

Reservation Dedicated Hosts Pricing

Just like the AWS EC2 Reserved Instances, the AWS EC2 Dedicated Hosts reservations also provide up to a 70% discount compared to the on-demand price.  

There are three payment options for you to choose when you purchase Reserved Dedicated Hosts.  

  • All Upfront —you pay for the entire Dedicated Host Reservation with one upfront payment. This option provides you with the largest discount compared to On-Demand pricing.
  • Partial Upfront —you make a low upfront payment and are then charged a discounted hourly rate for the Dedicated Host for the duration of the reservation.
  • No Upfront —you do not need to make an upfront payment and you get a discounted hourly rate for the duration of the term.

For complete AWS EC2 Dedicated Hosts pricing, visit the AWS EC2 Dedicated Hosts Pricing page.

Cost Estimation with AWS EC2 Instances

  1. So, you have got an idea of the various AWS EC2 instances and their pricing. What next? How would you estimate the costs for the desired instance type?

As an AWS EC2 user or one who is going to use AWS EC2, you are well aware the fact that AWS EC2 facilitates complete control of your computing resources.  “AWS EC2 changes the economics of computing by charging you only for capacity that you actually use” as stated in an Amazon Web Services pricing guide.

According to the latest AWS pricing guide, consider the following points when you estimate the cost of your AWS EC2 requirements:

  • Clock Hours of Server Time – Resource charges are applied when they are running. For example, from the time AWS EC2 instances are launched until they are terminated.
  • Machine Configuration – The physical capacity of the Amazon EC2 instance you choose along with the AWS region, OS, number of cores, and memory.
  • Machine Purchase Type –On-Demand instances, Reserved Instances, Spot Instances, or Dedicated Hosts.
  • Number of Instances – Based on the number of instances that you want to provision to handle peak loads. You can have multiple instances of your AWS EC2 and Amazon EBS resources.
  • Load Balancing –Use an Elastic Load Balancer to distribute traffic among AWS EC2 instances. Calculate the number of hours the Elastic Load Balancer runs and the amount of data it processes to the cost.
  • Detailed Monitoring –Use Amazon CloudWatch to monitor your AWS EC2 instances. The default basic monitoring is enabled and available at no additional cost. You can opt for detailed monitoring for a fixed monthly rate. Partial months are charged on an hourly pro rata basis, at a per instance-hour rate.
  • Auto Scaling – Use Auto Scaling to automatically adjust the number of AWS EC2 instances in your deployment according to conditions you define. This service is available at no additional charge beyond Amazon CloudWatch fees.
  • Elastic IP Addresses – You can have one Elastic IP (EIP) address associated with a running instance at no charge.
  • Operating Systems and Software Packages – Operating System prices are included in the instance prices. These commercial operating systems require are no additional licensing costs:
    • Red Hat Enterprise Linux
    • SUSE Enterprise Linux
    • Windows Server
    • Oracle Enterprise Linux

AWS has partnered with Microsoft, IBM, and several other vendors so you can run commercial software packages on your AWS EC2 instances (for example, Microsoft SQL Server on Windows, IBM Software). These costs need to be estimated. Also, for commercial software packages that AWS does not provide, such as nonstandard operating systems, Oracle Applications, Windows Server applications such as Microsoft SharePoint and Microsoft Exchange, you need to obtain a license from the vendors. You can also bring your existing license to the cloud through specific vendor programs such as Microsoft License Mobility through Software Assurance Program.

Save more than 50% on your cloud with smart RI planning.

Make Hay While AWS Drops Prices!

In May 2017, AWS announced significant price reductions on their EC2 instances. “As AWS grows, we continue to find ways to make it an even better value. We work with our suppliers to drive down costs while also finding ways to build hardware and software that is increasingly more efficient and cost-effective”, declares AWS’s chief evangelist in a blog post that announced the 61st price reduction.

AWS reiterates the fact that in addition to reducing the prices, they also give customers options that help them to optimize their use of AWS.

Let’s take a closer look at the May 2017 AWS EC2 price reductions:

  • New No Upfront Payment Option for 3 Year Standard RIsNo Upfront payment option with a 3 year term for C4, M4, R4, I3, P2, X1, and T2 Standard Reserved Instances.
  • Lower Prices for No Upfront Reserved Instances – lower by up to 17% prices for No Upfront 1 Year Standard and 3 Year Convertible Reserved Instances for the C4, M4, R4, I3, P2, X1, and T2 instance types, depending on instance type, operating system, and region.

An indicative chart for the estimated average reductions for No Upfront Reserved Instances for Linux in representative regions:

* US East (Northern Virginia) US West (Oregon) EU (Ireland) Asia Pacific (Tokyo) Asia Pacific (Singapore)
C4 -11% -11% -10% -10% -9%
M4 -16% -16% -16% -16% -17%
R4 -10% -10% -10% -10% -10%

*Source: EC2 Price Reductions – Reserved Instances & M4 Instances AWS Blog

  • Lower Prices for Convertible Reserved Instances –lower by up to 21% prices for 3 Year Convertible Reserved Instances for the C4, M4, R4, I3, P2, X1, and T2 instances.

Convertible Reserved Instances allow you to change the instance family and other parameters associated with the RI at any time; this allows you to adjust your RI inventory as your application evolves and your needs change.

An indicative chart for the estimated average reductions for Convertible Reserved Instances for Linux in representative regions:

* US East (Northern Virginia) US West (Oregon) EU (Ireland) Asia Pacific (Tokyo) Asia Pacific (Singapore)
C4 -13% -13% -5% -5% -11%
M4 -19% -19% -17% -15% -21%
R4 -15% -15% -15% -15% -15%

*Source: EC2 Price Reductions – Reserved Instances & M4 Instances AWS Blog

  • Lower Prices for M4 Instances –lower by up to 7% prices for M4 Linux instances.

As an AWS customer, you can use multiple strategies to purchase and manage your Reserved Instances. You may prefer to make an upfront payment and earn a bigger discount; or prefer to pay nothing upfront and get a smaller, but still substantial, discount. Else, make a partial upfront payment and a discount that falls in between the two other options.

All changes in prices and the reductions are already effective. So, why wait? Make the most of it…Now!

How to Further Save Costs?

Coming back to the actual business, the major driving factors of the cost of your AWS EC2 compute infrastructure should be the needs of your applications and how you intend to use the resources for optimal results. You no longer need to but the cutting edge physical hardware to provide computing. Instead, you are now using the flexible of benefit of cloud computing by spinning AWS EC2 instances whenever you need those. Your computing infrastructure sizes to be a physical datacenter!

However, even on the cloud, without proper cost analysis, cost implementation, usage management, and resource optimization, you are running the risk of bottlenecking performance of your infrastructure both in terms of technical oversights and financial mismanagement. All that can happen due to mismatches in technical requirements and AWS EC2 resourcing.

To avoid all possible bottlenecks and to engage your resources properly, you need to understand the following key parameters:

  • How AWS users use and pay for EC2 instances
  • The different families and sizes of EC2 instances
  • How to identify opportunities to optimize EC2 instances

You can optimize your costs for AWS EC2 instances by purchasing EC2 Reserved Instances or Spot Instances. On-Demand instances are a good option if you run your Amazon EC2 Instances a couple of hours a day or a few days per week; however, if you plan to run your Amazon EC2 Instances more than that, Reserved Instances can save you money…etc…etc…

Sounds tough?

Botmetric Helps to Make the Right Directions

Facts are stated. Directions are set. Now, you must take right decisions on your AWS EC2 resources based on the facts, figures, and directions. Just to recap, you have a gamut of AWS EC2 instances to choose from, a set of cost reduction and optimization guidelines to conform to, and a new set of price reduction from AWS as high level guidance. And you have the Botmetric’s analytical tools and expert analysts to help you out.  

AWS EC2 Reserved Instances — Choosing the Right One that Fits You

AWS EC2 Reserved Instances (RIs), which provide significant discount compared to on-demand pricing, have been extensively used by enterprises and businesses of all sizes across the globe.

In this post, I am going to discuss the types of use cases where AWS EC2 Reserved Instances will fit in for optimal discount, the complete flow of reserving the RIs, preferences behind reserving RIs ( to choose capacity first or discounts first), and much more. Just so that you can choose the right RI that fits your needs.

The Backdrop

Currently, AWS offers its users to buy compute instances in 3 modes: on-demand, reserved instances, and spot instances. Let’s dive into the details of these three instances.

  1. On-demand Instances: With on-demand instances, you pay for compute capacity by the hour with no long-term commitments or upfront payments. You can increase or decrease your compute capacity depending on the demands of your application and only pay the specified hourly rate for the instances you use.
    • Pay-as-you-go, no commitment, pay hourly rate.
    • Suitable for unpredictable workloads, or developed or testing in EC2 newly.
  2. Reserved Instances: RIs provide you with a significant discount (up to 75%) compared to on-demand instance pricing. In addition, when reserved instances are assigned to a specific Availability Zone, they provide a capacity reservation thereby giving you additional confidence while launching instances when you need them.
    • Significant discount, 1 year or 3 year commitment.
    • Ideal for predictable and steady usage.
  3. Spot Instances: AWS allows you to bid on spare Amazon EC2 computing capacity. These instances are known as spot instances. Spot instances are often available at a higher discounted rate compared to on-demand pricing. So you can significantly reduce the cost of running your applications, grow your application’s compute capacity and throughput for the same budget. You can bid for Spot instances using AWS API’s, AWS CLI and Web Console. Your Spot instance runs whenever your bid exceeds the current market price.
    • Provide up to 90 % discount.
    • Useful for steady and flexible workloads such as batch processing.

Now, let’s discuss about how to make the most of RIs by understanding the attributes that define RI, offering class, plans of RI, and the factors that affect your savings.

  1. Of all the AWS instances, RIs are the ones which give you massive discounts. The discounts provided will vary from 45%-75% depending on the plan and scope that you choose.
  2. RIs affinity will decide on which account the RI is actually applied.
  3. RI can provide optional capacity reservation.
    1. Reservation will be applied only in the account that purchased the RI.
    2. If you are planning to purchase capacity reservation, ensure you purchase it in the account where you are going to use it. Because while applying the RI discounts, owner account is always given the priority.
  4. AWS assigns reserved instance hours to linked accounts. It always starts first with the linked account that purchased the reservation, which is sometimes called Reserved Instance affinity. If there are hours from the capacity reservation left over, they are applied to other accounts operating identical usage types in the same Availability Zone. Again, this allocation always occurs using unblended rates.

Payment Options for AWS RI

To purchase RIs, AWS offers three payment options, namely All Upfront, Partial Upfront, No Upfront.

  • All Upfront: Pay full amount for the reservation term in one single payment. This one gives the highest savings.
  • Partial Upfront: Pay portion of amount for part of the reservation term in an upfront payment and pay the remaining in installments every month for the duration of the term. This option costs more than All Upfront, but less than No Upfront.
  • No Upfront: Pay for the reservation in installments throughout the term’s duration every month. This payment offers the lowest savings rate.

Apart from the discount you get individually from the above plans, if you have total active RI list value above $5,000,000 per region, you get more discount, from 5% to  10%. This discount is known as RI Volume Discount.

Note: It is highly recommended to purchase the RIs in bulk together in a single transaction. The reasons being: you can merge the RIs if reservation going to be unused due to the changing requirements over the time.

AWS RI Offering Classes

AWS offers the RIs in three modes, i.e Standard, Convertible, and Scheduled, where each have advantages and disadvantages of their own.

Standard RIs: These provide the most significant discount (up to 75% off on-demand) and are best suited for steady-state usage as shown in the below pic. If the load and infra per instance is properly estimated by load testing, and is not going to change frequently for at least an year, these RIs are recommended.

Botmeric, AWS EC2 Consistent Usage GraphImage source: Botmeric, AWS EC2 Consistent Usage Graph

This mode of RI will give maximum discount over other modes.

Convertible RIs: These provide a discount of up to 45% over on-demand instances, and the capability to change the attributes of the RIs as long as the exchange results in the creation of Reserved Instances are of equal or greater value.

Like Standard RIs, Convertible RIs are also best suited for steady-state usage. These provide good discount but less than the standard RIs, average of 45% discount. With this offering class, you can change every attribute of RI. No limits to exchange size. You can purchase the convertible RIs only with 3 year term plan. You can check if RI is convertible or not by verifying the “Offering Class” in the AWS console.

Plus, with convertible RIs, you can exchange the RIs across the family. For example: from t2 to m4, with different OS, Windows to Linux, to new instance size. medium to large, and more.

P.S: While exchanging the convertible RIs, you may need to either exchange it with instance type/size smaller than the current one, or vice versa.

Refer the below two use cases:

Exchanging the instance with lower cost: In this scenario, you will get additional instances, which are either unused or applied to other instance types. For example, say that you are running m4.4xlarge instance in us-east-1a, as per your new requirement, if you are exchanging it with t2.large instance in us-east-1a (as t2 family instances are cheaper than m4), you will get 5 t2.large instances for exchanging 1 m4.4xlarge instance.

Exchanging instance with higher cost: While exchanging the instance with higher cost than the current one, you may need to pay true up charge, which will be reflected in your current month bill.Below is the formula used for calculating the true up charge of an RI.

True up charge = new convertible RI you receive by exchange  —  prorated upfront charges of current instance.

For example: say that you have an t2.micro instance in 3 year term plan partial upfront with 32 months remaining. Now, if you go for exchanging that instance with t2.small instance, then

The total upfront price of your new reservation t2.small is : $133.792,

Remaining upfront value of your exchanged reservations : $109.25,

True Upcharge = 133.792–109.25 = 24.54 with hourly rate of $0.006.

You can exchange with convertible RI only if the following conditions are met.

  1. Active
  2. Not pending another exchange request
  3. Terminating in the same hour (but not minutes or seconds)

Limitations of Convertible RIs

There are few limitations to take into account while dealing with Convertible RIs:

  1. Convertible RIs can only be exchanged for other Convertible Reserved Instances currently offered by AWS.
  2. Convertible RIs cannot be modified. You can only exchange it with other configuration.
  3. Convertible RIs can only be exchanged with the same or higher payment option. For example Partial Upfront Convertible Reserved Instances can be exchanged for All Upfront Convertible Reserved Instances   but they cannot be exchanged for No Upfront Convertible Reserved Instances.

Scheduled RIs: These are available for discounts within the time windows you reserve. This option allows you to match your reservation to a predictable recurring schedule that only requires a fraction of a day, a week, or a month. These are recommended heavily when you have predictable spike for a duration or for running the batch jobs. For example, this reservation is recommended when your system generates reports at 2:00PM every day and emails to all your product users.

Note: You can purchase the RIs in this mode using AWS CLI, API’s, AWS management console.

Scope of RIs — Zonal RI & Regional RI

Zonal RIs: Any RI purchased for specific availability zone is called as zonal RI. In this scope of RI, instance capacity reserved for your use in that AZ gives better confidence while launching instances. If you want to run an instance in AZ and if AWS has reached the capacity of instance type you need, then you will not be able to launch the instance due to hardware limitation in that AZ.

With Zonal RIs, irrespective of instance being used or not, the instance capacity is assigned to you. Capacity reservation are available within that account. The attributes that decide the RIs discount are Instance Type, Tenancy (Shared/Dedicated), Availability Zone, Operating System. These RIs will be applied to the instances running with same instance type and OS in the AZ RI purchased. This is highly recommended when you are reserving the higher instances types on AWS, as they are limited.

Regional RIs: This scope is recommended if you prefer the discount over the capacity since region scope does not offer capacity reservation. But regional RIs give flexibility over managing the RIs as if it has broader applicability and flexibility. These RIs are recommended for maximum discounts. Note that based on your requirement, you can always modify the scope of RIs with no extra cost.

Instance Size Flexibility

All regional Linux/UNIX RIs with shared tenancy apply to all sizes of instances within an instance family and AWS region (even if you are using them across multiple linked accounts). This will help further in reducing the AWS costs. In this RIs are applied based on scale known as normalization factor within a particular instance family. Below is the normalization factor table for instance sizes.

AWS Instance Size Flexibility

Let’s say you already own an RI for a m4.16x large. This RI now applies to any usage of a Linux/UNIX C4 instance with shared tenancy in the region.

This could be applied on either:

  • Four m4.4xlarge instance
  • Eight m4.2xlarge instances
  • Sixteen m4.xlarge instances
  • Thirty two m4.large instances.

Or any combination of above instances for above family that matches to the total normalization factor.

Limitations of instance size flexibility:

  • This is not applied on Zonal RIs.
  • This is not applied on Windows, RHEL.

Rate will be applied completely if proper match is found, else it will be partially applied for the units.

How RIs are Applied?

  1. Zonal RIs are always applied first.
  2. Regional RIs are applied next.
  3. The instance size flexibility. Applied by the first qualified instance based on the instance.

Save more than 50% on your cloud with smart RI planning.

Understanding the Application of Reserved Instances

The following scenarios cover the ways in which Reserved Instances are applied.

Scenario One

A customer is running the following On-Demand Instances in account A:

4 x m3.large Linux, default tenancy instances in Availability Zone us-east-1a

2 x m4.xlarge Amazon Linux, default tenancy instances in Availability Zone us-east-1b

1 x c4.xlarge Amazon Linux, default tenancy instances in Availability Zone us-east-1c

The customer then purchases the following Reserved Instances in account A:

4 x m3.large Linux, default tenancy Reserved Instances in Availability Zone us-east-1a (capacity is reserved)

4 x m4.large Amazon Linux, default tenancy Reserved Instances in us-east-1

1 x c4.large Amazon Linux, default tenancy Reserved Instances in us-east-1

The Reserved Instance benefits are applied in the following ways:

  • The discount and capacity reservation of the four m3.large Reserved Instances is used by the four m3.large instances because the attributes (instance size, region, platform, tenancy) between them match.
  • The m4.large Reserved Instances provide Availability Zone and instance size flexibility, because they are Amazon Linux Reserved Instances with default tenancy.
  • An m4.large is equivalent to 4 normalized units/hour.
  • The customer has purchased four m4.large reserved instances, and in total they are equal to 16 normalized units/hour (4×4). Account A has two m4.xlarge instances running, which is equivalent to 16 normalized units/hour (2×8). In this case, the four m4.large Reserved Instances provide the billing benefit to an entire hour of usage of the two m4.xlarge instances.
  • The c4.large Reserved Instance in us-east-1 provides Availability Zone and instance size flexibility, because it is an Amazon Linux Reserved Instance with default tenancy, and applies to the c4.xlarge instance. A c4.large instance is equivalent to 4 normalized units/hour and a c4.xlarge is equivalent to 8 normalized units/hour.

In this case, the c4.large Reserved Instance provides partial benefit to c4.xlarge usage. This is because the c4.large Reserved Instance is equivalent to 4 normalized units/hour of usage, but the c4.xlarge instance corresponds with 8 normalized units/hour. Therefore, the c4.large Reserved Instance billing discount applies to 50% of c4.xlarge usage. The remaining c4.xlarge usage is charged at the on-demand rate.

It is interesting to note that regional Linux/Unix Reserved Instances apply to any usage matching the region, tenancy, and platform within the instance family. Reserved Instances are first applied to usage within the purchasing account, followed by qualifying usage in any other account in the payer account. In the case of Reserved Instances that offer size flexibility, there is no preference to the instance size within a family that the Reserved Instances apply. The Reserved Instance discount is applied to qualifying usage that is detected first within payer account. The following example may help explain this.

Scenario Two

A customer is running the following On-Demand Instances in account A:

  • 2 x m4.xlarge Linux, default tenancy instances in Availability Zone us-east-1a
  • 1 x m4.2xlarge Linux, default tenancy instances in Availability Zone us-east-1b
  • 2 x c4.xlarge Linux, default tenancy instances in Availability Zone us-east-1a
  • 1x c4.2xlarge Linux, default tenancy instances in Availability Zone us-east-1b

The customer is running the following On-Demand Instances in account B — a linked account:

2 x m4.xlarge Linux, default tenancy instances in Availability Zone us-east-1a

The customer then purchases the following Reserved Instances in account A:

  • 4 x m4.xlarge Linux, default tenancy Reserved Instances in us-east-1
  • 2 x c4.xlarge Linux, default tenancy Reserved Instances in us-east-1

The Reserved Instance benefits are applied in the following way:

  • The discount of the four m4.xlarge Reserved Instances is used by the two m4.xlarge instances in account A and the m4.2xlarge instance in account A. All three instances match the attributes (instance family, region, platform, tenancy). There is no capacity reservation.
  • The discount of the two c4.xlarge Reserved Instances can apply to either the two c4.xlarge instances or the c4.2xlarge instance, all of which match the attributes (instance family, region, platform, tenancy), depending on which usage is detected first by the billing system. There is no preference given to a particular instance size. There is no capacity reservation.

In general, RIs that are owned by an account are applied first to usage in that account. However, if there are qualifying, unused zonal Reserved Instances in other accounts in the payer account, they are applied to the account before regional Reserved Instances owned by the account. This is done to ensure maximum Reserved Instance utilization and a lower bill. For billing purposes, all the accounts in the organization are treated as one account. The following example may help explain this.

Scenario Three

The customer is running the following instance in account A

1 x m4.xlarge Linux, default tenancy instances in Availability Zone us-east-1a

The customer is running the following instance in another linked account B:

1 x m4.xlarge Linux, default tenancy instances in Availability Zone us-east-1b

The customer then purchases the following Reserved Instances in account A:

1 x m4.xlarge Linux, default tenancy Reserved Instance in Availability Zone us-east-1

The customer also purchases the following Reserved Instances in account C:

1 x m4.xlarge Linux, default tenancy Reserved Instances in Availability Zone us-east-1a

The Reserved Instance benefits are applied in the following way:

  • The discount of the m4.xlarge Reserved Instance owned by account C is applied to the m4.xlarge usage in account A.
  • The discount of the m4.xlarge Reserved Instance owned by account A is applied to the m4.xlarge usage in account B.
  • If the Reserved Instance owned by account A was first applied to the usage in account A, the Reserved Instance owned by account C remains unused and usage in account B will be charged at On-Demand rates.

Summary:

Here’re the key highlights summerizing the key aspects of AWS EC2 RIs:

  • Standard RIs offer you more discounts over any Convertible RIs.
  • Zonal RIs offer capacity reservation, recommended for larger instance types and if capacity is preferred over discounts.
  • Regional RIs give more flexibility in managing the RIs.
  • Convertible RIs give you wide range of options while exchanging but offers you lesser discounts compared to Standard RIs.
  • Instance size flexibility give you further discounts for Linux/Unix instances for regional RIs and shared tenancy.

Though AWS RIs give you the maximum savings in your cloud cost, if not managed properly, they might lead to unused cost. Planning and managing AWS RIs is tedious task. Analyze & forecast your usage properly before you purchase. After purchasing RIs, you must monitor the usage regularly if the discounts are applied or not.

For better understanding and analysis of RIs, you can take a look at Botmetric’s Cost and Governance RI. It provides wide range of analysis for RI Utilization, unused RI, planning RI based on the metrics like CPU, IO and number of days instance running. It has free 14 day trial.

Editorial Note: This blog post was first published on Medium. To see the original post, click here.

AWS Comes with 61st Price Reduction, EC2 RIs & M4 Prices Slashed

AWS patrons using EC2 RIs and M4 instance type rejoice! AWS has come with yet another price reduction. This time the EC2 RIs & M4 prices have been slashed. 

AWS has been phenomenal in offering public cloud. As of today AWS offers a plethora of services that cater to various business needs and workload types. With its revolutionary pay-as-you-go model, AWS empowered agility in businesses. Now with further price reductions, it’s icing on the cake for businesses running on EC2 RIs and M4 instances.

In the words of Jeff Barr in one of his recent blogs, “Our customers use multiple strategies to purchase and manage their Reserved Instances. Some prefer to make an upfront payment and earn a bigger discount; some prefer to pay nothing upfront and get a smaller (yet still substantial) discount. In the middle, others are happiest with a partial upfront payment and a discount that falls in between the two other options. In order to meet this wide range of preferences we are adding 3 Year No Upfront Standard Reserved Instances for most of the current generation instance types. We are also reducing prices for No Upfront Reserved Instances, Convertible Reserved Instances, and General Purpose M4 instances (both On-Demand and Reserved Instances). This is our 61st AWS Price Reduction.”

All You Need To Know About Price Reductions of EC2 RIs and M4

No Upfront Option for 3 Year Standard RIs

Earlier AWS offered a No Upfront payment option just for 1 year term for Standard RIs. Henceforth, there will be a No Upfront payment option even for a 3 year term for C4, M4, R4, I3, P2, X1, and T2 Standard RIs.

~17% Price Reductions for No Upfront Reserved Instances

No Upfront 1 Year Standard and 3 Year Convertible RIs for C4, M4, R4, I3, P2, X1, and T2 instance types will now be available for 17% lesser, depending on instance type, operating system, and region. Refer the table below to know the average reductions for No Upfront Reserved Instances for Linux in several representative regions:

EC2 RIs prices slashedImage Source: https://aws.amazon.com/blogs/aws/category/price-reduction/

~21% Reduced Prices for Convertible Reserved Instances

AWS is now reducing the prices for 3 Year Convertible Reserved Instances by up to 21% for most of the current generation instances (C4, M4, R4, I3, P2, X1, and T2). Refer the table below to know the average reductions for Convertible Reserved Instances for Linux in several representative regions:

~21% Reduced Prices for Convertible Reserved Instances Image Source: https://aws.amazon.com/blogs/aws/category/price-reduction/

According to AWS, similar reductions will go into effect for nearly all of the other regions too. 

~ 7% Reduced Price for M4 Instances

M4 Linux instances’ prices are now available at a price lesser by 7%. M4 has been one of the most popular instance types among new generation instances.

Visit the EC2 Reserved Instance Pricing Page and the EC2 Pricing Page, or consult the AWS Price List API for all of the new prices.

The Wrap-Up

Cost modelling, budget reduction and cost optimization are some of the top most considerations for businesses irrespective of size. Whether it is an enterprise with 100+ foot print or a small start-up with less than 10 employees, this price reduction is a great news.

Share your views too with us. Just drop in a line below in the comment section or just gives us a shout out @BotmetricHQIf you want to holistically reduce your AWS bill, then just try Botmetric Cost & Governance. You will get data driven cost management to monitor AWS finances and take wise decisions to maximize your AWS cloud ROI.

Get Started Now!

The October Roundup @ Botmetric: Making AWS Cloud Management Simpler And Better

Amazon Web Services (AWS) never ceases to amaze us. The month of October was eventful for all the stakeholders dealing with AWS. Ask why? Just when the AWS users were wishing that they had more flexibility in AWS Cloud Management, AWS announced the launch of Convertible RIs and the new Region Benefit scope, and the launch of new AWS East (Ohio) region. Here’s the round-up of these three new features:

1. AWS unveils new Convertible RIs

What is it about: A new addition to EC2 Reserved Instances (RIs) ecosystem to bring in more flexibility.

How will it help: If you have committed RI for specified instance type depending on current usage and have suffered for not being able to utilize, then the new Convertible RIs will cater to this need. Plus, it will also provide up to 45% savings over on-demand instances. Read Botmetric blog, Making Sense of the New AWS EC2 Convertible RIs, to know more. Alternatively, you can also read this blog on AWS Week-in-Review page.

2. EC2 RIs are now AZ-agnostic

What is it about: A new addition to the RI attributes, called the Region Benefit scope

How will it help: Earlier you had to reserve RI into multiple AZs within a region, however, unused RIs would be charged; and switching between AZ of same region were generally chargeable. With the new Region Benefit, you can now be independent of AZ. Read Botmetric blog, Demystifying the New AWS Regional Benefit Scope: Making EC2 RIs AZ-Agnostic, to know more. Then again, you can also find and read this blog on AWS Week-in-Review page.

3. AWS expands it cloud footprint with the launch of new US East (Ohio region)

What is it about: The launch of new US East (Ohio region)

How will it help: The new region features multiple services, including Amazon Elastic Compute Cloud (Amazon EC2), Amazon Simple Storage Service (Amazon S3), and Amazon Relational Database Service (Amazon RDS). Plus, it’s a great news for existing customers in US East (Virginia) region due to the potential opportunities it provides. Some of these include multi-region application deployments, lower cross region DR, business disaster recovery implementations, and more. Read Botmetric blog, Why the AWS US East (Ohio) Region is a Great News for US East (Virginia) Customers?, to know more. This blog is also available on AWS Week-in-Review page.

Knowledge Sharing @ Botmetric

As we said in the previous September month-in-review blog, we understand the fast-paced life, and believe in all things quick! Continuing our new tradition to provide quick bites and snippets on better AWS Cloud Management, here are few blogs that we covered in the month of October:

5 Must-Address AWS Disaster Recovery Management Challenges (For Beginners)

Even with an all-encompassing Disaster Recovery (DR) System integrated into AWS, businesses have to ensure that the software systems not only maintain data consistency across the systems but also look into other dynamics to it. Plus, they face several challenges day in day out. If you are new to AWS and want to know current challenges looming AWS DR management , then this blog is a must read. You can also find it on AWS Week-in-Review page.

5Ws to Rule the AWS EC2 World

Know anything and everything about the basics of AWS Elastic Compute Cloud, “ or dearly called AWS EC2.” This Botmetric blog covers the 5Ws — Why, When, Where, Which, and What, that will help you kickstart efficient usage of EC2. This blog is also available on AWS Week-in-Review page.

Debunking 7 Myths About AWS Cloud Backup And Disaster Recovery

Many enterprises have embraced AWS. However, there are still few misconceptions looming among the enterprises when it comes to AWS cloud backup and disaster recovery. Bookmark this blog, as it covers some of the key myths around AWS cloud backup and disaster recovery that you need to be aware of and take corrective measures.

Role of AWS in Digital Transformation: Truly a Technology Enabler in Every Vertical

Innovation, growth, and transformation are the three key elements AWS has been offering to digital enterprises. As technology continues to grow and shift towards more digital disruption, AWS is believed to continue to provide the best access to data and infrastructure and will be central for all enterprises undergoing a digital transformation. Read this insightful blog on the role of AWS in digital transformation across verticals.

Top 5 Reasons why AWS for Fintech is a Perfect Match

AWS has impeccable capabilities, along with entire software development lifecycle support from development to deployment. Without a doubt, AWS is a perfect match for Fintech companies to stride through the path of digital transformation. If you are an IT decision maker or a DevOps professional in a Fintech company that is already on AWS, then you might explore this blog.

AWS for E-Commerce & Online Retailers: Sky’s the Limit. Agree?

When an e-commerce or online retail company adopts AWS, it not only gets a secure, globally available and highly scalable infrastructure to support the core product catalog and checkout service, it also gets a complete Amazon cloud infrastructure for deploying e-commerce business. On AWS, sky’s the limit. Bookmark this blog page, if you are an IT decision maker in e-commerce sector and contemplating cloud.

There are many more insightful blogs populated on AWS cloud management. Do read them here.

Plus, Botmetric brings more AWSomeness to AWS stakeholders with the launch of new Partner Program for Cloud MSPs, AWS Resellers. Read the press release, here.

Finally, continued excitement with 5 star reviews for Botmetric

Get a sneak-peak here.

Botmetric Review October 2016

If you have missed rating us, you can do it here now. If you haven’t tried Botmetric, we invite you to sign-up for a 14-day trial.

To catch up with what happened last month, read Botmetric’s September roundup blog.

Rain or shine, Botmetric will continue to provide many more AWS cloud management features. Until the next month, stay tuned with us on Twitter, LinkedIn, and Facebook.

AWS EC2 RIs are now AZ Agnostic, Convertible RIs are now a Reality

The days of worrying about not able to convert machines of different configuration when on AWS EC2 Reserved Instances (RIs) and the DevOps team panicking about the wrong AZ allocation are gone! AWS today announced Convertible EC2 RI and Regional Benefit, which will benefit enterprises looking for capacity assurance and flexibility on all their current EC2 instance types on a three-year term. In this two-part series we will walk you through the two new announcements where EC2 RIs are now convertible and AZ agnostic.

The sneak peek :

Convertible EC2 Reserved Instances

This is indeed a good news, as the EC2 Reserved Instances ecosystem is now more flexible. As the name says, Convertible RIs help users buy new category of RI featuring exciting new flexibility options, which can provide up to 45% savings over on-demand instances.

A lot of customers commit for RI for specified instance type depending on current usage but then suffer for not being able to utilize with capability like the other instance types due to change in their infra requirements. For instance, if you want a burstable performance requirement and opted for t2.large but would like to switch to more compute based c4.large, then this conversion type is possible now. This is all feasible in the new Convertible RI types wherein you can modify instance family, OS flavor as well as instance size, ultimately to reap maximum benefits.

Region Benefit – EC2 Reserved Instances goes AZ agnostic

Earlier you had to reserve RI into multiple AZ’s within a region, for the purpose of securing load balancing/ redundancy. However, unused RIs would be charged. Moreover, AWS allowed switching between AZ of same region under ‘Modify RI’ option, but in few cases these were chargeable.

With the announcement of new Region Benefit RI availability, enterprises can now be independent of AZ, thus becoming AZ- agnostic. However, there is an exception to this.  When you opt for the Region Benefit feature, it doesn’t guarantee you the capacity, hence if you are betting on capacity then Region Benefit might not be an option for you. The best part is that you can modify existing RI’s for Region Benefit.

Already getting the feeling of fresh out of the box?

Watch out for this space. We will come up with complete details shortly. Especially the Convertible RIs seems very exciting and useful. We will see how you can make use of it. Also, very soon Botmetric’s RI Planner will be updated to take into consideration these two important updates on EC2 Reserved Instances.

What’s New in Botmetric ? Enhanced AWS Reserved Instance Planner

Reserved Instance Planning on AWS is one of the most important tasks for a AWS cloud IT team with respect to cost optimization and savings. It is also one of the most complex tasks. Botmetric, with its AWS Reserved Instance Planner helps you in resource reservation planning for EC2 and RDS. To further help you in optimizing cost, Botmetric also finds out the unused reservations. It also goes a step ahead and recommends possible modifications within reservations in order to save more efficiently.

We, at Botmetric, understand the importance of reserved instance planning for our customers and constantly work towards enhancing our offering. Botmetric’s AWS reserved instance planner is one of our most used and sought after feature. We received multiple requests from our customers. As always we have listened and acted upon them. We are happy to announce multiple updates to our RI Planner:

EC2 Reserved Instance Portfolio

This was one of the most requested feature. A simple but powerful one. A kind of essential one, so that our customers need not go to AWS console to get the details of the current existing and recently retired reservations while they are planning for their reservations on Botmetric. Also this will eliminate the need to switch across multiple accounts to gather reservation info. What if you have more than 20 Linked accounts! We could feel our customers pain here and acted on it swiftly. Result is brand new EC2 Reserved Instance Portfolio.

botmetric-aws-ec2-reservation-portfolio

We now have a dedicated section for complete EC2 reservations information. You can now do the following with this update:

  1. Get the holistic list of active and retired EC2 reservations across all the Linked accounts under a Payer account. On AWS you need to switch between accounts to get this. And as you may already know, reserved instance planning is something which must be taken up at the payer account level. Hence, the information of all the existing reservations across all Linked accounts at one place becomes very powerful and useful.
  2. Get the list of reservations expiring in near future. You can sort the list as per number of days left for expiring. This can help you in planning your renewals.
  3. Get a list of recently retired reservations and check if any of them is required to be renewed.
  4. You can also look out for old generation AWS instance-types and ensure that you upgrade the corresponding running EC2 instances to a newer generation and renew the reservation accordingly.

RI Planner New Reports

Botmetric’s AWS reserved instance planner now has few more reports added. You can now download three new reports:

    • EC2 Reservation Recommendation CSV Report
    • Existing Reservation CSV Report
    • Expiring RI CSV Report

botmetric-aws-reserved-instance-planner-reports-list

RI Expiry Email Alert

We have now released Unused RI Email Alert , which updates you with the unused reservations every week. This is an extension of our Unused RI Analyzer. Unused reservations are one of the places where you must definitely optimize. You can modify unused reservations to match existing running instances and save.

botmetric-aws-unused-ec2-reservations-alert

There are many updates which you can expect in near future on optimizing unused reservations.

Apart from these updates on our AWS reserved instance planner , we have a few more for you:

  1. You can now analyze cost in Cost Explorer by excluding/including Subscription Cost.
  2. You can now add the emails of multiple Botmetric users in your cloud automation jobs. In case of job failure, all the configured users will get notified. Earlier, only the job creator used to get these email notifications. You asked for it, we heard and delivered!
  3. We have redesigned and improved our summary and alert emails, made them look better.

We believe that with these latest enhancements and additions, our customers AWS cloud management experience on Botmetric will be enriched.

To stay updated on news and views regarding Botmetric, follow us on Twitter.

As always, many of the features and updates in Botmetric are Customer driven. You can share your suggestions or feature requests here.

Are you using AWS for your business and still not using Botmetric?

Don’t wait up. Start optimizing, take control of your cloud infrastructure cost. Try Botmetric for free.

Making Sense of AWS EC2 Instance Type Pricing: ECU Vs. vCPU

If you are using Amazon Web Services, understanding the nuts and bolts of AWS EC2  instance type pricing is pivotal for you. Why? No two organizations are alike. And every organization has unique computing and storage needs. By knowing the key technicalities, you can only pay for the EC2 Instance Type that fits your business scenarios rather than paying more.

AWS EC2 Instance Type – Unboxed

AWS, long time ago, classified different EC2 instance types (“virtual servers”) by defining an “Amazon EC2 Compute Unit” (ECU). This classification  till date helps developers to compare the CPU capacity between different EC2 instance types. AWS used many benchmarks to ensure that ECUs were consistently and predictably measured EC2 CPU capacity, regardless of the underlying hardware. It gave a relative measure of the integer processing power of an AWS EC2 Instance Type.

For new prospective AWS customers, this might be a difficult concept to grasp. Why? For the reason that more traditional deployments, like those on VMWare, were always declared with vCPU (Virtual CPU). The FAQs page on AWS has the complete information on this.

Rather than diving deep into this concept, today, in this blog post, I would like to talk more about ECU and vCPU and how the pricing points differ for both.

As cited on Amazon, EC2 provides a wide selection of instance types optimized to fit different use cases. Instance types comprise varying combinations of CPU, memory, storage, and networking capacity. This type classification gives you the flexibility to choose the appropriate mix of resources for your applications. Each instance type includes one or more instance sizes, allowing you to scale your resources to the requirements of your target workload.

In April 2014, AWS moved towards using vCPU based measure. This compares EC2 Instance sizes as CPU (Clock Speed), the number of CPUs, RAM, Storage, etc. And each vCPU is a hyperthread of an Intel Xeon core for M4, M3, C4, C3, R3, HS1, G2, I2, and D2.

The M3 Instances may also launch as an Intel Xeon E5-2670 (Sandy Bridge) Processor running at 2.6 GHz. While the AVX, AVX2, and enhanced networking are only available on instances launched with HVM AMIs (Amazon Machine Image).

Now, take a look below at AWS EC2 Instance Type Matrix:

Making Sense of AWS EC2 Instance Type Pricing: ECU Vs. vCPU - Botmetric

Making Sense of AWS EC2 Instance Type Pricing: ECU Vs. vCPU - Botmetric

Making Sense of AWS EC2 Instance Type Pricing: ECU Vs. vCPU - Botmetric

Figure: AWS EC2 Instance Type Matrix Using vCPU

There’s a wide variety of EC2 instance types optimized to fit different use cases, combining varying CPU, memory, storage and networking capacities. This classification will help you to choose the right instance type for your particular business needs. Each instance type includes 1+ instance sizes to allow for scalability.

From the above figure and the above classification information, you can get an idea as to how the pricing differs. To know more on this topic read the Amazon documentation.

It might seem daunting when trying to figure out which EC2 instance type you should launch. But that’s where Botmetric comes to your rescue! You will be notified in the “Cloud Insight” view when you should scale down your instance sizes to save money. You also have the EC2 vs. vCPU-based Cost Analytics view in the Cost Analytics Dashboard to monitor your usage and tailor your vCPUs with a fine-tooth comb!

Only pay for the EC2 instance types that fit your business scenario.

Have you faced any challenges with your AWS cloud infrastructure? As a cloud solutions provider, we can help. Just drop us a mail or get in touch with us on Facebook, Twitter, LinkedIn.
This insightful blog article is written by our Chief Evangelist Kim Schmidt.