As a cloud journey professional, what are twenty minutes worth to you? Twenty minutes is all it took for our cost management product manager Mike to bring the VMware cloud team on a live walkthrough of our new Convertible Reserved Instance (RI) Exchanger and illustrate how VMware could save $1.7M over the lifetime of our RIs.
Recently, 451 Group found that more than 50% of large enterprises worry about costs associated with cloud daily, with 80% believing that ineffective, often homegrown methods of managing cloud financials are negatively impacting their bottom line. Businesses are both unprepared and daunted by the thought of managing multi-million dollar cloud budgets—and they’re looking for solutions that provide the visibility and automation needed to optimize their environment.
The Risk of Variable Spend
Outside of large cloud adopters (those pioneers who budget and spend $1M+/month on cloud services), most enterprises are struggling to manage their variable spend resource—even though cloud budgets have quickly become a material part of their IT spend.
Operational units like engineering and DevOps are now working alongside, and have an important stake in, the business’ financial functions. The challenge? Communication between these teams includes language terms like EC2 Instances and reservations for compute, technical jargon not all stakeholders have an equal understanding of. Formulaic methods previously used to calculate budgets for data centers now need to be relearned and replaced with budgeting methods that can account for the rapidly expanding world of cloud—where the ability to increase speed is easy and the potential for a strong return on investment (ROI) is within reach.
Before Convertible Reserved Instances (RI) Existed
Before the genesis of the Convertible RI, there was only one class of EC2 RI, known as a Standard RI. Standard RIs allowed the buyer to modify the EC2 Instance family, but restricted the modification to be within the same instance family. As consumers matured and expanded their migrations to the cloud, cloud stewards quickly learned the true challenge of predicting the long-term requirements cloud users within the organization would have. Workloads evolved based on application design, work requirements, and simply because of the real-time change in today’s digital world. Standard EC2 RIs are helpful only when you’re accurate in predicting your long-term requirements. If your predictions are off, you need to be prepared to compromise on performance or cost.
All reservations of any class are tied to an instance type (i.e. M5), a payment option (e.g. All Upfront, Partial Upfront, No Upfront), operating system (Linux, Windows), and tenancy (i.e. shared). Over time, workloads change and a need for more memory or compute power will require you to make changes to the instance type.
Imagine you’ve reviewed the engineering department’s needs for the coming year and decided to purchase Standard EC2 RIs. Later, as the year progresses, you find that your projections were inaccurate, and you need to modify the RIs you purchased. As you attempt to make those changes, you realize you can only modify your EC2 Reserved Instances within the same family class.
If migrating within the same family doesn’t meet your technical and business requirements, you must pay extra to purchase RIs that better suit your compute, memory, network, or storage needs. Now, the reservation investment you made to save money is preventing you from taking full advantage of the cloud’s flexibility. Even more challenging, you’ll now need to explain to finance why you had to pay additional money for new reservations while carrying the burden of several unused RIs, a combination that just blew up your budgeting mastery.
The Financial Leverage and Operational Power of Convertible RIs
Convertible RIs eliminate all the hassle of attempting to guess your workload needs with pinpoint accuracy. Convertible RIs provide enhanced flexibility, and nearly all attributes (aside from account and region) can be changed via an exchange for new RIs of greater or equal value.
Yes, exchanging Convertible RIs can be free, but you’ll often pay a true-up cost if the value of the new RIs are not equal to the value of the RIs you’re exchanging for. More importantly, with Convertible RIs, you can assure your teams and finance colleagues that you will:
- Minimize RI waste
- Optimize with improved flexibility and increased confidence
- Drive material savings on your AWS bill
CloudHealth Sees the Rise of Convertible Reservations
Convertible Reservations have been growing rapidly in popularity since November 2017. CloudHealth manages more than $8B of cloud spend across more than 4,000 customers. We’ve found that 75% of our customers are taking advantage of Amazon Elastic Compute Cloud (EC2) RIs. Of the more than 1.7 million active RIs CloudHealth customers currently have, today more than 60% of them are Convertibles. We expect this adoption to reach more than 70% by the end of the year.
AWS Makes the Migration to Convertibles Sensible
One major enhancement AWS brought to the table to help accelerate adoption was the ability to purchase 1 year Convertible RIs. At the same time, they made exchanges more flexible, allowing customers to split and recombine groups of RI purchases to make more advantageous exchanges. However, all of this added another layer of complexity for Convertible RI purchases and exchanges.
Up until now, customers using Convertible RIs relied on complex spreadsheets to do the analysis for the exchange, and even then, were unsure if they were making the right decisions. Just planning for a simple exchange could take several hours every week.
CloudHealth Makes Convertible RI Management Easy
Our Convertible Reserved Instance Exchanger and newly released automation feature is an industry-first solution for quickly analyzing your AWS environment, making recommendations, and taking automated action on Convertible RI Exchanges— allowing you to save tens or even hundreds of thousands of dollars in a matter of minutes. Here’s how it works:
- Set a budget for your exchange. It can be $0 if you don’t want to make any additional investments in the transaction.
- CloudHealth identifies underutilized Convertible Reserved Instances and On-Demand usage candidates. Next, the platform will select the most efficient candidates.
- CloudHealth will recommend which of your Convertible RIs should be exchanged, and what they should be exchanged for, including what your expected monthly savings and savings over the lifetime of the reservation will be.
- From there you have three execution choices.
- Export the exchange recommendations and log into the console to make the exchanges.
- Export the exchange recommendations and share them with your AWS rep.
- Our personal favorite – hit the exchange button within the CloudHealth platform and seamlessly execute without needing to speak to anyone at AWS.
Here is an example of our own use of the Convertible RI Exchanger here at CloudHealth:
Our Convertible Exchanger is so Good – We Use it Too!
We are technologists and business practitioners at CloudHealth. We build all our products to the standards we would expect to use in our own environment—and that’s exactly what we did. As a large consumer of AWS ourselves, our DevOps team runs a diverse RI portfolio that includes both Convertible and Standard RIs. As part of the development process, we decided to see what we could save by running Convertible RI Exchanges on our own environment. We uncovered 223 RIs that would benefit from an exchange.
The results? For a mere $466 in true-up costs, we were able to save $200k over the lifetime of the RIs… in just about 7 months! And as we started working with customers, we found out these results were pretty standard. The typical customer found $100k+ in savings, and with one large AWS customer, we identified savings of more than $12.5M!
Take the Next Step
If you haven’t made the leap yet to Convertible RIs, now is a perfect time! With modeling new Convertible RI purchases and exchanges now easier than ever, you can get both the significant discounts and the flexibility you want.
If you’ve already invested in Convertible RIs, it’s very likely that you’re leaving unrealized savings on the table. Discover how much you can save with our Convertible RI Exchanger.
