#06. Are your Cloud Commitments Reaching their Potential Savings?

Cloud vendors aren't lying when they advertise 72% savings. In fact, if you dig a bit you will find that the potential is slightly higher. However, before rushing to purchase, you need to understand the conditions that make such savings achievable.

TL;DR

• Cloud elasticity usage makes commitments saving potential much less than anticipated
• Automation is key to reach the highest potential of savings.

Why Are You Not Getting the Most Out of Your Cloud Savings?

As discussed in article #3, understanding the various Commitment-Based Discount offerings is crucial before purchasing them to maximize your savings potential. However, one key point stands out: you can only achieve these savings if your resources need to run 24/7. Why? Article #4 explained this well. To maximize your savings, you need to strike a good balance between coverage and utilization. Otherwise, in some cases, you're better off sticking with on-demand pricing.

RIs offer greater discounts for longer reservation periods (e.g., 3 years vs. 1 year). However, they only reach their full potential when the workload runs continuously. This is ideal for commitments such as an RDS database or a production instance operating 24/7. However, many cloud workloads typically involve periodic shutdowns, which significantly reduce potential savings—sometimes even resulting in losses (as illustrated in the example above).

How to Reach the Full Potential of Cloud Saving On Reserved Instances?

Wouldn't it be perfect if we could have a commitment with elastic usage? Something that adjusts with demand and usage? Unfortunately, no commitments currently offer such elasticity. However, you can emulate this flexibility by following these guidelines:

1. For workloads guaranteed to run 24/7 for extended periods (e.g., a production database), purchase Standard RIs.
2. Although Standard RIs are the cheapest, they're also the riskiest. When possible, opt for Convertible RIs to maintain flexibility in changing their properties and attributes, rather than wasting them.
3. Cover any remaining needs with Savings Plans.

This sounds like a simple plan, but a crucial question remains: How do we determine the right amount of commitments to purchase?

To determine the potential savings, we need to compare the actual costs of running a resource on-demand versus under a given commitment. We can then adjust various combinations of Standard RIs, Convertible RIs, and SPs to find the optimal mix for maximum savings. This process, of course, takes into account business plans and long-term commitment capabilities. Would you like to perform this analysis? I bet not!

This brings us to the main point of the article. Purchasing a commitment solely because of its high discount is ill-advised. However, manually calculating optimal combinations is impractical. This process is ripe for automation—a perfect scenario where using a specialized platform or tool becomes invaluable.

Summary

A commitment will only reach its maximum potential when it's used on resources running continuously. However, when dealing with resources that are turned on and off, it's essential to calculate the savings value by comparing the on-demand price to the benefits offered by the commitment. For this, try to use a tool that calculates and automates the purchase and conversion of commitments to emulate an elastic commitment that yields the highest value of savings.

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