PLEASE NOTE: As of December 2nd 2014, there has been a major change to the Reserved Instance model. As a result, some of the information in this blog post may be incomplete.
Using Reserved Instances is undoubtedly one of the best ways to save money on cloud costs, and a primary feature of RIs that makes this possible is the variety of RI types available to purchase. The different options for types of RI purchases allow you to mix and match RIs perfectly for the best cost savings—but what are the different Reserved Instance types, and when should each be used?
Reserved Instance types: The basics
There are three basic Reserved Instance types: Light, Medium, and Heavy. The difference between these reservation types comes down to how much you pay upfront for the reservation, and how much you pay by the hour. Generally speaking, Light reservations tend towards lower upfront payments, Heavy reservations tend towards lower hourly payments, and Medium reservations rest somewhere in between.
Heavy reservations: A big commitment for big savings
Heavy RIs are often lauded as the “best” or “easiest” RI type to use. Even Amazon describes Heavy RIs as offering “the most absolute savings of any Reserved Instance type.” With that sort of packaging, it’s easy to understand why when purchasing RIs, many businesses will simply buy a few Heavy reservations a year and call it good.
Heavy reservations, unlike other reservation types, do not charge according to varying hourly usage. Instead, the instance is reserved for every hour of the duration of the reservation (either one or three years) and a comparably low usage fee for each of those hours is charged up front at the beginning of every month. In other words, you pay the upfront fee upon making the reservation, and are then billed for 744 or 720 hours of usage on the 1st of each month. Then you hope to first break even, then to generate savings, by using that reservation a certain amount of the time. For most one-year Heavy reservations, the break-even point is between 50 and 60%. This means that if your instance is running more than half the time, a Heavy RI purchase will likely save you more money than a traditional on-demand cost model would have.
However, 50%-60% is a fairly high utilization rate. Restricting your RI purchases to Heavies prevents you from saving on your instances which don’t run as frequently— but still run enough to qualify for savings with other RI types. Businesses which limit themselves to Heavy RIs may also find that their flexibility is limited— once you’ve purchased a Heavy RI, you’re obligated to use that instance a rather considerable amount, in spite of changing projects and business directions.
There are many advantages to using Heavy RIs— they can save you up to 45% when compared with on-demand instances, and are an excellent choice for saving on your core infrastructure costs. However, to limit your business to exclusively Heavies is to severely limit your business’s flexibility and savings.
For handling infrastructural volatility due to autoscaling, or for rolling out dev or test environments, you can utilize Medium or Light reservations.
Medium reservations: The middle of the road
Medium reservations feature a significantly lower upfront cost than Heavy reservations. This is because instead of charging for every hour of the reservation upfront, Medium reservations only charge you for the hours of the reservation that you use. The upfront cost therefore merely accounts for the price of the reservation, and the rest of the costs are accumulated as you use the reservation. These hourly usage charges are considerably lower than hourly on-demand prices, and as such, you can save up to 39% compared with on-demand instances. This is lower than the savings that Heavy RIs offer, but still a considerable amount.
Whereas the breakeven point for a one year Heavy RI is around 50-60%, the breakeven point for a one year Medium RI is generally around 40%. This means that even if an instance doesn’t qualify for a Heavy RI, it may still qualify for a Medium RI— and save you 39% compared to on-demand.
Light reservations: Save on the small stuff
Light reservations boast an even lower upfront cost than Medium or Heavy reservations. Like Medium reservations, you pay for the reservation of a Light instance upfront, and then pay an additional fee for each hour you use the reservation. While still notably lower than on-demand prices, these hourly charges are slightly higher for Light reservations than they are for Medium or High.
The breakeven point for a one year Light reservation is generally under 30%— much lower than Medium and Heavy. This means that you can use Light RIs for many instances which wouldn’t qualify for a heavier RI, and still save up to 30% compared to on-demand costs.
Mix and match for maximum savings
Instead of limiting yourself to Heavy RIs for big projects, introducing a few Medium or Light RIs can help you save on smaller projects— and those savings will quickly stack up to make a substantial difference on your cloud bill.
Ready to maximize your savings with the perfect combination of Reserved Instance types? Check out our new Reserved Instance planner, where we do all the utilization rate calculations for you to determine the number and type of reservations you need. Log in or start a free trial of Cloudability now to begin planning your RIs.