Red Line vs. Green Line: Reporting on Reserved Instance Coverage and Waste
For as long as we've been talking about Reserved Instances, we've advocated making iterative, monthly purchases to help keep your Reserved Instance portfolio aligned with your-ever changing infrastructure. But there's a science behind making the most of each purchase—and it begins with what you already own.
Before you get started with your next purchase, there are two metrics you should look at to get a sense of the state of your current reservations. First, your current RI coverage, which we'll be referring to in this post as the "Green Line." Second, your current RI waste, which we'll be referring to as the "Red Line." With each purchase, you'll aim to push the Green Line (coverage) up, and keep the Red Line (waste) low.
The Green Line
First, let's explore the Green Line. This will represent where you currently stand as you prepare to make a purchase, by telling you what percentage of your total EC2 hours are already covered by a reservation. It's calculated by comparing your total EC2 usage hours (reserved or on-demand) with your total Reserved Hours. In a Cloudability report on these metrics, we also overlay the Reserved Coverage Rate metric, which shows the percentage of EC2 hours covered by Reserved Instances.
The Green Line is a great measure for Reserved Instance goal setting. Many companies strive to reach 80% coverage. You might even aim as high as 90%. Remember, though, that when you purchase a Reserved Instance, you commit to paying for every hour of the 1 or 3 year reservation period. Assuming some elasticity in your cloud environment—which is the biggest benefit of cloud— aiming for any degree of coverage over 90% could result in you not using all the hours you’re paying for.
In the above chart: “Usage Hours” represents total EC2 hours, Reserved Hours represents the number of hours covered by Reserved Instances, and Reserved Coverage Rate represents the percentage of the total EC2 hours covered by Reserved Instances.
There are several ways to raise your Green Line: buying new reservations, modifying existing under-used reservations, or even changing your existing infrastructure to match your existing under-used reservations.
But how quickly should you try to raise your Green Line? A little slower than you might think. A lot goes into managing a Reserved Instance portfolio beyond just making the purchase. You want to purchase intelligently to maximize modification opportunities (see last section of this blog post). Once you’ve purchased the RIs, you’ll want to report on the impact of the purchase by showing savings over time. You’ll also want to get your organization up to speed on the process; this may include streamlining budget approvals to run an iterative process, and getting your finance or procurement teams on board to properly report on the purchases.
Due to the complexity of the process, we typically see the most effective organizations buy 10-25% of their total recommended RI footprint each month. A month later, they report on the impact and buy another group of RIs. One of the key metrics that they look at after they make a purchase is the Red Line.
The Injected Line Item
Before we get into building out waste reporting using the Red Line, you’ll need to understand how the Injected Line Item works in your AWS Detailed Billing Report. The injected line items are inserted on the first of each month and retroactively updated throughout the month as you use your RIs. They can be a bit confusing at first. Here’s what each column means:
As you can see, if you report on the “Usage Quantity” or the “Unblended Cost” column from the injected line item, you can isolate how much of your RI purchase you haven't used. Note, the Injected Line Item does not exist for All Upfront RIs—a great reason to opt for Partial Upfront or No Upfront RIs instead.
The Red Line
The Red Line references the Injected Line Item to show you how many of your pre-paid RI hours you didn't use.
There are two common ways to report on the Red Line. The first is as a graph showing the value of the unused RI hours compared to the total cost of the recurring RI hours. You build the Red Line report by filtering only on the Injected Line Items in your DBR and by looking at the Total Invoiced Cost (i.e., the Blended Cost which is the cost of all RI hours) compared to the Unblended Cost (which is the cost of unused hours only).
In the chart above, Unblended Cost represents the cost of unused RI hours each month. Total Invoice Cost represents the cost of all RI hours for the month. You’ll note that in July an RI purchase was made pushing up the Reserved Coverage Rate but the Unblended Cost (i.e., the unused RI hours) barely increased. This indicates a successful purchase.
Another helpful way to report on the Red Line is to build a table that shows the total amount of unused RI hours and their cost by Instance Type or Account Name.
In this example, the first two metric columns (Unblended Cost and Usage Quantity) represent the unused portion of the RIs while the Total Invoiced Cost (Blended Cost) represents the total cost of the RI hours for the month.
Keep in mind that despite the fact that the DBR is always dated on the 1st of the month, AWS continuously updates the Injected Line Item. In other words, they don’t add a new line item when it changes—they overwrite the old line item. This means that your report will change throughout the month, depending on when you look at it. So don't report on stale data!
Green and Red Line reports can be a valuable resource regardless of where you are in your Reserved Instance purchasing process—so if you're not looking at these reports yet, try spinning some up yourself.
Stay tuned for the next article in this series, where we’ll discuss factors that might drive your Red Line up and how to keep the waste down. To get notified about future posts, subscribe for email updates!