RILM: What Is It and What Can It Do for Your Cloud Costs

Wily cloud costs are concerning for some organizations. As companies strive to optimize their operations in the cloud, it’s crucial to manage expenditure effectively. Leveraging Reserved Instances (RIs) or Committed Use Discounts (CUDs) can make a world of difference in helping businesses maintain a firm grip on budgetary considerations.

RIs and CUDs are  purchasing options offered by cloud service providers like AWS, Azure and GCP that allow customers to reserve capacity for their cloud resources (e.g., virtual machines, databases) for a specified period, typically one or three years, at a discounted rate. These options are a great way to save money on cloud computing costs. However, it's important to manage your RIs and CUDs effectively throughout their lifecycle in order to maximize your savings. We refer to this as Reserved Instance Lifecycle Management (RILM).

There are two primary benefits of RILM:

• Reduced costs: By managing your RIs and CUDs effectively, you can ensure that you're always taking advantage of the best possible discounts.
• Increased predictability: RIs and CUDs provide predictable costs, which can help you to budget more effectively.

You can manage your RIs and CUDs manually, or you can use a cloud management tool. If you choose to manage your RIs and CUDs manually, you'll need to track their expiration dates and make sure that you're renewing them on time. Establishing a quarterly or bi-annual renewal cadence may make the most sense for your organization. You'll also need to keep an eye on your cloud usage patterns so that you can make sure that you're still getting the best possible discounts.

To manage RIs and CUDs effectively, it’s good to have an understanding of what exactly the lifecycle of these purchase options looks like.

1. Purchasing: This is the initial step where customers purchase Reserved Instances. They commit to using the reserved capacity for a specific term (e.g., one or three years) and pay an upfront fee or a reduced hourly rate.

2. Assignment: Once purchased, Reserved Instances need to be assigned to specific resources. This involves associating the reserved capacity with running instances or services in the cloud environment. It ensures that the benefits of the Reserved Instances are applied to the right resources.

3. Utilization monitoring: Throughout the Reserved Instance term, it's crucial to monitor their utilization. Cloud users and administrators should track how much of the reserved capacity is being actively used and how much is still available.

4. Modifications: During the lifecycle, users may need to modify their Reserved Instance configurations. For example, users might modify the availability zone, instance size and other attributes of the Reserved Instances to adapt to changing needs.

5. Renewal: As the Reserved Instance term approaches its end, users have the option to renew their reservation for another term. Renewals might come with different pricing options or updated instance types.

6. Expiry: When the Reserved Instance term ends, it moves to an "expired" state. After this point, the customer will no longer receive the benefits of the reserved pricing, and the instances will be billed at regular on-demand rates.

7. Rebalancing: Some cloud providers offer options for automatic or manual rebalancing, which ensures that Reserved Instances are used efficiently. This involves shifting RIs benefits to match usage patterns and optimize cost savings. Working with tools or providers that can leverage RI Arbitrage, can assist with ending RI commitments early and purchasing new RIs at lower costs.

By effectively managing the Reserved Instance lifecycle, cloud users can achieve substantial cost savings while ensuring their cloud resources are utilized efficiently. It requires careful planning, monitoring, and adjustments based on changing needs to maximize the value of RIs and CUDs over time.

Certain cloud management tools can automate many of the tasks involved in RILM for you. This can save you significant time and effort while ensuring that you're always taking advantage of the best possible discounts.

In addition to managing your RIs and CUDs, it's also important to factor in the end-of-life (EOL) dates for the underlying hardware or backend system types. This is because RIs and CUDs are typically tied to specific hardware or system types. If you don't factor in the EOL dates, you could end up with RIs or CUDs that are running workloads on systems that are obsolete.

In addition to RIs and CUDs, you should also consider using the savings plans offered by some cloud providers. Savings plans can offer similar discounts to RIs, so they can be a great way to save money if you're confident that you'll be using a certain amount of cloud computing resources in the future. These plans are based on a commitment to a specific dollar amount per hour over a specified amount of time, where RIs require a commitment to a specific instance (i.e. virtual server).