How Reserved Instances can Reduce Your On-Demand Cloud Costs

reserved instances reduce cloud usage costsMany jump into the cloud computing bandwagon thinking that it is the ultimate way to foster innovations, increase productivity and lower costs. While the cloud can give you answers, but mostly what cloud vendors pitch you is not entirely true, especially in the cost saving department.

Myth buster: The cloud can cost you more

you see, we want to adopt the cloud because cloud solutions – with “borrowed” hardware and software – give us plenty of computing power at much lower costs compared to running applications on your own IT infrastructure. However, not all computing requirements can be cheaper using cloud solutions. In fact, in some cases, the cloud will cost you more than your on-premise IT solutions.

But don’t get me wrong – the cloud can cost you more for at least one good reason: It offers you flexibility. You can access resources on-demand. This is powerful, because some businesses need burstable computing resources – accessing huge amount of resources in short period of time; this is how the cloud can help businesses. Cheaper? May be not, but yes, the cloud can give you more power.

Now, one of the culprits of expensive cloud is the hourly rate. Yes, hourly cloud access is both the benefit and drawback of the cloud; again, the cloud offers computing on-demand, on pay-as-you-go basis; but if you are not careful, the hourly charges can burn you down if you don’t track your resource usages.

Reserved instances can help you manage your cloud costs

Depending on your cloud usages, there is something that can help you lower your on-demand instances costs while reserving resources on your behalf, called reserved instances.

First off – what are instances?

In object-oriented programming an instance is an occurrence or a copy of an object, whether currently executing or not. Instances of a class share the same set of attributes, yet will typically differ in what those attributes contain – source: Wikipedia

In cloud computing, instances refer to the similar thing: If you sign up with Amazon Web Services (AWS), you will be created an instance for you to access cloud computing resources.

There are many types of instances; for a true cloud vendor, the instances created for users are typically on-demand instances. You will be billed for the instance-hour you consumed – this can be very expensive if, again, you don’t track your cloud usages.

More on reserved instances…

As I mentioned above, some cloud vendors, such as AWS, offer what’s called “reserved instances.” To learn more about reserved instances, let’s take Amazon EC2 Reserved Instances as an example.

Launched in 2009, Amazon offers reserved instances, yet another pricing option for Amazon EC2; they are positioned as complementary to EC2 On-Demand Instances. This type of instances allows you to reserve capacity at a low, one-time payment. Reserved instances will also allows you to access cloud resources at reduced hourly usage charges.

Just like the On-Demand Instances, you can pay as you go with the Reserved Instances; you will need to pay for resources as you need them – only they are up to 71 percent more cheaper than on-demand instances (sources: AWS)

So, with all the similarities, why reserved instances? Simple – instead of the “sky is the limit” approach of on-demand computing, reserved instances will reserve capacity of your choice (AWS offers them in three utilization level: Low, medium and heavy utilization.) You can access resources as much as you want, as long as they are still within your limit.

Should I purchase reserved instances?

Depending on your usage patterns, you should purchase reserved instances that are best-suited with those patterns. You should consider contacting a cloud consultant or a cloud vendor’s partner.

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