When not to reserve in the Cloud

Hey there!

If you have been running IT in the public cloud, odds are you heard that thou shalt optimize your VMs because Reserved Instances are so damn much cheaper than running pay-as-you-go. Which in principle, yes, they are. And while I am a fervent proponent of a quite aggressive reservation strategy, there clearly are good reasons out there when a reservation is not the right thing for you without deeper analysis.

1: Incompatibility with your budgeting process or budget cycles.

Reservations bind you to a specific set of systems for a year or three. Depending on your contractual agreement, these are either charged in a lump sum upfront (much like buying classic physical systems) or in monthly installments. In the first case, you are generating a significant cost spike which may just blow your IT budget for the current year, especially if you made the reservation towards its end.

On the other hand, should you have IT budget left at the end of a fiscal year, purchasing a reservation is a pretty convenient way to carry over some of it into your next fiscal year.

In any case, your fiscal processes likely need some adjustments to cope with a “CAPEXing the OPEX” in the cloud. Been there, done that, multiple times. Let me know if I can help you.

2: You are not yet perfectly happy with the systems themselves.

Imagine you have built up a sizeable fleet of systems to fulfill a specific task, but you find that the VM family chosen is not quite doing it right. Reserving at that point in time creates a problem on Azure and possibly a far bigger one on AWS (if you chose the immutable reservation plan there). So, even if the system fleet is costly in a PAYG mode of operation, hold it there until you have taken a decision to stick with it. Just ensure that this decision is not procrastinated indefinitely. A rule of thumb is that systems running for three months or more would have been cheaper if they were reserved.

 3: The VM family you are currently using offers only a low discount.

I got surprised by this myself on Azure: while most VM families there offer a rebate around 40% for 1 year and 60% for 3 years, specifically HC44rs give you 15% or 30% respectively. Now imagine you built a solution with 220 CPUs on five of these machines and three months into the project determine that four E64as_v4s would have been the better choice. You cannot mutate your reservation, because the reservation discount of the E family is much higher, making the 264 CPUs in the E family much cheaper than the 220 of the HC instances. And since you can only change to a reservation of the same or higher total order value in Azure… in that situation, you hopefully have quite a few unreserved systems left to make it to the initial reservation amount.

4: Reserving makes the specific resource actually more expensive.

Now, this is really strange and I hope it was a mistake in my calculations or on the CSP price list I used to do the math… but a 3 year reserved Premium SSD on Azure with 1+ TB actually cost more per month than running it in pay as you go mode.

If you have found resources that actually up the cost when reserving… please share it in the comments.

What is your stance towards reserved instances in the public clouds?