Cloudreach Voices EC2 Making Sense of the Cost Options

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Cloudreach Voices: EC2 Making Sense of the Cost Options

Copyright ©2016 Cloudreach Limited





is recognised as a market leader in delivering cost effective, scalable compute resource via its Elastic Compute Cloud (EC2) service.

AWS

● Options from single core, sub 1GB RAM Instances through to 36 core, 244GB behemoths

● Intelligent autoscaling capabilities which dynamically manage Instance numbers to suit load varying load requirements

● There are affordable, appropriately sized options for practically any workload.

EC2





its main value proposition was the provision of temporary compute resource for rapid prototyping and development of workloads.

With EC2 today, businesses can deliver highly available, secure and compliant production applications and services to internal and external customers in an economical, OpEx-driven cost model without the traditional up-front CapEx costs of traditional on-premises ‘tin’.

In the early days of EC2

enterprises large and small are harnessing the capabilities of EC2 and associated services.

These days





As well as embracing DevOps and infrastructure as code methodologies, the most successful cloud consumers are developing new cloud-specific skills, including FinOps: the design and management of cloud estates to deliver maximum possible bang for your buck.

And EC2 is a key target for FinOps.

To deliver optimal solutions within AWS takes a different set of skills to traditional on-premises or hosting services.

BANG!





Understanding the cost options available for the launching and running of EC2 Instances

Important elements of optimising

EC2 solutions

Let’s briefly run through the available options, and some of the key use cases for each.

Selecting the most appropriate options for your architecture





Good if you have very rigorous compliance requirements (or perhaps auditors who have very rigorous interpretations of compliance requirements)

Dedicated hosts also provide visibility on physical cores on the Instances, which can be required by software vendors whose licensing regimes are not (yet) well aligned with modern trends towards the cloud, or even old-school on-premises virtualisation

Dedicated Instances/Dedicated Host Instances

Rating: Most Expensive

Advantages:

Pay hourly

Reserve for the use of one or more Instances on hardware dedicated to single customers

Reserve for a whole host dedicated to the customer on which there are multiple Instances of the same family (e.g. general purpose generation 1, 3 or 4, compute-optimised or memory-optimised Instance families).

Cost Analysis

ConclusionThese options have a very specific niche. Since even rigorous financial regulatory frameworks such as PCI can be satisfied with non-dedicated Instances, dedicated Instances and hosts will typically not be central to the majority of cost optimisation strategies.





All Instance type/platform/region combinations have specific break-even points based on the percentage of a reservation duration that the Instance can run.

Below these break-even points, On-Demand Instances will work out more cost effective than running under a matching Instance reservation. These vary between types, platforms and regions, but as a rule of thumb, general purpose Instances running for less than 70% of a 12 month period will be more cost effective running On-Demand rather than under a 12 month Instance reservation.

Compared to Spot Instances, and On-Demand Instance may be more expensive, but unlike a Spot Instance, On-Demand Instances are not under threat of termination if the number of available matching Instances drops too low.

On Demand Instances

Rating: Moderate (though has many benefits)

Advantages:

Default Instance option and Workhorse of the EC2 world

Pay a fixed hourly cost based on the Instance type, platform (e.g. Amazon Linux, Windows, Ubuntu etc.) and region profile of the Instance for every hour or partial hour that the Instance is running.

You can shut down and restart a configured On-Demand Instance when not in use and you will not pay the hourly cost for compute whilst the Instance is running. (But you will pay the storage costs of any attached EBS Instances).

Cost

Analysis

ConclusionIf your Instance contains a workload that is not tolerant of unscheduled termination and needs to run for more than 6 hours but less than the break-even for the Instance type, On-Demand is not only the most flexible but the most cost-effective option.





To take advantage of these potential savings there are of course trade-offs.

The Spot Instance market apportions resources that would otherwise remain unused until required by a customer for On-Demand or Reserved Instances. When looking to provision one or more Spot Instances, a customer places a bid for the maximum price they are willing to pay for a spot Instance. Available resources are granted to Customers based on highest bid first, with earliest bid breaking deadlocks, until all available resources are consumed.

Spot Instances

Rating: Moderate

Cost

Analysis

Advantages:

Cost of running Spot Instances can, in some cases, be an order of magnitude below that of the equivalent On Demand Instance.

The value of the lowest priced bid fulfilled sets the Spot price, which all customers pay. However, as resources are required for On-Demand or Reserved usage, AWS will terminate Spot Instances so as to provision the resource for full fee-paying customers. They will start terminating Instances at the lowest bid first until all On-Demand and Reserved Instance requirements are met, with the new lowest bidder setting the Spot price with their bid.





This has two knock-on effects:

Price paid for a Spot Instance is unpredictable and fluctuates over time (though it will never exceed the Customer’s bid for the Instances because, at the point this would happen, the Instance would be terminated). Thus, as long as your Spot bid is lower than the On-Demand asking price, you will never pay more than the On-Demand price to run the Instance.

A Spot Instance can be terminated at any time, without warning. Customers heavily invested in the use of Spot Instances will often develop, or seek the assistance of partners such as Cloudreach to develop tooling to gather Spot pricing data from the API, analyse risk and adjust their Spot usage strategy accordingly. Amazon has also recently provided a web tool to allow customers to get a broad brushstroke picture of the likelihood of an Instance being terminated at a given spot bid price.

Spot Instances

Analysis

ConclusionEven the best algorithms cannot predict sudden rushes of demand for an Instance type such as a large customer spinning up large farms of EMR Instances, and as a result, Spot Instances are best used in a number of specific use cases:

● Workloads performing time-insensitive, non-urgent tasks;● Workloads that can tolerate unscheduled termination and store execution data and state off-system; or● Elastic workloads that have been architected to request and use Spot Instances in preference to On-Demand

Instances where available.





The situation with Spot Instances has recently gained an additional dimension with the announcement of Fixed Duration Spot Instances.

When bidding for a Fixed Duration Spot Instance, you additionally specify the required duration of the Instance, which can be between one and six hours. If Instances are available, they will be provided at a flat rate for the requested duration.

Fixed Duration Spot Instances

The last use case requires a sizeable dose of DevOps know-how to implement successfully, but can be very cost-effective in large scale-out deployments.

Cost Analysis

CommentaryThese instances are useful for workloads with a known duration activity cycle of less than 6 hours, albeit at a reduced saving compared to that of a standard Spot Instance. Of course, if you have workloads which fit the bill and can be architected to make use of Spot Instances, savings of up to 50% on On-Demand prices make this a cost effective way of delivering short-duration workloads.





No UpfrontFor no upfront cost you commit to pay for an Instance matching the reservation criteria (of type, platform and Availability Zone) for 12 or 36 months in return for a discount on hourly costs, typically in the region of 25% for a general purpose Instance for a 12 month reservation

Instance Reservations

All UpfrontPay an upfront cost which allows you to run an Instance matching the reservation criteria without incurring an hourly compute cost for the matching Instance for the reservation period, which will typically provide an overall saving in the region of 30% for a general purpose Instance for a 12 month reservation

Partial UpfrontA halfway house, where you pay a smaller upfront cost in exchange for a moderate discount on hourly cost for an Instance matching the reservation criteria, which will typically provide an overall saving between that of a No Upfront or All Upfront reservation





Instance reservation is not tied to a specific Instance.

Instead, it will apply to and confer the benefits on any On-Demand Instance which meets the reservation criteria (of type, platform and Availability Zone).

This means that for larger or elastic estates it is possible to model reservations against overall numbers of Instances rather than specific Instances.

Reservation modelling is offered by services such as CloudHealth (and of course also by Cloudreach Governance Services) to enable customers to make informed decisions on reservations of their estate.

Services such as these have significant benefits over AWS Trusted Advisor, which will identify potential reservation targets for you, but only at a very high level without the long-term sensitivity to Instance run-times, which can risk over-reservation.

Key Gotchas to Consider





You are committing to pay for an Instance matching the reservation criteria

Another consideration is that for all reservation options, you are committing to pay for an Instance matching the reservation criteria (of type, platform and Availability Zone) for the duration of the reservation.

If you shut down or resize an Instance which is currently making use of a matching reservation, and there is no matching Instance to take advantage of the reservation, you will continue to pay the Reserved Instance hourly price even though no matching Instance is running.

In the case of an All Upfront reservation, whilst you are not paying an hourly cost, you are failing to take advantage of the upfront payment you have made, which has the same effect on your TCO.

Key Gotchas to Consider





In the case of resizing

You will pay the On-Demand cost of the resized Instance in addition to the Reserved Instance cost for the now unused reservation.

As a result of this, when considering reservations, it is important to consider the capacity plan for workloads running in your estate, and modify any reservation plans accordingly.

When Cloudreach Governance Services engages with a customer, we will typically work with the customer to understand capacity plans so as to provide optimal reservation recommendations, and to work with the reservation movement and resizing capabilities of EC2 to provide ongoing optimisation of reservations.

To make matters worse...





In other words: the understanding of a customer’s capacity is what separates a suboptimal reservation plan straight out of a visualisation tool from an optimal reservation plan which takes these into account.

Our team has a saying...

“information

without insight is

at best a blunt

instrument”





It is the commitment to pay for a matching Instance for the duration of the reservation which results in the effective breakeven points for Instance reservations.

As a rule of thumb

for a 12 month Instance reservation for a general purpose Instance, the break-even point for percentage of time a matching Instance must run over the duration of the reservation for reservations to become cost effective is in the region of 70-75%, although this can vary greatly depending on Instance size and operating system.

Understanding of these break-even points is critical to an optimal reservation strategy.

Breakeven Points

Not

Reserved

(70-75%)

Reserved

TIME INSTANCE RUNS





If your Instance contains a workload that is not tolerant of unscheduled termination and needs to run for more than the break-even for the Instance type, Instance reservations are the most cost-effective option, but beware of capacity planning!

It is cheaper, for example, to run an reserved Instance one size too large for 12 months than to run a reserved Instance for 6 months and resize it due to increased demand on the workload.





Of course there are further cost optimisation opportunities within EC2, not to mention within Amazon as a whole.

This deck has given a brief overview of the various cost options for compute resource within EC2, along with related use cases, but of course there are various permutations and combinations of these options that can be deployed, and there are also strategies for optimising storage and networking costs associated with AWS compute capacity.

This is even before considering optimisation of additional AWS Services.

The beauty of the AWS cost model is that, by considered architectural design and ongoing optimisation of costs, there is a cost effective solution for virtually any workload from large enterprise workloads through agile, scalable digital estates.

Conclusion





If you are interested in learning more about Financial Optimisation or how Cloudreach can assist your business

in implementing a solid governance framework for its cloud estate, please drop us a line on commercial-

[email protected].


mailto:[email protected]



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Cloudreach Voices EC2 Making Sense of the Cost Options

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