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Reserved instances a new path for Amazon Web Services clients

There has been nothing reserved in Amazon Web Services push to move clients from on-demand instances to reserved instances.

Cost concerns are great for me because as a startup I'm very much aware of our burn.

Mike Stephenson,
co-founder, PayrollHero.com

"It's only been in the past two or three months that Amazon has been aggressive in pushing customers to move from on-demand to reserved," said Cameron Peron, vice president of marketing and business development at cloud analytics company Newvem, based in Tel Aviv.

Speculations vary as to why Amazon, known for its on-demand model, is pushing for reserved instances. Some say it has to do with the recent outages, others opine that it is a response to increased cloud competition from HP, Microsoft and Google.

Regardless of the motive, from the vendor standpoint reserved instances offer plenty of perks for the user according to Peron. Newvem's analytics platform examines many aspects of customers' Amazon usage, including identifying situations where moving from the on-demand model to the reserved instances model is cost-effective.

"We can see which part of your cloud is cost-effective or not cost-effective," Peron said. "Now we can analyze your cloud and say this is an area with more consistent usage that would be better done through reserved model."

Mike Stephenson stumbled across Newvem in April and brought them on to analyze AWS usage at the startup he co-founded, PayrollHero.com, a Vancouver-based work productivity and payroll vendor focused on the Southeast Asian market.

"Cost concerns are great for me because as a startup I'm very much aware of our burn," Stephenson said. "[AWS] costs are significant, and based upon the insights from Newvem we were able to strategically choose where to purchase reserved instances."

He had heard about reserved instances from Amazon sales reps, but didn't have the statistical-backing to make the move. The ability to make the switch based on data rather than a sales pitch was key for Stephenson.

"Our AWS contacts are great but they obviously have an agenda. Newvem actually gives us the reasons as to why you should move to reserved instances," Stephenson said.

Stephenson receives weekly reports from Newven. These feature a variety of cloud usage analytics as well as alerts when Newvem identifies instances in which the company strays from best practices. Newvem is able to track the client's cloud usage while maintaining anonymity in its reports.

"It saves our engineers a ton of time, and then the other cool thing is we are able to benchmark ourselves against best practices," Stephenson said. "We can infer what is a best practice out there in the industry."

Amazon offers reserved instances at a rate 50 to 60% less than on-demand instances, but they come with fixed usage rates and one- or three-year contracts. Peron believes reserved instances make sense for customers that know how much cloud they are using and says they get a higher quality of service by switching to the reserved model.

"For customers that have a very heavy cloud footprint and know how much usage that they have, they would benefit from a longer term contract," he said, adding that, from an Amazon standpoint, signing customers to contracts makes sense given the increase in cloud competition.

Stephenson said that PayrollHero.com has saved 30% on Amazon spending since Newvem helped them transition to reserved instances. While they still use the on-demand model, they have moved things like load balancers, application components and a monitoring server to reserved instances. The money saved was then spent on other areas of the business.

"We're able to plug that money back into our engineering team," Stephenson said . "Because of that savings, we were able to hire a full-time iOS guy and put out two applications since April and have them go into extensive testing."


This was first published in August 2012

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