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As enterprise cloud adoption accelerates, optimizing cloud spending has become a top priority for many organizations. Yet, it’s shocking how much waste is incurred, especially with Reserved Instances (RIs) and other discount programs. AWS offers various ways for cloud cost management, but are you leveraging them effectively?
A recent FinOps survey revealed that nearly one-third of cloud investments go to waste, and most organizations exceed their budget by at least 13%. If you are responsible for cloud cost optimization and facing discount program wastage as high as $5,000 per day, it's time to take immediate action.
This blog will shed light on the key reasons behind cloud inefficiencies and offer actionable steps to help you regain control of your cloud spend, with a particular focus on addressing Reserved Instance (RI) & Savings Plan wastage.
Are You Really Losing Money to AWS Cloud Wastage? Here's How to Assess Your Wastage
Before diving into cloud cost optimization strategies, it’s important to assess your wastage. This can be done by using AWS’s comprehensive cloud cost management tools, which provide detailed insights into your cloud spending patterns and identify inefficiencies. Here's how you can get started.
Leveraging AWS Cost Explorer & Utilization Report
AWS Cost Explorer is an essential tool for analyzing your cloud spending. It provides interactive visuals that make it easy to track where your money is going and identify areas of potential wastage, particularly when it comes to Reserved Instances (RIs) and Savings Plans.
For example, you can analyze your costs on a month-to-month basis by grouping the data by month and charge type, specifically focusing on charges related to RIs and Savings Plans such as Savings Plan Covered Usage, Savings Plan Recurring Fee, and Recurring Reservation Fee. This method helps you spot any cloud cost anomalies and assess their financial impact, giving you a clear picture of where adjustments may be needed for cloud cost optimization and taking corrective actions based on the size of the cloud wastage.
Once you've identified a cost anomaly in AWS Cost Explorer, you can dive deeper to determine which Reserved Instances (RIs) are contributing the most to the wastage. To do this, use the Utilization Report under the Reservations section of AWS Billing and Console. This report is a critical part of AWS RI management as it provides detailed insights into RI usage, helping you pinpoint underutilized instances that are driving unnecessary costs.
The graph above illustrates the utilization percentage, with the ideal target being 100%. If there's a sudden drop or decrease, it can be easily spotted in the graph. To further investigate which individual RIs are contributing most to the wastage, refer to the table in the Utilization Report. By sorting the list by Net Savings in descending order, you can quickly identify the RIs where you're losing the most money.
For more detailed information about an RI, click on the Subscription ID to view specifics such as the instance type, effective hourly rate, count, region, and more. This will provide a comprehensive overview, helping you fully understand the source of RI wastage.
Similarly, you can refer to the Utilization Report for Savings Plans to dive deeper into their usage and identify any inefficiencies or wastage.
Leveraging AWS Cost and Usage Dashboards (CUDOS) and Cost Intelligence Dashboards
For a more comprehensive and tailored analysis, the AWS Cost and Usage Dashboards (CUDOS) and Cost Intelligence Dashboard offer a detailed breakdown of your cloud spending. CUDOS aggregates data across all your AWS accounts, providing deeper insights and enabling you to analyze spending trends with exceptional precision, helping you identify opportunities for cloud cost optimization.
By using these tools, you can generate actionable insights that help you spot wastage and identify areas for improvement in real time.
Probable reasons you might be losing money on AWS RI/Savings Plan?
AWS's Reserved Instances and Savings Plans are designed to provide significant cloud cost savings by committing to a usage model. However, they can also be a source of considerable waste if not properly managed. Misaligned resource provisioning, underutilized instances, and rigid discount structures can all contribute to significant daily spend wastage.
If you are experiencing wastage on this scale, the root cause often includes:
- Underutilized RIs and Savings Plans: Misconfigurations or overcommitment lead to instances sitting idle, causing unnecessary costs.
- Inflexibility of Standard RIs: Locked into long-term commitments with instances that no longer fit your usage patterns.
- Inability to Leverage Discounts: High spend regions (exceeding $500K) are ineligible for further RI discounts, pushing organizations toward more flexible but complex pricing models. Without additional discounts, the fixed pricing of RIs might not match your evolving usage patterns, leading to underutilized capacity and wasted costs.
Strategies to Reclaim and Optimize Your Cloud Spending
Once wastage has been identified, it’s time to take action. Here are a few strategies you can implement for effective cloud cost optimization:
Collaborate with Your Team to Enhance Resource Utilization
Work closely with your product owners, engineering teams, and FinOps practitioners to identify inefficiencies and develop targeted solutions. Initiatives such as a "Cleanup Challenge" or "Financial Improvement Sprints" led by FinOps can help focus efforts on identifying wasted spend and optimizing resource usage. By aligning on these goals, you can achieve significant cloud cost reduction and improve overall resource efficiency.
Convert Underutilized Convertible RIs
If you have Convertible RIs that aren’t being fully utilized, it’s possible to convert them to instance types or sizes that better match your current usage patterns. AWS allows you to exchange a Convertible RI at any time during the term for another Convertible RI, provided that the new RI:
- Has an equal or higher total cost over the remaining term compared to the existing RI.
- Belongs to the same scope (either regional or zonal), ensuring that the coverage remains consistent.
If the RI for m4.large is underutilized, you can convert it to another instance family with consistent and significant On-Demand usage, enabling better coverage and reducing cloud wastage.
For more details, visit the AWS documentation
Sell EC2 Standard RIs on the Marketplace
If EC2 Standard RIs are underutilized, consider listing them on the AWS RI Marketplace. Though you won’t be able to list discounted Standard RIs (due to AWS policies), selling your unused capacity can significantly reduce AWS RI wastage.
For instance, if the RIs highlighted in the utilization report are from older generations like r4.large, r5.large and contributing to significant wastage, you can collaborate with your team to list those RIs on the AWS marketplace, if you've already migrated to the latest generation. This can help reduce unnecessary costs and optimize your cloud resources.
Note: Amazon Web Services India Private Limited (AWS India) customers can't sell Reserved Instances in the Reserved Instance Marketplace. For more details on selling RIs visit the AWS documentation.
Reduce Convertible RI Commitments
You can also minimize waste by adjusting the commitment levels for your Convertible RIs, particularly if your cloud usage fluctuates. By reducing the commitment of your Convertible RIs, you can transition those workloads to be covered by a Compute Savings Plan or EC2 Instance Savings Plan, further aiding in cloud cost optimization.
For example, if you had a high commitment to m5.large Convertible RIs but now need to shift to different instance types, you can lower that commitment and let the Savings Plan automatically apply across various instance families and regions. For more details visit the AWS documentation.
Reach Out to AWS Support for Assistance
AWS offers a 7-day return window for newly purchased Savings Plans. If you realize within this window that your plans are being underutilized, you can cancel or exchange them with the help of AWS Support. Additionally, they may assist in exchanging or even canceling RIs in case of misaligned purchases. Alternatively, you can reach out to our experts at CloudKeeper, who are ready to guide you through the process at any stage.
By implementing proactive cloud cost management strategies—utilizing AWS tools, launching organization-wide initiatives, optimizing RI commitments, and seeking AWS Support when needed—you can significantly reduce daily cloud spend. For enterprises facing major wastage, especially those losing $5K or more per day, adopting these practices is critical. Don’t let your cloud investment slip away—optimize your Reserved Instances, Savings Plans, and overall cloud cost management with CloudKeeper today.
Did you know that you can eliminate the hassle of AWS RI management, buy-back guarantee on unused Reserved Instances, access on-demand EC2 resources at three-year RI pricing, and much more - all with no commitment or cost involved? Sounds interesting? Try CloudKeeper Auto today!
