The RI Exchange Gamble
A media company has 200 Standard RIs for m5.2xlarge instances in us-east-1, purchased 2 years ago with 1 year remaining. Due to a shift to containerized workloads, they now need more memory-optimized instances (r5.2xlarge). The RIs have a remaining value of $120,000. The company can exchange RIs for different instance families of equal or greater value, but the exchange may result in a new 1-year or 3-year term. The FinOps team is considering exchanging all RIs to r5.2xlarge, but the engineering team warns that the workload mix is still evolving, and they might need a mix of instance types. Additionally, the company has a policy to avoid long-term commitments beyond 1 year. The exchange process requires careful planning to avoid coverage gaps. The CFO wants to minimize waste and maximize savings.
1. Should the company exchange all RIs? What factors should they consider, and what alternative approach would you recommend?
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Exchanging all RIs is risky because the workload mix is uncertain. Key factors:
- Value preservation: RI exchange requires the new RI to have equal or greater value. r5.2xlarge is more expensive than m5.2xlarge, so exchanging might require adding value (e.g., paying the difference). Calculate the remaining value and the cost of exchange.
- Term commitment: Exchanging may reset the term to 1 or 3 years. The company policy avoids >1 year, so choose 1-year term if possible.
- Flexibility: A mix of instance types may be needed. Exchanging all to r5 could lead to waste if some workloads remain on m5.
- Coverage gap: Ensure new RIs are applied to matching instances. Use Cloudability to model the impact.
Recommendation: Exchange only a portion (e.g., 60%) of RIs to r5.2xlarge based on current usage trends, and keep the rest as m5 RIs or exchange to a flexible instance family. Alternatively, consider converting to Compute Savings Plans, which offer flexibility across families, but that may not be possible via exchange. Use Cloudability's RI exchange planner to simulate scenarios.
2. How would you execute the exchange to minimize risk and ensure compliance with company policy?
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Execution plan:
- Analyze usage: Use Cloudability to identify the actual instance families and sizes running in the next 3-6 months. Determine the optimal mix.
- Model exchange options: Use AWS RI Exchange tool or Cloudability's planning features to compare scenarios (e.g., exchange 50% to r5, keep 50% m5).
- Choose term: Select 1-year term to comply with policy. If 1-year not available, consider partial exchange.
- Stage the exchange: Exchange in tranches (e.g., 25% at a time) to monitor utilization and adjust.
- Update governance: Document the exchange in the commitment register and set alerts for utilization.
- Communicate: Inform engineering and finance of the new RI coverage and any changes to cost allocation.