In our last article, we understood Amazon Web Services with the help of a restaurant expansion analogy and how to set up an AWS account. Amazon Web Services are the best partners for small and medium businesses helping them scale without spending a huge amount.

As we know, using the cloud costs money and companies pay AWS, Azure, etc to use cloud servers. The cloud lets companies grow fast. They can add servers quickly when they need them. However, this flexibility can lead to waste because companies may use more servers than they need. When companies waste money on the cloud, it takes away from other priorities. Now, unfortunately, as of January 15th, 2024, AWS has banned the reselling of reserved instances.

What is AWS’s recent policy?

AWS has implemented a major policy change about discounted Reserved Instances (RIs). As of January 15, 2024, AWS has banned the resale of any RIs bought at a discount on the EC2 Reserved Instance Marketplace.

This change is being made because section 5.5 of the AWS service agreements do not allow the sale of discounted RIs. While AWS previously allowed the practice, it has been prohibited now based on their official rules.

As a transitional gentility, customers were allowed to resell discounted RIs bought before October 1, 2023, on the Marketplace until January 15, 2024. 

What does this ban mean for the companies?

The days of savings have come to an end. For a while now, companies have been able to save up by selling their unused Reserved Instances (RIs), especially those they bought at discounted rates from promotional programs. But as of January 15, 2024, AWS has banned this deal. It means that companies looking to cover their AWS expenses can no longer do this. Without the option to sell discounted RIs, companies need to find other suitable options and need to work on optimising cloud usage. It's time to get a hold of the money allocation and get smart about managing expenses. 

Impact on cost savings

• In the past, selling unused Reserved Instances (RIs) that were bought at significant discounts was an easy and effective way for companies to cut their cloud expenses. It was like hitting the jackpot, with some organisations managing to cover 80% of their AWS bills.
• So, companies can't just count on reselling to save money on cloud services now, and without these savings, lots of organisations will see cloud costs shoot through the roof. They need to reduce usage, plan things better, and get serious with how they buy things. 

Impact on SMBs

• In the past, small and medium businesses could sell any extra capacity and make some money while keeping their cloud expenses low. But, unfortunately, this cost-saving measure has been banned, leaving SMBs without any easy optimisation strategy.
• Now, without these savings, SMBs with unpredictable workloads might find that AWS is not as cost-effective as it used to be. They'll need to keep a close eye on their usage, make sure their Reserved Instances are the right size, and maybe explore other options to keep their cloud costs under control. But, dealing with these regulations and losing money could be a real challenge for small SMB teams. 

Impact on hoarding of instances

• Earlier, AWS used to offer discounts on Reserved Instances, which was helpful for some companies. This would mean, they reserve more instances than they actually needed, just in case they had unexpected needs or for future growth. The low rates meant no downside to doing this.
• But now, things have changed. All that excess capacity that's not being used will end up being a problem and drive up costs. Companies that don't have a clear view of how their Reserved Instances are being used across different departments and applications will struggle.

Impact on growth

• In the past, companies could save a bunch of money through discounted RI, which gave them more money to invest in growth projects and to fund other areas like developing new products or entering new markets.
• But now, without this revenue stream, companies won't have as much cash for reinvestment. They might have to move the funds they were using for innovation and business development to cover the higher costs of the cloud. Essentially, they won't have that safety net of savings anymore, which might make them reconsider investing in growth. So, if a company heavily relies on discounted RI arbitrage to expand, they'll need to come up with a new budget.

What are the best adaptation practices?

• This ban means understanding the spending and usage patterns. There are cloud cost management tools like CloudZero that provide complete allocation reporting and help you identify areas where companies are wasteful. With this tool, we can figure out the actual need by analysing the hourly usage and avoiding unnecessary expenses.
• To keep using reserved instance discounts without reselling, we can use savings plans and convertible RIs. Balancing convertible RIs across different instance families can give us flexibility and save costs. 
• Developers and engineers need to have some limits in place so they don't go overboard with spending. Being careful with cloud resources is extremely important for all teams. In order to optimise your cloud costs, check out AWS Trusted Advisors‍
• To make sure nothing is wasted we can set up schedules to shut things down when we don't need them, we can adjust resources as necessary, and get rid of anything we're not using. It's also a good idea to keep an eye on the storage volumes, databases, load balancers, and instances to see if they can be fine-tuned. Check out AWS Cost Explorer to see if they have any suggestions on how things can be rightsized.
• It's worth thinking about moving the workload to a different cloud provider if they offer a better deal. But remember to take a close look at how much it'll cost to migrate compared to how much you might save in the long run.

The AWS discounted RI resale ban is basically ending the era of easy wins. It's going to be a little tough, but it's also a chance to create some efficient practices. If we have the right tools, good visibility, and optimisation skills, we will make it and bring in a new way of cloud management. With shifts like this, you need someone reliable, who understands your needs and expenses. We help you become self-sufficient with cloud efficiency.