Shamrock Consulting Group launches groundbreaking campaign with Blue Street Capital to help clients finance large Reserved Instance (RI) purchases on Amazon Web Services and Microsoft Azure
Unless you’re Rip Van Winkle and have been sleeping for the last 20 years, I’m about to tell you something you already know – companies of all sizes are migrating some or all of their enterprise workloads to the public cloud.
This trend will continue for the foreseeable future, and there are a number of reasons why the migration of enterprise workloads is a smart move – including cost savings, simplicity, scalability, ease of management, and speed to market.
While the migration to the public cloud has been an ongoing trend for years, an emerging sub-trend we’re seeing in the public cloud world is the utilization of Reserved Instances. The term Reserved Instances refers to the reservation of committed future cloud resources and capacity. These reserved resources and capacity are paid for up-front and, if implemented correctly, can produce significant savings for cloud-ready businesses. We’ll cover the mechanics of this later.
The deployment of Reserved Instances can be a powerful cost saving tool, although the uptake of RIs to-date has been relatively low, with most businesses still using the ‘pay-as-you-go’ model for their cloud resources.
Why is this?
Our team at Shamrock Consulting Group think there are several factors driving the slow adoption of Reserved Instances:
First, a successful Reserved Instance strategy requires accurate forecasting of future cloud resource needs, which in turn requires time and acumen that many businesses may not currently have.
Second, an effective Reserved Instance strategy requires companies to pay for some or all of their RI resources upfront. Many finance departments have not yet wrapped their heads around the cloud, and IT leaders have told us that navigating the process of getting finance’s approval to pay upfront for future cloud resources can oftentimes be more trouble than it’s worth.
Third, and most importantly, many companies have found the upfront costs associated with Reserved Instances to be incompatible with their short-term budgets, and that their options for financing these upfront costs are limited (or non-existent).
While accurate cloud resource forecasting will continue to be a requirement for a successful RI strategy, the accompanying financing challenges are about to become a thing of the past…
Financing Reserved Instances vs Capital Expenditure
A 2017 study conducted by the Equipment on Leasing and Finance Foundation’s found that 68% of large IT equipment capital expenditures was financed. And in Shamrock’s experience, many enterprises view the upfront costs associated with Reserved Instances as capital expenditures, and therefore they have sought to pay for their RI costs with financing. The historical lack of viable RI financing options, however, have often halted these RI initiatives in their tracks.
Several IT leaders have told us that a Reserved Instances strategy would be much more attractive if they had the ability to finance the upfront costs associated with RIs in the same way that IT equipment capital expenditures are commonly financed by their businesses.
However, just as finance departments regularly require IT equipment capital expenditures be financed, IT leaders are often finding that their requests for Reserved Instances funding are being rejected by their finance departments due to the lack of viable financing options.
Fear not though, dear reader…as you’ll find out shortly, the financing problem that has kept many companies’ RI strategies stuck in neutral is quickly becoming moot.
Why Financing Reserved Instances Make Financial Sense
The primary appeal of Reserved Instances is that they provide customers with the same public cloud resources at a fraction of the cost. In essence, the public cloud providers are telling customers, “Pay us now for cloud resources you will use at a later date and, in exchange, we will provide these future resources at a discounted rate.”
The discounts offered by the public cloud providers vary depending on the portion of resources the customer is willing to pay for upfront, with greater discounts being offered to customers who pay for larger portions of their RI resources upfront.
For example, a customer paying 100% of their RI costs upfront could receive up to a 75% discount on their future public cloud resources when compared to the rates paid by “pay as you go” customers. In contrast, a customer that only pays for a fraction of their RIs upfront may receive a discount of 30% to 40%, and a customer who doesn’t pay for any of their RI resources upfront may only receive a 20% to 30% discount.
Therefore, the most cost effective RI strategy will be one that garners the greatest discount percentages by paying for all RI costs upfront. As we’ve established though, this isn’t always an option for companies that are averse to large, one-time expenditures and instead prefer static monthly costs.
If only there was a way to provide customers with the best of both worlds, i.e. discounted cloud resources paid for in monthly installments. A way of financing Reserved Instances, perhaps…
Can you Finance Reserved Instances?
Up until now, the answer would have been no.
That’s why we are excited to announce the partnership between Shamrock Consulting Group and Blue Street Capital (www.bluestreetcapital.com).
Shamrock Consulting Group is a premier solution provider for cloud, data center, telecommunications and data communications services. Blue Street Capital is a market leader in tech financing, specializing in the financing of IT hardware, software, and now the cloud.
As highly-experienced Reserved Instance consultants, we at Shamrock Consulting Group can help you calculate your future cloud resource needs and decide whether financing RI spend will be an effective strategy based on your company’s unique cloud and financing needs. We have the ability to assess the viability of a financed RI deployment for any public cloud platform, including Microsoft Azure and AWS and Google Cloud Platform.
Whether you need help rightsizing an RI purchase, are interested in seeing financing options and terms for an RI deployment, or just want objective consultative feedback, the RI experts at Shamrock can help. We offer free consultations to all potential clients!