This blog post was written by Ben Schaechter, Co-Founder & CEO of Vantage. Ben previously worked on the technical product management team for container services at AWS and the product management team for compute at DigitalOcean. All of the information in the blog post is based upon publicly available information and no confidential information.
Last year, I published a blog post on some subtle albeit material changes to AWS’s enforcement of policies on Reserved Instances. As AWS never made an official announcement on the policy, that blog post served as the first community resource for the changes.
Roughly a year later, AWS is back with some even more material changes to their policies that will have significant ramifications for Managed Service Providers, Cloud Resellers, and the customers of the two aforementioned groups. This blog post is meant to explain the situation in casual terms, offer opinion as to why AWS is making these changes, and give recommendations to impacted customers for next steps.
TL;DR What’s the Update?
AWS is making a policy update that prohibits the sharing of Reserved Instances (RIs) and Savings Plans (SPs) across end customers within a single AWS Organization. The new policy will become effective June 1, 2025, which is fairly quick by AWS standards. AWS claims that “These changes are aimed at aligning the partner actions to AWS’ intent for RI and SPs to be customer specific commitment-based pricing products.”
This is a completely separate and distinct situation from a single organization having RIs and SPs held at a root/management level being shared across that same organization’s linked or member accounts, which remains unimpacted.
Who Does this Impact?
There are a number of Managed Service Providers and new-age reseller companies that facilitate the purchasing of commitments on behalf of their end-customers. These businesses typically have a portion of their revenue model orchestrated by purchasing SPs and RIs in a centralized organizational account. As these savings are realized, the majority of the savings are passed on to their end-customers, but some margin of that is retained as revenue to the MSP or reseller.
These organizations sometimes have hundreds or thousands of companies that they’re orchestrating commitments on behalf of. They also take on significant risk by nature of being on the hook for these SPs and RIs that are spread out across their customer base.
These changes, which go into effect on June 1st, 2025, shut this model down overnight (pending bespoke, negotiated exceptions). The end-customers will no longer be able to receive the savings from the centralized organizational account. They must have commitments made directly in their account from that point forward to be able to receive savings.
Probably even more impacted are the MSPs and new-age resellers that are still obligated for the commitments they made on behalf of all of their end-customers. It’s possible that these organizations are exposed to hundreds of millions or billions of dollars of annualized spend that presumably would be heavily exposed to commitments impacted by this policy.
In short, come June 1st, 2025, these resellers and MSPs are still obligated to pay for their customers’ commitments they’ve accrued but will not have the technical ability to pass these commitments on to their customers anymore. It’s very possible that we could see insolvency in a number of these companies relatively quickly unless AWS works with them to reallocate commitments to the customer base.
Why is AWS doing this?
Because they can!
That’s actually the tongue-in-cheek way of putting it. In actuality, there are likely a couple different reasons. Resellers are amassing a massive amount of sway that AWS is becoming increasingly uncomfortable with. If you’re an organization that represents hundreds of millions or billions of dollars of annualized spend, you have political power in two ways: (1) you are able to negotiate significantly higher discounts than is otherwise available and (2) you represent risk by potentially negotiating with other clouds and moving workloads from one cloud to another.
By eliminating this technical capability, AWS is quickly removing that risk…and likely going to have an accretive event as a result of it. They continue to have the revenue that the resellers are on the hook for by nature of 1- or 3-year commitments they’ve made on behalf of their customer base. By requiring customers to manage commitments on their own behalf once this policy goes into effect, if the customer does nothing then they automatically convert that usage to On-Demand spend. If the customer makes a net new SP or RI commitment, it’s in addition to the SPs and RIs that the reseller is on the hook for.
What Next?
If you’re an AWS customer that doesn’t work with a reseller: nothing. You’re all set. If you’re a customer of a reseller, you may want to be in contact with your reseller to determine what the next steps are for the commitments you’re benefitting from.
If you’re a Vantage customer using Autopilot, you have no impact and are all set. Autopilot has never worked in a reseller capacity and commits customers directly on their own behalf. If you’re a customer that is looking to switch from another provide to Vantage in light of these changes, please feel free to request a demo or sign up to Vantage.
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