Is It Better to Optimize Commitments or Rightsizing First on AWS?
I hear this question during almost every initial consultation. Engineering leads want to push for rightsizing to "clean up" the environment, while CFOs want to see immediate monthly recurring cost (MRC) reductions via Savings Plans. As someone who has spent over a decade navigating the intersection of infrastructure engineering and finance, I’ve learned that the answer isn't a choice between the two—it is a matter of mathematical sequence. If you commit before you rightsize, you are essentially buying a wholesale discount on waste.
Defining FinOps: It’s About Accountability, Not Just Cost Cutting
True FinOps is not a "cost-cutting" exercise. It is a cultural practice where engineering, finance, and product teams work together to make data-driven spending decisions. When we talk about cloud governance, we are talking about shared accountability. If your engineering team doesn't understand the impact of their instance selection on the balance sheet, your FinOps program will fail regardless of what tooling you use.
Before you commit to a three-year Savings Plan, you need to be able to answer one question: What data source powers that dashboard? If you are relying on tribal knowledge or a spreadsheet that hasn't been updated since Q1, you aren't governing; you're gambling.
Rightsizing: The Foundation of Efficiency
Rightsizing is the process of matching instance types and sizes to your workload performance and capacity requirements. It is a continuous optimization loop. You cannot "finish" rightsizing because application usage patterns evolve. When you rightsize, you are reducing the "baseline" upon which your commitments will eventually sit.
Consider the logic: If you have an M5.4xlarge running at 5% utilization, buying a Reserved Instance (RI) for that resource is a classic FinOps failure. You have now committed to paying for 95% waste for the next one to three years. Tools like Ternary are excellent at helping teams visualize these opportunities, allowing engineers to identify underutilized resources before finance locks in a long-term contract.
The Case for Commitments: Savings Plans and Reserved Instances
Once you have right-sized your environment, you are ready to address the "unit cost" of your compute. This is where Savings Plans and Reserved Instances come into play. These are powerful instruments, but they require high-fidelity data to be effective.
In a multi-cloud environment—such as a firm utilizing both AWS and Azure—managing these commitments manually is a recipe for disaster. Using platforms like Finout, organizations can aggregate data from multiple providers to ensure that their commitment strategy covers the "always-on" base layer of their infrastructure without over-committing on volatile, transient workloads.
The Sequence: Why Rightsizing Must Precede Commitments
The sequence matters because commitments are mathematically tied to your hourly usage. If you commit first, you are effectively signing a lease on a house that is twice as big as you need. If you rightsize first, you downsize the house, then sign the lease for the smaller, more efficient footprint.
Action Primary Benefit FinOps Maturity Level Rightsizing Elimination of waste Intermediate Savings Plans Reduced unit cost Advanced Automated Governance Prevention of drift Expert
Bridging the Gap: Real-World Implementation
I recently worked with a team at Future Processing that was struggling with the "chicken or the egg" https://instaquoteapp.com/cloudcheckr-vs-cloudzero-cost-governance-or-unit-economics/ dilemma regarding their cloud spend. They had massive RIs covering workloads that were no longer relevant to their current architecture. They learned the hard way that "instant savings" claims often ignore the fact that RIs are rigid instruments. If your architecture changes, your RIs become expensive anchors.
To avoid this, we implemented a three-step workflow:
- Visibility & Allocation: Identify which business units own which resources. If you can't attribute the spend, you can't ask them to rightsize.
- Rightsizing Loop: Automate the detection of underutilized instances. Use metrics, not just CPU usage, to inform these decisions.
- Commitment Strategy: Only after the "right-sized" baseline is established, apply Savings Plans to cover that stable, predicted load.
Avoid the "AI" Trap
I am frequently approached by vendors claiming that "AI-driven optimization" will solve all cost issues overnight. I remain skeptical. Unless the AI provides clear, actionable recommendations tied to a workflow—such as triggering an automated pull request to update an Auto Scaling group configuration or identifying an anomaly in a specific Kubernetes namespace—it is just another buzzword.
Real optimization requires engineering execution. An AI tool that suggests a change is useless if your infrastructure-as-code (IaC) pipeline doesn't support a safe deployment path for that change. You need a feedback loop, not a magic button.
Budgeting and Forecasting Accuracy
When you shift the culture toward shared accountability, your forecasting accuracy will naturally improve. When engineers know that their instance-type choices directly impact the department's bottom line, they start thinking about cost during the design phase rather than as an afterthought during the month-end bill review.
By rightsizing first, you gain a clear view of your true minimum compute floor. This makes forecasting significantly Check out here easier for the finance team. You aren't guessing at waste; you are planning for growth. You can then layer your commitments on top of that predictable baseline, knowing exactly what your cost coverage looks like for the next 12 to 36 months.
Conclusion
If you take nothing else away from this, let it be this: Commitment without rightsizing is subsidizing inefficiency.
Start by focusing on visibility. Map your tags. Understand your data sources. Once you have a clean view of your AWS (or multi-cloud) spend, run your rightsizing exercises. Only once your baseline is lean and performant should you look toward Savings Plans or RIs to further drive down your unit costs. This isn't just about saving money; it’s about building a robust, mature, and scalable cloud operation that respects both the architecture and the budget.
If you are looking for a shortcut to "instant savings," you are looking for the wrong thing. Look for the workflow that drives continuous improvement. That is where the real value lies.
