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Recently, there has been growing interest in cloud computing, partly due to its elasticity and scalability . In 2019, Amazon released Savings Plans , which offer a flexible pricing model with on-demand pricing to help businesses manage their cloud infrastructure while scaling efficiently.
Amazon EC2 Savings Plans and Reserved Instances (RIs) are the primary ways to reduce AWS costs. While businesses can use both services, this article will help you understand the differences, benefits, and limitations of each, as well as some practical use cases to help you make the best financial decision.
Why you need cost savings
Choosing the right AWS plan helps you optimize your financial resources while taking advantage of the flexibility available when deploying complex applications in the cloud.
The most confusing part is that savings plans and RI offer the same discounts regardless of the discount programs used. In this article, you will learn more about savings plans and RI so that you can better understand what their benefits and limitations are and how you can implement them effectively.
AWS savings plans
Savings Plans was created to simplify RI services that met the computational needs of managing complex reservations. A well-known feature of this is the commit discount structure or commitment to one instance type for up to three years. Savings Plans offer discounts for the flexibility of computing power and use of tandem access with the commitment of the fund for one or three years.
There are three types of savings plans : EC2 instance savings plans, compute savings plans , and Amazon SageMaker savings plans.
Calculation savings plans
Compute Savings Plans are typically automated, regardless of family, size, region, operating system (OS), location, and region. This plan works with Amazon Elastic Compute Cloud (Amazon EC2) , Amazon Elastic Container Services (Amazon ECS) , AWS Fargate , and AWS Lambda . Compute Savings Plans are the most flexible savings plan, and with an on-demand rate, you can get a discount of up to 66% compared to other savings plans.
Often, Compute Savings Plans are similar to Amazon EC2 convertible RI in that they both offer the same 72% discount. However, they differ because you can change the first instance family type (C5 to M5), operating system, Availability Zone (AZ), tenancy, and region. With Compute Savings Plans, you can also move your resources or applications from Amazon EC2 to Amazon ECS using AWS Fargate without increasing costs.
Savings plans from SageMaker
Amazon describes SageMaker Savings Plans as the flexible pricing model for Amazon SageMaker. These plans offer discounts of up to 64% and are a machine learning service for cloud-based projects managing large data in a distributed environment. Amazon SageMaker instance usage includes Amazon SageMaker Studio , Amazon SageMaker Canvas , Amazon SageMaker Training Compiler , and more.
EC2 instance savings plans
Savings plans in EC2 instances require an organization's commitment to the same family. It is similar to the conventional Reserved Instance but allows for a change of family type instance. It also provides for savings up to 72% regardless of size ( that is m5.xlarge e m5.2xlarge), from the operating system ( that is Linux, Windows or Mac) and the location (i.e. host or dedicated) within the family of the specified region.
Advantages of savings plans
Savings Plans is known for its flexibility (this is especially true for Compute Savings Plans) compared to RI, which locks in the instance for three years. It also offers much less planning and infrastructure complexity than traditional RI. With Savings Plans, you can change instance family types.
Limitations of Savings Plans
Savings Plans are not available on services such as Amazon Relational Database Service (RDS) , Amazon Redshift , Amazon ElastiCache , and Amazon DynamoDB instances . As previously stated, they are limited to AWS Fargate and Amazon EC2 instances. Amazon may offer savings plans for unavailable services in the future, but they are not currently available.
Savings Plans do not provide better capacity reservations or discounts than RI, and their resale options are not available for underused commitments. The simplicity offered by Savings Plans often leaves you with less control over the duration of your commitment because you cannot run out of underused commitments.
AWS Reserved Instances
Reserved Instances have been around for over a decade and are still widely used by many companies, including Netflix , NRG Energy, and NCR Corporation . RI requires an upfront commitment to instance types (M4, T2, T3a, etc.) in exchange for a discount for one or three years. Plan options are available, including All Upfront, Partial Upfront, and No Upfront . RI incorporates Amazon RDS instances , Amazon Redshift, Amazon ElastiCache, Elasticsearch , and Amazon DynamoDB services.
There are two types of RI: standard RI and convertible RI.
Standard Reserved Instances
Standard RIs offer a discount of up to 72% and are designed for stationary use. Standard RIs offer the largest discount for a long-term contract with a limit to a particular instance type.
Convertible Reserved Instances
Convertible Reserved Instances are also suitable for stationary use, but offer a 66% discount on request . What sets Convertible Reserved Instances apart from Standard Reserved Instances is their flexibility, including the permitted changes to the operating system, leases, and families.
Benefits of Reserved Instances
RI discounts are available for Amazon RDS and Amazon EC2, but not for AWS Fargate.
With Reserved Instances, you may not benefit from changing instance type or family due to usage commit and complex design. But you can take advantage of the elasticity of its flexible transfer of workloads.
On the Reserved Instance Marketplace , you can transfer underused commitments when you no longer need them, something you can't do with Savings Plans. When you prepay for one or three years, you get a significant 72% discount.
Limitations of Reserved Instances
IRs can be difficult to plan and require ongoing work due to their complex architecture. For example, when you commit to RI, you need to run the server for approximately 774 hours per month.
While plan pricing may vary during your engagement, you may not benefit from changing plans or receive instance commit discounts because RI blocks your engagement (instance commission) for the specified period.
Savings plans vs reserved instances
When choosing which plan is right for you, it is best not to commit to one, but rather a hybrid or open approach, as each has its pros and cons; you can also use or purchase both plans with the same account. If you end up engaging in one, there could be detrimental consequences for your organization. For example, if you want more control over your commit, you can't use Savings Plans because you can't sell underutilized commits when you no longer want to use them. In this case, RIs offer more control but require more human resources to manage the infrastructure.
The flexibility offered by savings plans can become a ploy to over-commit if you don't really need that flexibility at a later time. You should choose your commitment in line with your organization's goal or goal. With a combination of Convertible Reserved Instances and Compute Savings Plans, you get greater regional coverage. If simplicity is all you want, Savings Plans are the best choice. On the one hand, RI does not incorporate AWS Fargate for serverless applications, which would provide additional application scope. On the other hand, the savings plans don't cover Amazon RDS.
As for the general management costs, the Reserved Instances require frequent monitoring, while the Savings Plans are automated and less complex.
Conclusion
The key to making the best decision for your organization's serverless computing doesn't necessarily lie in choosing savings plans over RI or vice versa. The Savings Plans were not created to replace RI but rather to simplify Amazon's services in meeting the demands of its customers.
However, it makes sense to conclude that both plans offer benefits with similar discounts, different architecture management, and different use cases. Using one service does not necessarily prevent you from using the other. You can use both services simultaneously or interchangeably. While RI has been the convention, savings plans help you manage costs better.
If you are looking for additional resources to help you manage your AWS costs, feel free to contact us. Managed Server's targeted daily AWS Cost Monitoring Reports help busy engineering teams understand their AWS costs, respond quickly to overspending, and promote cost-saving opportunities.
