AWS Savings Plans and Reserved Instances are both commitment-based ways to reduce AWS compute costs, but Savings Plans apply discounts based on a dollar-per-hour commitment across services with more flexibility, while Reserved Instances provide discounts tied to specific instance families and regions with less flexibility.
There are endless ways to over spend in a utility-based cloud platform without the right level of oversight. However, with the understanding of services, usage, plans and cloud usage reporting, you can innovate quickly with an optimized cost. There are several options including AWS Cost Savings Plans and Reserved Instances.
In this video, Hong Pun of PTP educates on the differences between the newly released AWS Savings Plan versus the option for Reserved Instances in cloud cost management and cost optimization.
Cost optimization is a critical aspect of cloud management, especially when working with Amazon Web Services (AWS). Understanding the available cost-saving options can help you make informed decisions and significantly reduce your cloud expenses. In this blog post, we explore the differences between AWS Reserved Instances and AWS Cost Savings Plans, along with their benefits and how you can leverage them to cut costs.
What are Reserved Instances?
Reserved Instances (RIs) offer a significant discount compared to on-demand rates in exchange for a one-year or three-year term commitment. There are two main types of Reserved Instances:
- Standard Reserved Instances: These provide a discount based on a commitment to a specific instance family within a given region. While you get a better discount with this option, it's less flexible.
- Convertible Reserved Instances: With this type, you can change instance types during the term, albeit with a lower discount compared to standard RIs. However, the region associated with the RI is fixed throughout the term.
Convertible RIs require an exchange process to change configurations, following a specific set of rules. This option is useful if you need to modify your instance type within the same family but doesn't allow changing regions.
What are Savings Plans?
Savings Plans offer similar discounts to Reserved Instances but with more flexibility. Consider it an updated version of Reserved Instances, providing more freedom to shift resources while maintaining cost efficiency. There are two types of Savings Plans:
- EC2 Instance Savings Plan: This plan allows you to save on EC2 usage by committing to a specific instance family within a region. It provides flexibility to change instances within the same family, across different sizes, operating systems, or tenancy types, regardless of the availability zone.
- Compute Savings Plan: This plan offers flexibility similar to convertible RIs, allowing you to commit to a specific hourly compute usage rate at a discounted price. It applies automatically to EC2 instances, AWS Fargate, and Lambda usage, regardless of instance family, size, availability zone, or region.
Similarities and Differences
While both Reserved Instances and Savings Plans offer cost-saving opportunities, they have key differences and similarities:
- Term Commitment: Both options require a one-year or three-year term commitment. Savings Plans offer more flexibility in terms of instance types and configurations.
- Payment Options: Both Reserved Instances and Savings Plans offer three payment options: all upfront, partial upfront, and no upfront. The all upfront option provides the highest discount, while the no upfront option offers the least discount but requires no initial payment.
- Region and Family Flexibility: Reserved Instances are tied to a specific region and instance family, with limited flexibility to change configurations. Savings Plans offer more flexibility, allowing you to change instance types, families, and even regions with Compute Savings Plans.
- Overage Charges: If you exceed your commitment, you'll be charged at the on-demand rate. This applies to both Reserved Instances and Savings Plans.
How to Get Started with Savings Plans
AWS provides an easy way to get started with Savings Plans through AWS Cost Explorer, where you can receive recommendations based on your on-demand usage patterns. If you're unsure which plan is right for you, PTP can help you navigate the cost-saving journey.
PTP offers cloud cost reduction analysis at no cost, helping you identify opportunities for savings. On average, our cloud experts can help you achieve a 25% or higher reduction in costs.
Conclusion
AWS Reserved Instances and Savings Plans are valuable tools for cost optimization. Reserved Instances are ideal for organizations with stable, predictable workloads, while Savings Plans offer more flexibility. To determine which option is best for you, consider your workload requirements, budget, and flexibility needs.
Learn More About AWS Cost Optimization
Explore AWS Savings Plans, PTP’s Cloud Optimization video, or pricing options to help your business reduce cloud costs.
AWS Savings Plans and Reserved Instances FAQs
Savings Plans discount a committed spend and apply across eligible services. Reserved Instances discount specific EC2 instance families in a region. Savings Plans are more flexible. RIs can be cheaper for stable, pinned workloads.
For a fixed instance family in one region, Standard RIs often deliver the highest discount. If workloads change size, OS, tenancy, or region, Compute Savings Plans usually win because coverage follows your usage.
Pick Compute for the broadest flexibility across EC2, Fargate, and Lambda, any region. Pick EC2 Instance plan for the best rate when you will stay within one instance family in one region but still want size and OS flexibility.
Yes, Compute Savings Plans apply to EC2, AWS Fargate, and AWS Lambda across regions. EC2 Instance Savings Plans apply only to EC2 usage for a selected instance family within a region.
Both Savings Plans and RIs offer one year or three year terms with all upfront, partial upfront, or no upfront payments. Larger upfront usually yields higher effective discounts.
Usage up to your commitment is billed at the discounted rate. Any usage above that bills at on demand rates. Review Cost Explorer and adjust commitments to match sustained usage.