AWS Savings Plans and Reserved Instances are AWS pricing models that provide discounts in exchange for long-term usage commitments. Savings Plans offer flexibility across services and instance types by committing to an hourly spend, while Reserved Instances apply discounts to specific instance configurations. Understanding how these discounts work and how to apply them correctly can significantly reduce EC2 and S3 costs.
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.
How do cloud discounts work for long-term commitments in AWS?
AWS cloud discounts reduce compute costs by offering lower pricing in exchange for committing to a consistent level of usage over a one- or three-year term.
- AWS discounts are applied when you commit to either a fixed hourly spend or specific compute capacity
- Discounts apply automatically to matching usage before on-demand pricing
- Longer commitment terms and upfront payments generally provide higher savings
- Coverage depends on the pricing model and the AWS services involved
Limitation: If usage drops below the committed level, unused commitments do not roll over and may reduce expected savings.
How do AWS Savings Plans compare to Reserved Instances?
AWS Savings Plans and Reserved Instances both provide discounted pricing, but they differ in flexibility, coverage, and how commitments are applied.
- Savings Plans apply discounts based on a committed hourly spend and can cover EC2, Lambda, and Fargate usage
- Reserved Instances apply discounts to specific instance types, sizes, regions, and operating systems
- Savings Plans offer greater flexibility for changing workloads
- Reserved Instances offer higher predictability and optional capacity reservations
When to choose each:
- Use Savings Plans for variable or evolving environments
- Use Reserved Instances for steady, predictable workloads
Limitation: Neither model guarantees savings if workloads change significantly during the commitment period.
What are effective ways to optimize AWS EC2 and S3 costs?
Optimizing AWS EC2 and S3 costs requires combining pricing commitments with ongoing usage management.
- Use Savings Plans or Reserved Instances for baseline EC2 usage
- Right-size EC2 instances regularly to avoid overprovisioning
- Use S3 storage classes and lifecycle policies to reduce storage costs
- Monitor usage trends using AWS Cost Explorer and budgets
Limitation: Cost optimization is an ongoing process and requires periodic review as workloads change.
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
AWS Savings Plans and Reserved Instances both reduce compute costs through long-term commitments, but they differ in how flexible the discount is applied. Savings Plans apply discounts based on a committed hourly spend and can cover EC2, AWS Fargate, and AWS Lambda usage. Reserved Instances apply discounts to specific EC2 instance attributes such as instance family, region, and operating system.
AWS Savings Plans are a better choice when workloads change frequently in instance type, size, region, or service. They provide flexibility across EC2, Fargate, and Lambda while still offering discounted pricing, making them well suited for dynamic or evolving environments.
Reserved Instances often provide the highest discount for stable, predictable EC2 workloads tied to a specific instance family and region. Savings Plans may be more cost effective overall when workloads vary, because discounts continue to apply even as usage patterns change.
Cost optimization is achieved by matching commitment types to workload behavior. Use Savings Plans to cover baseline, flexible compute usage and Reserved Instances for long-running, predictable EC2 workloads. Regularly review usage trends and adjust commitments as workloads change.
Reserved Instances provide significant cost savings for EC2 workloads that run continuously and have predictable usage patterns. They can also include capacity reservations, which help ensure compute availability in specific regions or availability zones.
Reserved Instances require a one- or three-year commitment in exchange for discounted pricing, while on-demand instances have no commitment and are billed at standard rates. On-demand instances offer maximum flexibility, whereas Reserved Instances reduce costs for predictable, long-term workloads.