While the pay-as-you-go model of the cloud is appealing to many, those who know that they will be using resources on a regular basis can save money by prepaying for usage. Previously, the only way to do this using Amazon Web Services (AWS) was to purchase Reserved Instances. Then in 2019, AWS introduced Savings Plans to offer additional discounts through long-term commitments.
In this post, we’ll discuss what Savings Plans are, how they differ from Reserved Instances, and how cloud cost management tools can help you get more out of your AWS purchases.
What are AWS Savings Plans?
AWS Savings Plans use a flexible pricing model that provides you with discounts for AWS services in exchange for committed usage. That usage is measured in dollars per hour of computer power and is available over a one- or three-year period.
There are three types of AWS Savings Plans, each with subtle differences:
1. EC2 Instance Savings Plan
As the name implies, EC2 Instance Savings Plans apply to the use of Amazon Elastic Cloud Compute (EC2) Instances. These plans enable you to save up to 72% by committing to an EC2 instance family and region. They also give you flexibility in terms of instance size and the ability to change operating systems. You can also pay for dedicated tenancy of EC2 instances, which can be important for licensing and security.
2. Compute Savings Plan
Compute Savings Plans offer a bit more flexibility as they apply to usage across Amazon EC2, AWS Lambda, and AWS Fargate. Users can achieve up to 66% savings, similar to Convertible RIs, with greater flexibility, including instance family, size, region, and OS, plus support for Fargate, AWS’ managed service for containers. (By contrast, Reserved Instances aren’t available for Fargate, so if you think you will be leveraging containers in the next three years, this may be important.)
3. Amazon SageMaker Savings Plans
The latest types of Savings Plans added are for Amazon SageMaker. This service gives users fully managed infrastructure, tools, and workflows to build, train, and deploy machine learning models. Amazon SageMaker Savings Plans can offer up to 64% savings on Amazon SageMaker service usage.
What are the differences between Savings Plans and Reserved Instances?
Previously, Reserved Instances (RIs) were the best way to see significant savings (often up to 72%, according to AWS) by making a long-term commitment of one year or three years. AWS also benefits from RIs by knowing what equipment to invest in, and in which region, to pass those savings on to the customer.
Like Reserved Instances (RIs), Savings Plans can provide a significant discount compared to using compute resources on-demand, similar to the RI purchasing model. Unlike RIs, however, AWS Savings Plans provide greater flexibility on how these savings can be applied across consolidated bills and reduce the risk of unused commitments due to a changing infrastructure. While Standard RIs can be sold on the AWS EC2 Reserved Instance Marketplace, there is no such option for Savings Plans, so proper planning is essential.
That said, RI planning can be somewhat complex and prone to inefficiencies. When RI planning is optimized, the savings can be significant. Yet when done incorrectly, a three year commitment with the wrong configuration of RIs can be an expensive mistake.
AWS Savings Plans can help alleviate the hassles of buying RIs. Instead of having to decide in advance which particular instance family, size, region and operating system to standardize on, AWS Savings Plan customers can purchase computing resources at an hourly rate. As with RIs, the commitment is for one or three years and can be paid in All Upfront, Partial Upfront, or No Upfront payments. Organizations can then mix up instance types, sizes, regions, and even operating systems. As long as they are spending the amount specified, they will be getting a significant discount.
How do you get the most out of AWS Savings Plans?
AWS is famous for frequently lowering prices and adding new pricing models for their offering. Indeed they’ve done so dozens of times in the 15-plus years that they’ve been in the cloud. To their credit, they are always looking for creative ways to make cloud computing more affordable.
AWS Savings Plans are a welcome alternative to Reserved Instance purchases. Both will have their place in helping AWS customers find cost savings. Whether you choose to use Savings Plans or Reserved Instances depends upon the needs of your organization. RIs still are being sold and will be for some time. Savings Plans are another option to help organizations take advantage of a more predictable spending model.
However, as with any IT expenses, there is still room for error with AWS Savings Plans. Too high a commitment means paying for unused resources. Keep in mind, a Savings Plan is not a total spend commitment over a year, but rather a commitment for every hour of every day, 365 days a year. Most enterprises don’t have such evenly distributed workloads: They may be busy on Monday to Friday and less so over the weekend; there may be peaks and valleys based on the season. Uneven workloads are important to consider because AWS Cost Explorer makes recommendations based on 7, 30, or 60 days with no option for a longer term.
Using cloud management for Savings Plans
Our cloud management platform, CloudCheckr CMx, brings you insights into your AWS spend through customizable dashboards and in-depth reports. It also supports AWS Savings Plans — and, in fact, was the first cloud management platform to do so.
Before making a one-year commitment for Savings Plans, CloudCheckr CMx gives you a recommendation engine that can leverage up to six months — rather than 60 days — of historical cloud utilization data. Additionally, the platform gives you the ability to automatically start and stop instances, helping you stick to a schedule that optimizes your specific Savings Plan.
CloudCheckr CMx can also help with resource right sizing to ensure optimized AWS costs and usage before you make any reserved purchases or sign up for a Savings Plan. For example, if your infrastructure is oversized, locking in that specific configuration or level of spending for the long term just magnifies that waste. With CloudCheckr, you can perform hundreds of best practice checks to ensure that you have set up your AWS environment correctly from cost, utilization, security, and compliance standpoints.
Support for Savings Plans in action
SmileShark, a managed service provider in South Korea, was founded shortly after AWS Savings Plans were introduced in November 2019. Within days of establishing, SmileShark also began using CloudCheckr to manage their customers’ cloud costs. This timing was ideal for SmileShark, so that they could take advantage of these discounts and provide additional value for their customers.
Additionally, with cloud billing features like List Price Translation in CloudCheckr, SmileShark could charge customers appropriately for bundled services, including Reserved Instances and Savings Plans. The feature gives SmileShark a way to apply custom charges in the right places so that they and their customers receive the benefits of these discounts.
With CloudCheckr’s cost optimization features, SmileShark was able to save customers hundreds of thousands of dollars, lowering month-over-month AWS costs from $300,000 to $100,000 for a single customer. Read the case study to learn more about how CloudCheckr can optimize your AWS costs.