EC2 (Amazon Elastic Compute Cloud) costs might quickly become overwhelming, especially when using auto-scaling clusters with higher classes of instances. This issue is affecting everyone using cloud infrastructure, where you get incredible flexibility in exchange for higher hourly prices. The problem is more significant for enterprises using thousands of instances, where the costs might be millions upon millions.
The cloud costs are so high, that the completely new cost optimization SaaS industry arose to help resolve it (for example Cloudability, CloudHealth, etc.). Even Gartner recommends a cost management solution for Amazon Web Services: “AWS granular pricing structure is complex; use of third-party cost management tools is highly recommended”.
AWS introduced Reserved instances over a decade ago, which introduced first discounts in exchange for a commitment to using a specific instance type and operating system within an AWS region. The Reserved Instance model has been polished over the years and enhanced with new functionalities like Regional Benefit, Convertible RIs, and Instance Size Flexibility. The Reserved Instance model, as it stands today, gives you discounts of up to 72%, but it does require you to coordinate your RI purchases and exchanges in order to ensure that you have an optimal mix that covers usage that might change over time.
AWS introduced Savings Plans in November 2019 as a simpler and more flexible alternative to Reserved Instances, which provide significant discounts for volume purchases of instances. In short, Savings Plans are a flexible pricing model that offers low prices, just like Amazon EC2 RIs, but with added flexibility. The savings could be up to 72 percent (EC2 Instance Savings Plans or Standard RIs).
You can check read more about Savings Plans and their comparison on the following website: https://docs.aws.amazon.com/savingsplans/latest/userguide/what-is-savings-plans.html
The following table taken from the above user guide highlights the difference between Savings Plans and RIs:
* Convertible RIs can be changed across instance families, sizes, OS, and tenancy, but requires you to manually perform exchanges.
** Regional convertible RIs and Regional standard RIs provide instance size flexibility.
Buying a Savings Plan is an extremely straightforward operation. The idea behind is that they offer significant savings over On-Demand, just like EC2 Reserved Instances, in exchange for a commitment to use a specific amount of computing power (measured in $/hour) for a one or three year period. You can then easily change instance family and size, switch to a different Tenancy or OS and even change the AWS Regions. Moreover, Savings Plans will automatically apply to your usage across Amazon EC2, AWS Fargate, and AWS Lambda. As long as you keep your spending on the committed level, you will be able to fully utilize the savings benefit. If your usage will increase over time, you can buy new Savings Plans to keep the utilization on the acceptable level and maximize your savings.
Savings plans can be found in the AWS Cost Management service.
AWS Cost Explorer will help you to choose a Savings Plan and will guide you through the purchase process.
There is even the Recommendations section.
You can specify Savings Plans type (Compute or EC2 Instance), Savings Plans term (1 or 3 years), Payment option (All upfront, Partial upfront or No upfront), and the period which AWS should take into account when preparing the recommendation (7, 30 or 60 days).
If the system can prepare the Savings Plans recommendation based on the selected criteria, then you can simply buy it with one click.
In our case the recommendation allowed us to save 54% of the EC2 costs, even if we chose No upfront payment option.
The Savings Plan has been added to our inventory immediately with the savings visible on the next day report. The achieved cost reduction (54%) could be higher, but we decided to be very conservative and careful with the long term commitments. Moreover, we didn’t have to pay any upfront amount, which can be significant in the case of 3-years plans.
The total time spent on purchasing the Savings Plan fitting our needs could be counted in minutes. This is due to the fact that the AWS recommendations system already calculated all the needed numbers for us. The ROI from this investment has been extraordinarily high taking into account immediate budget savings.
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