AWS Savings Plans 2020

AWS has introduced two new Savings Plans this year. They both offer substantial savings compared to On-Demand compute pricing.  The Savings Plans can be used in conjunction with Reserved Instances (RIs).  

Read this blog to understand the differences between the Savings Plans and RIs, as well as the pros and cons of each Savings Plan, so that you can choose the plan that’s right for you.

Understanding Reserved Instances versus Savings Plans

• While RIs are a commitment, there is an “aftermarket” available to sell standard RIs if circumstances change.  This means there is the possibility of reducing or eliminating this commitment if you are able to sell the RI. Savings Plans are a 12- or 36-month commitment with no option to reduce it.

• Savings Plans do offer more flexibility than Reserved Instances in how they are applied.  Reserved Instances must typically match region, instance size, operating system, and tenancy to apply.  Savings Plans have some more flexibility built in, including flexibility across region, which we discuss below.

• The Compute Savings Plan can apply to Fargate usage.

• Savings Plans are purchased in dollars per hour rather than instances.

• Savings Plans are applied after RIs are applied.

AWS offers two different Savings Plans:

   1. EC2 Instance Savings Plan – 12- or 36-month commitment to a minimum spend per hour

• • Offers the same savings as Standard RIs (up to 72% discount)

  • EC2 Savings Plans are purchased for a specific region and a specific family (e.g. t3 or m5).  They can apply to any instance size, operating system, and tenancy.

  • AWS automatically applies the savings plan to the instances within the region/family that have the highest savings over On-Demand. See How AWS Applies Savings Plans for more detail.

  • Well suited for companies with predictable workloads and larger installations of certain instance families.

  • We only recommend 1-year plans for those utilizing the newest instance types.  3-year plans will not allow for instance generation upgrades.

  2. Compute Savings Plan – 12- or 36-month commitment to a minimum spend per hour

• Offers the same savings rate as Convertible RIs (typically 10 to 20% less savings than EC2 Instance Savings Plan)

• CSP Savings Plans can apply to EC2 Compute and Fargate usage regardless of region, instance family, instance size, operating system, or tenancy.

• AWS automatically applies the savings plan to the instances that have the highest savings over On-Demand.  This requires much less “management” than Convertible RIs.

• Well suited for most spend not covered by RIs or EC2 Instance Savings Plans, as well as workloads that may move to Fargate.  The risk is overcommitting on hourly spend.

Here is a quick comparison chart between the two savings plans:

Consistent with RIs, AWS Savings Plans have three different purchase options:

• • All upfront: Receive the largest discount on both RIs and Savings Plans

  • Partial upfront: Receive lower discount, typically 1%-10% lower than all upfront. 

  • No upfront: Receive a smaller discount, but free-up capital to spend for other projects. 

For both RIs and Savings Plans, we typically recommend no upfront for current generation instances as the savings difference between no upfront and partial upfront is usually <5%. We recommend partial upfront for previous generation instances as the savings difference between no upfront and partial upfront is >10%. We generally do not recommend all upfront as the additional savings is not worth tying up the capital.

We urge companies to carefully consider covering any SQL Enterprise applications with savings plans.  The savings here are low, and the hourly costs are high, creating more risk.

Sharing Savings Plan among AWS Accounts:

Both types of savings plans can be shared among your various AWS accounts.  However, AWS applies them first to the account that owns them, and then applies any remaining amount to the best savings opportunity among your other accounts. Given this application methodology, we recommend buying savings plans in a master account, or in an account with limited resources.  This will allow AWS to just apply the savings plans to the best possible savings opportunity among all of your various AWS accounts.

While AWS Savings Plans are available for EC2 Compute and Fargate usage, they are not yet available for other services. Reserved Instances can still be purchased one or three years in advance for compute and database resources for the following AWS services:

• Amazon Elastic Compute Cloud: Amazon EC2

• Amazon Relational Database Service: Amazon RDS

• Amazon ElastiCache

• Amazon Redshift

We have covered some of the fundamental best practices for AWS Savings Plans. Cloudticity helps with cost optimization by monitoring performance and making recommendations based on usage to minimize costs.  Please contact us if you are interested in discussing cloud cost optimization further.