AWS introduced Savings Plans at the end of 2019, bringing a simpler cost savings offer into the mix. This new offer, called Savings Plans, provides more flexibility (applying across all Regions and Families), while offering the same cost savings (66-72% discounts) as Reserved Instances.
Given this information, you might think that Reserved Instances (RIs) are dead, and that, going forward, businesses will use up their existing RI purchases and switch new commitments to Savings Plans (SPs). However, we surveyed a small group of our customers (n=30) last month and learned that while most will switch over to buying Savings Plans, Reserved Instances are not dead. Here’s why:
1) AWS Savings Plans are still new
AWS Savings Plans have only been on the market for less than a year, so many businesses are still learning how Savings Plans differ from Reserved Instances, and which is best for their business. For many, a combination of RIs and SPs may be the right solution. It’s important to note that there’s an order in which AWS will apply your available discounts to your On Demand compute usage:
- Standard Reserved Instances (Zonal)
- Convertible Reserved Instances (Regional)
- EC2 Savings Plans (EC2 usage only)
- Compute Savings Plans (EC2, Fargate, and Lambda usage)
In other words, AWS will apply compute discounts from the least flexible to the most flexible purchases. This means you don’t have to wait until your existing RIs expire before purchasing Savings Plans; you can layer new SP purchases on top of existing RI commitments, ensuring maximal savings.
2) AWS Savings Plans are sold differently than RIs
Reserved Instances have always been sold by the number of hours of usage you commit to using. Savings Plans are a little different; instead of committing to a certain number of hours of usage, you commit to spending a certain amount of money per hour on compute services. This shift will take a little time for businesses to grabble with, as they must now forecast in terms of dollars instead of hours.
Even after getting comfortable with this new offering, some of our customers told us that they will still continue to buy new RI’s (often in addition to SPs) for the following reasons:
3) No discount on database engines
Currently, Savings Plans only apply to compute services (EC2, Fargate, and Lambda); there are no Savings Plans that apply to database services. If your business is using Reserved Instances to save money on the cost of e.g., RDS instances, AWS Redshift, or ElastiCache services, you'll have to continue using Reserved Instances to save money on databases until the new discount program is extended to these services.
4) No secondary marketplace
At present, you can't buy or sell AWS Savings Plans in the AWS Reserved Instances Marketplace. This means that if you overcommit to a Savings Plan, you'll be stuck with the financial obligation for 1 to 3 years (depending on which SP you purchased). So even though Savings Plans are easier to manage—because they automatically apply to available compute usage without making manual exchanges—they still require visibility into your cloud environment so you can accurately plan for your future needs. Luckily, CloudHealth has everything you need to make the best decisions around Savings Plans.
5) No capacity guarantees
While capacity challenges are typically few and far between these days, some of our customers have reported capacity challenges during the COVID-19 pandemic, reviving the concern about guaranteeing compute capacity.
With Standard RIs, customers have the option of assigning the RI to a specific Availability Zone in order to reserve capacity. This option doesn’t exist with AWS Savings Plans. However, there is a workaround. You can purchase On Demand Capacity Reservations, thereby guaranteeing capacity, and your Savings Plans purchases will be applied to this usage. This way, you reap the double benefit of guaranteed capacity at a discounted rate.
Managing your AWS Savings Plans
While Savings Plans go a long way to providing greater flexibility for reservations, they don’t eliminate the need to properly forecast your future requirements. Making commitments for future needs will always require visibility into your cloud infrastructure and workload requirements. CloudHealth by VMware is here to help guide you toward the most optimal Savings Plan purchase for your business. Reach out to our Strategic Savings Desk—a complimentary service for CloudHealth customers—at firstname.lastname@example.org.