A Look At Reserved Instance And AWS Savings Plan Pricing

Author:
CloudHealth Tech Staff Cloud Tech Journalist
Published: July 08, 2020
5 Min Read

As businesses start to consider AWS Savings Plans as a replacement for about-to-expire Reserved Instances, now is a good time to take a look at Reserved Instance and AWS Savings Plan pricing in order to help establish whether it is better to take advantage of one option in preference to the other.

Last November, Amazon Web Services (AWS) rolled out its new discount program—AWS Savings Plans. As there had been no warning of the program’s launch, most businesses were not in a position to take advantage of the new offering immediately; and, although there were some use cases in which it was possible to purchase Saving Plans before Reserved Instances expired, many businesses decided to wait until their current commitments were about to expire before investigating further.

For some businesses, that time is approaching; and therefore this is a good opportunity to look at Reserved Instance and AWS Savings Plan pricing, and compare the benefits of the two discount programs against each other. It is also a good opportunity to look at solutions for managing Reserved Instances and AWS Savings Plans to ensure you get the maximum benefit out of whichever program is most suitable for your business—or both programs if a dual approach works better.

As a quick reminder, there are two types of Reserved Instances—Standard and Convertible—and two types of Savings Plan being offered by AWS. EC2 Instances Savings Plans are most similar to Standard Reserved Instances, while Compute Savings Plans are most similar to Convertible Reserved Instances. However, there are differences between the two discount programs which businesses need to be aware of before even considering Reserved Instance and AWS Savings Plan pricing.

The differences between the two discount programs

First of all, let’s start by explaining the primary difference between the two discount programs—what you pay for when you purchase a Savings Plan compared to what you pay for when you purchase a Reserved Instance. A Savings Plan is a financial commitment rather than a utilization commitment. Therefore, rather than committing to a specific use of vCPU and memory for one or three years, you are committing to spend $x.xx per hour over the next one or three years.

The financial commitment option offers a more flexible program than Reserved Instances, but with limitations. For example, when you purchase a Savings Plan, discounts are applied to EC2 instances regardless of tenancy and operating system; and, in the case of Compute Savings Plans, regardless of region or family. However, although a Compute Savings Plan can save you money on Fargate and some Lambda services, it can´t be used to save money on RDS instances, and Redshift or ElastiCache services.

Another difference between Reserved Instances and Savings Plans is that, if AWS cuts the prices of EC2 instances in the future, the financial commitment you have made will go further. Here´s a simple example of how that works:

  • You purchase a Standard 1 year Reserved Instance for an m5.12xlarge EC2 instance (On-Demand hourly rate $2.304) and pay $12,035 all upfront.
  • AWS subsequently cuts the price of an m5.12xlarge EC2 instance by 10% to $2.074, but because you have paid for a utilization commitment, you don´t benefit from the price reduction.
  • However, if you purchase a 1 year EC2 Instance Savings Plan for the same price, when the hourly rate of the m5.12xlarge instance falls to $2.074, there is $0.23 per hour left over.
  • This $0.23 per hour is automatically discounted from the cost of any EC2 instance in the same region and family for the remainder of the term of the Savings Plan.

Further differences between the two discount programs can be found in our “Comparison of Reserved Instances vs. AWS Savings Plans”, and in our eBook “The Ultimate Guide to AWS Savings Plans”. 

Reserved Instance and AWS Savings Plan pricing

Although the way in which Reserved Instances and AWS Saving Plans work may be different, their pricing is identical. Similarly, so is the scale of discounts for purchasing one year or three year commitments, and for paying the cost all-upfront, partial upfront, or with no upfront. As we used a m5.12xlarge EC2 instance as an example of how businesses using Savings Plans benefit from price cuts, we’ll use the same instance to demonstrate how Reserved Instance and AWS Saving Plan pricing works.

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Because Reserved Instance and AWS Saving Plan pricing is identical, you won’t find a page on the AWS website listing individual Saving Plans prices. Individual Savings Plan prices can be found in AWS Cost Explorer or via the API/CLI; but, for anybody without access to these tools (i.e. a non-AWS customer), all you need to do to find out the cost of an AWS Savings Plan is to look on the Reserved Instance pricing web page.

Solutions for managing Reserved Instance and Saving Plan commitments

AWS provides tools to help businesses identify when opportunities exist to purchase Reserved Instances and Savings Plan; but many businesses need more than just recommendations to invest more money into discount programs. They need to know where and how the discount programs are being used. This is particularly true in cases where excess discounts float across regions and between instance families, or get dispersed throughout consolidated accounts.

It is also important to know when Reserved Instances and Savings Plans are not being fully utilized. Although you can resell unused Reserved Instances through the AWS Marketplace, that’s not the case with Savings Plans. Once you have made a commitment to spend $x.xx per hour over the next one or three years, you are tied to that commitment for the lifetime of the Savings Plan. For this reason, you need to be on top of how your discounts are being utilized at all times.

CloudHealth can help businesses looking for granular visibility into Reserved Instance and AWS Savings Plan pricing by tracking which accounts benefit from discounted prices, and calculating net compute costs down to business units, projects, teams, individuals, or logical business groupings. The platform can also be configured to alert administrators to unused discounts, while our Convertible RI Exchanger can find the mathematically optimal use of the discount programs.
 

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CloudHealth Tech Staff, Cloud Tech Journalist

The CloudHealth Tech Staff team is made up of industry experts who report on trending cloud news, offer cloud management best practices, and compare products and services across the major cloud providers. As a part of CloudHealth, the CloudHealth Tech Staff come from all different backgrounds making them unique leaders in this industry.

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