Back in November of 2019, Amazon announced a new discount plan called the AWS Savings Plans. This pricing model offers new ways of paying for cloud usage.
What are AWS Savings Plans?
The new AWS Savings Plans aim to offer customers greater flexibility on compute discounts compared to existing pricing options today. AWS Savings Plans allows customers to save up to 72% on Amazon EC2 and AWS Fargate in exchange for making a commitment to a consistent amount of compute usage for a 1 or 3-year term.
Existing pricing models, like On Demand and Reserved Instances, are still available and aren’t going away anytime soon. This can make it difficult to know which discount options, or combination of options, makes the most financial sense for your organization moving forward.
The two types of AWS Saving Plans
There are two different types of Saving Plans: the EC2 Instance Savings Plan and the Compute Savings Plan. These two types provide customers the choice between maximizing financial benefit and sacrificing flexibility or maximizing flexibility while benefiting from a smaller discount.
The EC2 Instance Savings Plan offers the greatest financial benefit—up to 72% off compared against On Demand rates—but you’ll be restricted to both the instance family and region you select during purchasing.
On the other hand, the Compute Savings plan offers greater flexibility, as the discounts can be applied across families and regions—although the tradeoff is a smaller maximum discount of 66%. The Compute Savings Plans offers discounts that will apply automatically which helps reduce management overhead.
Thinking about your company's needs can help determine which Savings Plans would be the best fit for you. If you know that the nature of your workloads is likely to change over the term of the commitment you’ll want to look into Compute Savings Plans, as you’ll be able to take full advantage of the purchased discounts over their lifetime.
Making the most out of Savings Plans
The new AWS Savings Plans differ from existing AWS discount options because customers commit to a minimum dollar per hour spend instead of committing to use specific instance types for a predetermined term length. Each Savings Plan has a Savings Plans price (the hourly amount) and an On Demand rate. It’s only when you exceed your committed usage that you’re charged at the On Demand, pay-as-you-go rate. Underutilizing your committed hourly rate leads to financial waste and is a practice you should aim to avoid.
It’s important to note that at this time, AWS doesn’t allow customers to change their Savings Plans contract once purchased or sell unused discounts in the AWS Marketplace. Once customers commit to a Savings Plan price, they are locked in for the one or three years they committed to. This means that customers should have a good understanding of their hourly cloud usage when analyzing different pricing plans to maximize their benefits and reduce wasted spend on unused commitments.
Customers should take advantage of these discount strategies by using a mixture of them to find out what works best for their cloud needs. Having good visibility, governance, and financial awareness of your cloud spend will help you navigate AWS Saving Plans efficiently. It’s important to note that while these different Savings Plans are an important discount program to take advantage of, they alone are not a substitute for an overarching cloud financial strategy—they’re just a discount strategy.
If you want to learn more about the AWS Savings Plans then check out our free eBook, The Ultimate Guide to AWS Savings Plans. The eBook goes into more detail about each type of Savings Plans, the differences between Convertible/Standard Reserved Instances and Savings Plans, and offers situational examples to help you determine which discount program makes the most sense for your organization.