AWS Savings Plans vs. Reserved Instances

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AWS Savings Plans provide discounts of up to 72% on EC2, Fargate and Lambda usage, compared to on-demand rates. When purchased, you make a commitment to a specific amount of compute usage, measured in dollars per hour, for a 1 or 3 year term. Any usage beyond that commitment is charged at on-demand rates.

In this article we will review how AWS Savings Plans fit in to a robust cloud optimization strategy to help you minimize costs and maximize performance.

Types of AWS Savings Plans

What different types of Savings Plans does AWS offer?

AWS EC2 Instance Savings Plans: Up to 72% savings on specific instance families within a region. These plans use standard RI pricing.

AWS Compute Savings Plans: Up to 66% savings on EC2 and Fargate usage regardless of region, instance family, OS or tenancy. The savings on AWS Lambda is up to 17%. These plans use convertible RI pricing.

What are the differences between EC2 and Compute Savings Plans?

AWS EC2 Instance Savings Plans apply only to EC2 instances within a specific region (e.g. Virginia) and instance type (e.g. m5), while Compute Savings Plans apply across EC2, Fargate and Lambda in any region. 

What are the advantages and disadvantages of AWS Savings Plans?

Savings Plans are simpler and easier to manage than Reserved Instances. However, both have their advantages and this article will give a better breakdown of the two.

Advantages of Savings Plans

• Savings Plans are the only discount option available for AWS Fargate and Lambda usage, which are not covered by RIs.
• Savings Plans generally require no monitoring and they are applied to the instances that provide the greatest discounts first.
• For Compute Savings Plans, their ability to reach into thinly used regions make them a great choice where that usage may change over time and RIs would not be prudent.

Limitations of Savings Plans

• Large enterprise customers do not get the benefit of RI volume discounts under Savings Plans. AWS provides a 5% discount on all standard RIs purchased in a region when the total value exceeds $500,000* in that region. There is a 10% discount when RIs exceed $4 million.
• AWS Savings Plans only apply to compute services, and not available for Amazon RDS, Redshift and ElastiCache. RIs provide substantial savings for these services.
• Savings Plans cannot be sold in the AWS Marketplace. When you purchase your plan, you are locked into that commitment and there is no way to change it.

Advantages of RIs

• Standard RIs can be sold in the Marketplace and convertible RIs can be stretched to reduce your commitment.
• For larger customers, discounts on standard RIs are possible.
• Particularly for Linux usage, three year standard RIs are feasible for many customers while enjoying the largest discounts.

Disadvantages of RIs

• While a standard RI can be sold, it does not mean that it will sell. Thinly used regions, less used instance types, or large volumes of RIs can make a quick sale difficult.
• Convertible RIs can not be sold (but they can be stretched).
• They need to be managed. As your usage changes, you need to be certain that the RIs you own line up with your instances.

Our thoughts on Savings Plans vs Reserved Instances

The appeal of Savings Plans is obvious; you receive a discount with almost no effort. In our opinion, Savings Plans shine in a few specific scenarios:

• Customers who have small usage in many regions, especially thinly used regions.
• Usage is mostly in Gov Cloud.
• Where auto scaling is in use and the loads are substantially different throughout the day (think of a bank website which will be busy during the day and slow at night).

For other scenarios, we have consistently found that RIs are better; you receive a bigger discount with less risk. Why do we say this?

• Based upon data we have accumulated, 2 out of 3 customers are buying 1-year Compute plans which provide the smallest discount AWS offers. The comparable EC2 plan provides 25-33% greater savings(Linux). The 1-year convertible RI (same pricing as the Compute plan) was not commonly used and it has now become the de facto standard. People are moving down from one-year standard pricing to one-year compute pricing and they’ve traded convenience for savings.

• The 3-year EC2 plan is now less than 0.5% of all usage whereas it represented approximately 9% of RI usage in the past. A commitment of three years for a particular instance type is an eternity in the cloud, especially if you have no method to sell the plan.

Final Thoughts

When comparing RIs and Savings Plans, a business really needs to decide where they want their flexibility: management or pricing. If you are willing to manage more, RIs are certainly your better choice and you’ll save more money. If savings is less important, go with the Savings Plan. You will not need to manage anything.
If you go with a Savings Plan, we have noticed that the recommendation engine in the portal is hyper aggressive. Make sure you understand what you’re buying before you do it; you can’t sell off a Savings Plan if you over-buy.