In November 2019 AWS introduced Savings Plans as a simpler and more flexible alternative to Reserved Instances, which provide significant discounts for volume purchases of instances. Both Savings Plans and Reserved Instances are available with a few major differences, and present additional challenges for customers in deciding which cloud pricing model to choose.
When should a company use Reserved Instances vs Savings Plans?
These pricing options are not available for the same set of AWS products and apply differently across instance attributes. Which option to choose will depend on your specific use case, and the amount you can pay upfront.
In this article we will review the pros and cons of each pricing model across different instance attributes, AWS products and commitment requirements, to help you choose the best plan to maximize your cloud savings.
The table below summarizes the key differences between the two pricing models.
Comparison by Type of Commitment
The key difference between RIs and Savings Plans is the type of commitment you have to make to receive volume discounts. With RIs customers commit to a set number of instances; with Savings Plans the commitment is for a set dollar amount per hour spend.
An important consideration in choosing between the two AWS payment options is the amount of money you can pay in advance to receive the savings. With RI payments you have the option to pay no upfront fees. That way you can defer the capital required to receive the discounted rates. However, with Savings Plans, a minimum of 50% of the committed amount has to be paid to receive the discounted rates. If you need to preserve cash for other expenditures, no upfront RIs provide a better incentive. Any consideration between partial upfront RIs and Savings Plans will require an evaluation of how much you can afford to pay, compared to how much you will save. Keep in mind that for partial upfront RIs, larger upfront payments will receive higher RI discounts. The discount from Savings Plans does not change based on the amount you pay in advance.
Comparison by AWS Product
- Instances for compute services can only be reserved for AWS EC2 services. Compute Savings Plans however, can also be purchased for serverless cloud compute services, AWS Fargate and AWS Lambda.
- Instances can be reserved for dbase services Amazon RDS, Redshift, and ElastiCache, for significant savings. Savings Plans however, are not available for dbase services, making RIs the only option to minimize dbase costs.
Comparison across Variants
AWS Savings Plans and Reserved Instances both come in different types. Savings Plans are available for EC2 Instances and Compute; RIs are available in Standard and Convertible types.
EC2 Instance Savings Plans are similar to Standard RIs, but they apply across all OS. Compute Savings Plans are similar to Convertible RIs, but they apply across any region. Based on these similarities, it will be more helpful to compare these cloud pricing options along their variants.
What are the differences between Standard Reserved Instances and EC2 Instance Saving Plans?
- EC2 Instance Savings Plans apply to usage on any OS or tenancy. Standard Reserved Instances can only apply to usage on a specific OS and default tenancy. While this may look like a flexible option, it may be misleading. The discount on each instance type with a standard RI is the same regardless of the OS. If you buy an m5.large RI in Virginia, you’ll save $306.60 over the year, whether it is on Linux, Red Hat or SQL Server Enterprise. Savings Plans discounts however, don’t offer a significant discount over Standard RIs, even though they apply across different OS.
- Standard RIs can be assigned to a specific Availability Zone in order to reserve capacity. Capacity reservations are not available with Savings Plans. You will have to make an On Demand Capacity Reservation first, and then apply Savings Plan discounts.
What are the differences between Convertible Reserved Instances and Compute Saving Plans?
- Convertible Reserved Instances will apply to usage for a specific instance type, OS tenancy, and region while Compute Savings Plans will apply to usage across all attributes, with a defined tenancy.
- If you have deployments across multiple regions Compute Savings Plans will offer more flexibility than Convertible RIs.
Implications with AWS Marketplace
Reserved Instances can be sold in the AWS Marketplace allowing you to upgrade instances to new generation types for better cloud performance and savings. With Savings Plans you cannot sell unused instances in the Marketplace. You will be stuck until you spend the committed amount.
With AWS Reserved Instances you have to continuously monitor cloud usage and manually apply reservations against actual usage to optimize costs and performance. If you don’t use an automated solution like Parquantix, manually tracking and managing usage can consume a lot of time, effort, and eventually cost. Savings Plans, on the other hand, automatically reduces your bills when your usage and instance mix changes. For companies with limited knowledge and resources, Savings Plans provide a simpler cloud pricing model.
When should a company use Reserved Instances vs Savings Plans?
For dbase usage, RIs are the only discount option. No upfront RIs let you preserve cash for other investments. 1 year Compute Savings Plans provide higher discounts and more flexibility for serverless cloud compute usage.
However, for most use cases the choice between RIs and Savings Plans is not an either/or decision. They will work best as part of a broader cost savings strategy. AWS Savings Plans apply to any on-demand usage that is not covered by Reserved Instances. If your usage qualifies for both RIs and Savings Plans, reservations are applied first, followed by Savings Plan discounts.
Because Savings Plans cannot be modified or sold, a conservative 1-year Savings Plan can be a good start with RIs layered on top for simplified cost savings with increased flexibility to match your workload needs.
Parquantix can design the optimal mix of RIs and Savings Plans to meet your usage requirements in the cloud. You can learn more on our website and schedule a 30-minute consultation to discuss your plans for optimum performance and savings on AWS.