What Are AWS Savings Plans? How They Can Lower Your AWS Bill

Amazon Web Services (AWS) introduced Savings Plans to offer customers a more flexible and discounted pricing model than Reserved Instances. AWS Savings Plans also offer discounts for longer-term commitments, like Reserved Instances.

You can learn more about the differences between Reserved Instances (RIs) and Savings Plans here.

In this post, we'll quickly explain what AWS Savings Plans are, how they work, and what they can and cannot do for you.

Table Of Contents

• What Are AWS Savings Plans
• AWS Savings Plan Types
• How Much Do AWS Savings Plans Cost?
• The Benefits Of Savings Plans
• Can You Queue Your Savings Plans Purchases?
• Frequently Asked Questions

What Are AWS Savings Plans?

AWS Savings Plans are a pricing model that offers discounted prices on regular On-Demand Instances when you commit to one or three years of use. A Savings Plan requires you to make an aggregate per dollar per hour commitment, such as $7.77/hour for one year.

You select an hourly spending amount of your choice. All compute usage up to that commitment is available at the discounted rate.

When you exceed your allocated threshold, AWS charges you at the regular On-Demand rate. For example, when you continue to run workloads after your Savings Plan has expired, and you have not renewed it, the extra consumption will be billed at the regular On-Demand prices.

The regular On-Demand price can be as much as 72% higher. So Savings Plans are a no-brainer for any organization looking to optimize its cloud costs. That 72% figure is a ballpark estimate, not a one-size-fits-all result. There's more to it than that as you’ll see below.

AWS Savings Plan Types

AWS provides three types of Savings Plans:

• Amazon SageMaker Savings Plans
• EC2 Savings Plan
• Compute Savings Plan

Here's a quick rundown:

1. Amazon SageMaker Savings Plans

These instances cover eligible instances in Amazon SageMaker, including SageMaker Studio Note, Data Wrangler, On-Demand Notebook, Batch Transform, Processing, Training, and Real-time Inference. In the best-case scenario, SageMaker Savings Plans can yield more than 64% savings, considering the recent price reduction.

However, the following two Savings Plans are the most popular for cloud cost optimization.

2. EC2 Savings Plan

The EC2 Instance Savings Plan provides the highest discount (the same as Standard Reserved Instances) for ‌use with Amazon Elastic Compute Cloud (EC2) instances.

The plan is mutable across size, operating system, and tenancy. If you need special licensing, security, and performance requirements, you can pay for a dedicated tenant. Savings Plans also let you change instance size and operating system, which Reserved Instances do not.

But EC2 Savings Plans only apply within a select instance family in a specific region. For example, you can switch from using an m5.xl running Windows to an m5.2xl running Linux. But you won’t be able to switch across instance families, say from a p2 to an m5.

3. Compute Savings Plan

For those who need more flexibility, AWS offers the Compute Savings Plan, which offers nearly the same discount level (66% versus 72%) but imposes fewer constraints.

Selections within the AWS Compute Savings Plan are flexible across instance family, region, operating system, tenancy, and even the specific compute service. For example, you could transfer your discount from an EC2 p2.xlarge instance running Linux in US West Oregon to an instance running AWS Fargate in US East Ohio.

This gives you a variety of options for how to spend your compute time. So, you can take on more projects and apply the initial savings to them as well.

Another advantage here is that you can eliminate waste even when you buy more capacity than you need for a particular project. Better yet, Compute Savings Plans apply to usage in EC2 instances, AWS Lambda, and Amazon Fargate.

AWS has yet to release Savings Plans for databases (Amazon Relational Database Service (RDS)). You'll need a Reserved Instances plan to do that.

How Much Do AWS Savings Plans Cost?

Savings Plan prices depend on a variety of factors, including the type of instance, operating system, tenancy, and payment method you choose.

For example, AWS offers three Savings Plan payment options:

• All Up-front - Pay in advance for the entire plan. Although this can be the riskiest plan, it is best if you have a good understanding of how much capacity you will need for your workloads during the commitment period.
• Partial Up-front - You pay at least 50% of your commitment up-front and the remainder on a monthly basis over the period of your contract.
• No Up-front - You pay for your commitment monthly with nil up-front payment.

So, what do you get for purchasing a Savings Plan?

What Are The Benefits Of Using AWS Savings Plans?

The biggest Savings Plans benefit is the flexibility you get compared to using Reserved Instances. We’ll explain.

• You purchase Savings Plans on a dollar-per-hour basis, rather than a per-instance basis. As a result, you can purchase compute capacity for as little as a tenth of a cent per hour.
• Any EC2 instance can use any Compute Savings Plans, regardless of region, tenancy, operating system, or instance family.
• Compute Savings Plans also save you money on instances in AWS Lambda (an event-driven serverless compute service), Amazon EC2 (compute instances), and AWS Fargate (serverless compute engines for containers via Amazon EKS or Amazon ECS). One purchase bundle can cover three AWS services, which can help reduce cloud waste.
• A Savings Plan requires less management because it automatically applies usage regardless of changes to your infrastructure.
• With EC2 Instances Savings Plans, you can save up to 72% when you commit to a particular region and instance family.
• EC2 Instance Savings Plans apply to all instance types and sizes within a particular instance family and region, maximizing the value of the plan you purchase.
• SageMaker Savings Plans reduce the cost of Machine Learning instances on AWS.
• With SPs, you can buy them all at once, with 50% upfront and the rest billed monthly, or pay for them monthly with 0% down and still enjoy the discounts, as long as you commit to using them for one or three years.
• If you'd prefer to schedule AWS Savings Plans to apply automatically at a later date, you can do so by queuing them. As an example, you can queue a Savings Plan to apply just before or just after your current plan expires so you can avoid paying the steep price for regular On-Demand Instances.

So, how much can you save with AWS Savings Plans?

How much savings can you expect from AWS Savings Plans?

How much you'll save with AWS Savings Plans depends on your AWS settings. However, here are a few pointers.

• Discounts are higher for 3-year terms than for 1-year terms
• All-up-front payments offer the highest discount (~30%), followed by partial payments (~25%). Discounts start at about 20% with monthly payments without an upfront payment.
• You'll also save based on which compute service(s) you use.

AWS's figures are more of a guideline than what most organizations achieve. Yet, here they are:

• Save 72% with EC2 Instance Savings Plans
• Save 66% with Compute Savings Plans
• Amazon SageMaker instances save 64% over the commitment period

In summary, here is a quick comparison of Compute Savings Plans, EC2 Instances Savings Plans, and Standard Reserved Instances.

But there’s more.

Can You Queue Your Savings Plans Purchases?

Amazon expanded on its AWS Savings Plan model in September 2020, by introducing queued purchases for Savings Plans. Queued Savings Plans are not a different type of plan, but rather a different means of purchasing either EC2 Savings Plans or AWS Compute Savings Plans.

Using queued purchases, Savings Plan buyers can:

• More easily avoid On-Demand pricing by scheduling renewals of plans ahead of expiry.
• Coverage starts on whatever future date you specify, rather than immediately upon purchase.
• You can plan ahead for future workloads while realizing savings on your compute spend.
• Queuing can also be useful if you need to expend capital before the end of a fiscal period. You can use queued Savings Plans to purchase future AWS services you know you will need now, and then use them when you need them in the future.

You can modify or delete Queued Savings Plans if your needs change before the specified start date. You can learn more about queuing AWS Savings Plans here.

What does this all mean to you, except that you can now save money on AWS more easily than ever before?

With AWS Savings Plans vs. Reserved Instances, planning and managing your utilization is far simpler, so a tool like AWS Cost Explorer or ProsperOps can help you stay on top of it. This effectively removes the need for time-consuming RI management.

It also frees you up to focus on what’s important in the cost equation: building high-margin products and features that deliver value to your customers.

As to which savings plan is best for you, ultimately it comes down to the amount of flexibility you need. In addition, the amount of savings you realize will hinge on the plan you select and whether your budget allows for prepayment.

AWS Savings Plans Frequently Asked Questions (FAQs)

Here are some AWS Savings Plans FAQs for quick answers to some of your most burning questions.

What is the major difference between EC2 Instance Savings Plans and Compute Savings Plans?

Flexibility. If you buy EC2 Instance Savings Plans, you can only apply them to any instance type and size within a particular instance family and region. Compute Savings Plans apply in any instance type, size, family, operating system, and tenancy.

How do Savings Plans apply?

AWS Reserved Instances apply first. You can then use any Savings Plan for eligible usage. EC2 Instance Savings Plans apply before Compute Savings Plans. Shared Savings Plans prioritize usage in the owner's account, then other accounts within the Consolidated Billing Family.

Also, Savings Plans apply to your highest savings percentage first. When multiple usages have the same savings percentages, the plans will apply to the first usage that has the lowest Savings Plans rate. This billing cycle continues until you run out of usages or your commitment is exhausted (at which point all usage is charged at On-Demand rates).

Where do I buy Savings Plans in AWS?

Using the AWS Billing and Cost Management console, inside the AWS Cost Management console, add them to cart from the Recommendations page, or the Purchase Savings Page.

Can I change my Savings Plan?

While you cannot switch, modify, or upgrade from one AWS Savings Plan to the other during a commitment period, you can purchase additional Savings Plans as your needs change.

Do AWS Savings Plans apply to Spot Instances

No. Savings Plans do not apply to spot usage or instances covered by Reserved Instances.

Do AWS Savings Plans apply to Amazon RDS?

No. They apply to Amazon EC2 Instances, AWS Fargate, and AWS Lambda.

Are AWS Savings Plans region-specific?

While EC2 Instance Savings Plans are region-specific, Compute Savings Plans apply across all regions.

Can I cancel AWS Savings Plans?

Savings Plans run for a fixed period (one or three years), until they expire, or no more usage is left. You can delete or cancel a queued Savings Plan purchase if you do so before its start date.

Cloud Cost Savings Are Great; Cloud Cost Intelligence Is The Next Step In Optimization

AWS Savings Plans enable you to reduce your AWS bill without tying yourself to a particular instance and location over one or three years (like RIs do). However, Savings Plans are not a complete cost management solution, since you can only reduce your costs so much.

By optimizing cloud costs instead, you can use savings towards improving your services, such as:

• Adding new product features
• Releasing updates to fix security threats
• Investing more in acquiring customer segments with the highest margins
• Developing additional revenue streams
• Funding factors that increase engineering productivity

Focusing on savings plans is just one aspect of cloud cost optimization. Spending less is a good idea, but to optimize your cloud usage, you need to see the connection between your cloud spend and the products you build and the people who build them.

Doing so requires that you have detailed cost data that maps costs to specific events, customers, product features, projects, environments, and teams. Like this:

With this level of granularity, your business can move beyond cloud cost management to cloud cost intelligence — where your cloud spend is completely transparent and reveals where you can pull strings to reduce your AWS bill or invest more to get higher returns.

CloudZero is a cloud cost intelligence platform that connects cloud costs with engineering metrics, so you can understand how and why your costs are changing, and what you're spending to fuel your products, features, development teams, and more.

Used ‌with AWS Savings Plans, you'll be able to correlate specific applications to usage levels, so you can better establish your hourly spend commitment. You can also take advantage of CloudZero’s alert functionality, which sends cost anomaly alerts and regular spend updates automatically. With this level of awareness, you’ll be able to ensure that your cloud-hosted applications are running at maximum efficiency without ever going over budget.

Want to see how CloudZero works?  to see what we can do to help your company better manage AWS costs.