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AWS Savings Plans: What They Can (And Can’t) Do For Managing Cloud Costs

Learn more about AWS Savings Plans, and additional steps you can take to manage cloud costs more effectively.

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It has been nearly a year since Amazon Web Services (AWS) first rolled out its new savings plans. AWS Savings Plans were created to help manage cloud costs; however, they are best used as part of a larger strategy focused around cloud cost intelligence. (Keep reading for more on that!)

But first, what is an AWS Savings Plan?

Essentially, AWS Savings Plan pricing allows you to achieve the discounts associated with their popular Reserved Instances (RIs) — up to 72% off on-demand pricing — without having to engage in the headache of managing the same. With the new plans, you commit to a particular hourly spend of your choosing on either a one-year or three-year fixed term. Any compute usage up to that commitment is provided at the discounted rate, while any spend beyond simply reverts to the on-demand pricing model, enabling your company to save money on AWS.

This article will help you understand AWS Savings Plan options, so you can choose the right ones for your business.

Also check out our list of five AWS cost saving steps.

Do you know exactly what makes up your cloud spend? Sign up for a demo of CloudZero to see how it gives you complete visibility into what’s generating your cloud costs.

AWS Savings Plans: Options and Features

Types of AWS Savings Plans

For cost saving plans, AWS offers two slightly different options:

EC2 Savings Plan

The first is called the EC2 Instance Savings Plan, which provides the highest discounts (the same as standard RIs) at the expense of flexibility. These plans are mutable across size, OS, and tenancy, but only within a selected instance family in a specific region. So while you’ll be able to seamlessly switch, for example, from using a m5.xl running Windows to a m5.2xl running Linux, you won’t be able to switch across instance families, say from a p2 to an m5.

Compute Savings Plan

For those who need more flexibility, AWS offers a 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 malleable across instance family, region, OS, tenancy, and even the specific compute service. For example, you could transfer your cost savings from an EC2 p2.xlarge instance running Linux in US West Oregon to running AWS Fargate in US East Ohio. This gives you a plethora of options for spending your purchased compute time, allowing greater diversity in the projects you take on and to which your savings apply.

Additional Discounting

Beyond the specific savings plan you choose, you can stretch your dollar further by committing to either a partial upfront or full upfront payment of the contracted costs, which wraps additional discounts into your purchased compute time. This is an option that every business must individually assess based on their budgetary constraints at the time of purchase.

Queue Your Savings Plans Purchases

Amazon expanded on its AWS Savings Plan model in September 2020, with the introduction of 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.

Queuing purchases allows you to 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; using queued Savings Plans you can purchase future AWS services you know you will need now, and then use them when you need them in the future. Queued Savings Plans can be modified or deleted if your needs change before the specified start date. You can learn more about queuing AWS Savings Plans here.

So what does this all mean for you, beyond the clear takeaway that saving money on AWS is now easier than ever?

First of all, you can stop buying reserved instances and consider selling yours on the marketplace if you want to be free of them sooner than later. With an AWS savings plan vs. reserved instances, planning and managing your utilization is far simpler, so a tool like AWS Cost Explorer can help you stay on top of it. This alleviates the need for reliance on the costly and complex RI cost optimizers and 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.

Cloud cost savings are great; cloud cost intelligence is the next step in optimization.

While AWS Savings Plans can help you manage your cloud costs, they are not a complete cost management solution.

Focusing on savings plans is just one aspect of cloud cost optimization. Spending less is always a good idea, but to really optimize your cloud usage, you need to connect your cloud spend with the products you build and the people who build them. Doing so requires the availability of (and easy access to) detailed cost data mapping costs to events, features, and teams. 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 aligned to your specific usage — so you can correlate costs to your business strategies and objectives.

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 in conjunction 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.

Interested in seeing how CloudZero works? Request a demo today to see what we can do to help your company better manage AWS costs.

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