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Read customer storyLearn more about AWS Savings Plans and additional steps you can take to manage cloud costs more effectively.
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
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 provides three types of Savings Plans:
Here's a quick rundown:
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.
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.
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:
So, what do you get for purchasing a Savings Plan?
The biggest Savings Plans benefit is the flexibility you get compared to using Reserved Instances. We’ll explain.
So, how much can you save with AWS Savings Plans?
How much you'll save with AWS Savings Plans depends on your AWS settings. However, here are a few pointers.
AWS's figures are more of a guideline than what most organizations achieve. Yet, here they are:
In summary, here is a quick comparison of Compute Savings Plans, EC2 Instances Savings Plans, and Standard Reserved Instances.
EC2 Instances Savings Plans |
Compute Savings Plans |
Standard Reserved Instances |
|
Commitment term |
1 year, 3 years |
1 year, 3 years |
1 year, 3 years |
Payment Options |
All Up-front, Partial Up-front, and No Up-front |
All Up-front, Partial Up-front, and No Up-front |
All Up-front, Partial Up-front, and No Up-front |
Instance Family |
Any |
Fixed |
Fixed |
Instance Size |
Any |
Any |
Fixed with the exception of regional scopes that use Linux/Unix |
Instance Operating System |
Any |
Any |
Fixed |
Instance AZ |
Any |
Any |
Any (regional scope) Fixed (zonal scope) |
Instance Tenancy |
Any |
Any |
Fixed |
Applicable to |
EC2 only |
EC2, Lambda, and Fargate |
EC2 only |
Need to reserve capacity? |
No |
No |
Yes (Zonal scope) |
Best case-scenario savings |
72% |
66% |
72% |
But there’s more.
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:
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.
Here are some AWS Savings Plans FAQs for quick answers to some of your most burning questions.
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.
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).
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.
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.
No. Savings Plans do not apply to spot usage or instances covered by Reserved Instances.
No. They apply to Amazon EC2 Instances, AWS Fargate, and AWS Lambda.
While EC2 Instance Savings Plans are region-specific, Compute Savings Plans apply across all regions.
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.
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:
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.
Erik Peterson is the co-founder and CTO of CloudZero, is a software startup veteran, and has been building and securing cloud software for over a decade. Erik is a frequent speaker on FinOps, cloud economics, DevOps, and security.
CloudZero is the only solution that enables you to allocate 100% of your spend in hours — so you can align everyone around cost dimensions that matter to your business.