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Using AWS Savings Plans to reduce AWS costs

StaffAWS Costs Optimization

In this article, we will describe what are AWS Savings plans, and when to use them.

What are Savings Plans?

AWS Savings plans were released by Amazon in November 2019. They are intended to lower compute costs.

According to AWS:

“Savings Plans are a flexible pricing model that offer low prices on EC2, Lambda, and Fargate usage, in exchange for a commitment to a consistent amount of usage (measured in $/hour) for a 1 or 3 year term. When you sign up for a Savings Plan, you will be charged the discounted Savings Plans price for your usage up to your commitment.”

How do Savings Plans work?

Savings Plans are just billing discounts. They apply to new resources or already created ones. They affect how Compute resources are billed. But now how they are used.

After you purchase this Saving Plan, AWS continually compares your plan with the resources (e.g. an EC2) used. Whenever the resources are covered with the plan, AWS charges it as part of the Savings Plan. And it has a discount compared to standard rates.

Savings Plans vs Reserved Instances

There are 2 types of Savings plans

  • EC2 Instance Savings Plan
  • Compute Savings Plan

Below is a quick comparison of the features of these plans, and Reserved Instances also.

Compute Savings plans EC2 Instance Savings Plans Reserved Instances (Standard)
Terms 1 or 3 years 1 or 3 years 1 or 3 years
All, Partial, and No Upfront payments Any Any Any
Instance family Any Fixed Fixed
Instance size Any Any Fixed (except on regional scope using Linux/Unix)
Instance region Any Fixed Fixed
Instance AZ Any Any Fixed (on Zonal scope), Any (on Regional Scope)
Instance OS Any Any Fixed
Instance tenancy Any Any Fixed
Applies to Fargate Yes No No
Applies to Lambda Yes No No
Savings Up to 66% Up to 72% Up to 72%
Capacity reservation No No Yes (on Zonal scope only)

As you can see, Compute Savings Plans are more flexible than EC2 Instance Savings Plans.

For example, let’s say you buy a Compute Savings Plan to commit to $2 / hour. This will apply to all instances in all regions. Instead, if you want to use EC2 Instance Savings Plans, you need to purchase one plan for each of the regions with EC2s in use. Also, Compute Savings plans will cover discounts for Fargate and Lambda for example. The disadvantage is that Compute Savings Plans provide less discount compared to EC2 Instance Savings Plans.

Please also note that both kinds of Savings Plans are more flexible than Reserved Instances. With Savings Plans, you don´t need to commit to an instance family (eg t3 or m1), a size (t3.medium or t3.large), a region (eg Ohio / us-east-2), an AZ in a region (eg us-east-2a or s-east-2b) or a specific OS of your instance (eg Windows Server or Linux). You just only one Savings Plans for any EC2 in your account.

Advantages of Savings Plan

The main advantage of Savings Plans is that you can get a discount for using the Compute services for 1 year. Additionally, you still don´t have to commit to a certain type of resource. You can completely change the compute hardware that supports your service (including instance family, sizes, region, AZ, OS or tenancy). And the discount will still apply.

Upfront payments

AWS offers 3 options to pay Savings Plans:

  • All Upfront
  • Partial Upfront
  • No Upfront

They indicate the period to pay the Savings Plan. In the first case, you pay the plan all-upfront at the beginning of the 1-year (or 3-years) period. There won’t be monthly costs related. In the second case, you would pay part of the plan at the beginning of the period, and the rest every month. And in the third case, you pay the cost the plan every month during the period, without initial payments. Note that the earliest you pay, the bigger the discount is.

How do I cancel a Savings Plans?

You can´t cancel a Savings Plan. Remember it´s a commitment to use a certain amount of resources each hour.

Example of choosing an AWS Savings Plans

You can review current Savings Plans pricing on AWS Savings Plans page

AWS Offers many Savings Plans. The picture below shows the initial filters. These allow you to refine your search based on Term Length, Payment Options, Instance Family, Region, OS, and Tenancy

Choosing an EC2 Savings Plans

For example in the following picture, there are 7 Savings Plans showed that meet these conditions.

Results from Choosing EC2 Savings Plans

The first row shows that t3a.nano instances have a rate of $0.0047 per hour. If you buy the Saving Plan, you will pay $0.0029 per hour for 1 year (without upfront costs). That means getting a 38% discount. In other terms, you commit to paying $0.0029 per hour. So AWS gives you an hourly discount for that commitment.

Note that if you don’t use the instance (for example you turn it off), you will still have to pay the Saving Plan rate committed. Let’s say you want to purchase the Savings Plan all upfront. Then you will get a Savings Plan rate of $0.0027 an hour. That’s a 43% discount compared to On-Demand Rate. But you will have to initially pay for all the hours in the 1-year period. That means an initial payment of $23.65.

Example discount scenarios

Let’s say you purchase a $10 per hour Savings Plans. The real discount will depend on how you use your instances or other resources.

Below are 3 example scenarios:

  • If you consume $14 an hour, then the first $10 won’t be charged (because they are covered by the Savings Plan you purchased). The rest of the cost ($3 in this case) will be charged using On-Demand rates.
  • If you consume $7 an hour, this cost will still be covered by your current Savings Plan. But remember you spent money to buy the Savings Plan, and you aren´t using it completely.
  • If you are using EC2 Instance, Fargate, and Lambda simultaneously, then the Savings Plans applies first to the service that makes a bigger saving, and then continue with the rest.

When not using them?

Savings Plans offer a great opportunity to save costs. But they should be used when you have a stable consumption, and you can commit to spending an amount of Compute services each hour. The hourly commitment is another important part.

Some cases where Savings Plans are might not be useful, and should be further analyzed:

  • Instances used below 1-year term
    For example, if you plan to use EC2 for some days or weeks, then a Savings Plan won’t help.
  • Instances not used 24hs a day
    For example, if you have non-production servers that you use on business hours only (8hs on weekdays), then Savings Plans won’t be useful also.

Alternatives to Savings Plans

  • Auto-Scaling
    AWS Auto Scaling helps to adjust the number of EC2 resources used based on current traffic. For example, you might need 3 EC2s to support your traffic during peak hours. But you might need only 1 EC2 at night. Auto-scaling allows you to automatically adjust the number of EC2s running based on some metric.
  • Spot Instances
    AWS also offers Spot Instances. They offer higher discounts compared to Savings Plans. And they don´t require a minimum 1-year commitment. The EC2 instance price is defined every second based on AWS supply and demand. Your EC2s will be running as long the price you offered is bigger than the current spot price. This is great for processes that are completed fast or could be reinitiated easily on other resources. The risk is that your instance might be shut down if your bid price is below the current spot price.

Where can I check the current Savings Plans Pricing?

Visit AWS Savings Plans Pricing


Below you will find more information related to Savings Plans

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