• Pricing & Cost Optimization

AWS Savings Plans vs Reserved Instances

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Emmanuel Akin-Ademola

16 Aug, 2022
5 min read

Recently, there has been increased interest in cloud computing due in part to its elasticity and scalability. In 2019, Amazon released the Savings Plans, which offers a flexible pricing model with on-demand prices to help companies manage their cloud infrastructure while scaling efficiently.

Savings Plans and Amazon EC2 Reserved Instances (RI) are the main ways you can lower your AWS costs. While companies can use both services, this article will help you understand the differences, advantages, and limitations of each, as well as some practical use cases to help you make the best financial decision.

Why You Need Cost Savings

Choosing the right AWS plan helps you optimize your financial resources while taking advantage of the flexibility available when deploying complex applications in the cloud.

The most confusing part is that the Savings Plans and RI offer the same discounts regardless of the discount programs utilized. In this article, you’ll learn more about Savings Plans and RIs so that you can better understand what their advantages and limitations are and how you can implement each effectively.

AWS Savings Plans

Savings Plans was created to simplify RI services that catered to the compute demands of managing complex reservations. A well-known feature of this is the commit discount structure or a commitment to an instance type for up to three years. Savings Plans offers discounts for flexibility in computing power and use access in tandem with fund commitment for either one or three years.

There are three types of Savings Plans: EC2 Instance Savings Plans, Compute Savings Plans, and Amazon SageMaker Savings Plans.

Compute Savings Plans

Compute Savings Plans is usually automated, irrespective of family, size, zone, operating system (OS), tenancy, and region. This plan works with Amazon Elastic Compute Cloud (Amazon EC2)Amazon Elastic Container Services (Amazon ECS)AWS Fargate, and AWS Lambda. Compute Savings Plans is the most flexible savings plan, and with an on-demand rate, you can get a discount offer of up to 66 percent when compared to other savings plans.

Often, Compute Savings Plans is similar to Amazon EC2 convertible RI in that they both offer the same discount of 72 percent. However, they differ because you can change the former’s instance family type (C5 to M5), OS, availability zone (AZ), tenancy, and region. With Compute Savings Plans, you can also move your resources or applications from Amazon EC2 to Amazon ECS using AWS Fargate without increasing your cost.

SageMaker Savings Plans

Amazon describes the SageMaker Savings Plans as the flexible pricing model for Amazon SageMaker. These plans offer a discount of up to 64 percent and are a machine learning service for cloud-based projects managing large data in a distributed environment. The Amazon SageMaker instance usage includes the Amazon SageMaker StudioAmazon SageMaker CanvasAmazon SageMaker Training Compiler, and more.

EC2 Instance Savings Plans

EC2 Instance Savings Plans requires an organization’s commitment to the same family. It’s similar to the conventional RI but allows an instance change of family type. It also makes provisions for savings of up to 72 percent regardless of the size (ie m5.xlarge and m5.2xlarge), OS (ie Linux, Windows, or Mac), and tenancy (ie host or dedicated) within the specified region’s family.

Advantages of Savings Plans

The Savings Plans is known for its flexibility (this is especially true for Compute Savings Plans) in comparison to RI, which locks the instance in for three years. It also offers far less planning and complex infrastructure than the classic RI. With the Savings Plans, changes in instance family types are possible.

Limitations of Savings Plans

Savings Plans is unavailable on services like Amazon Relational Database Service (RDS) instancesAmazon RedshiftAmazon ElastiCache, and Amazon DynamoDB. As previously stated, they are limited to AWS Fargate and Amazon EC2 instances. Amazon may make provisions for the unavailable services in the future, but currently, they’re not obtainable.

The Savings Plans does not provide capacity reservations or offer better discounts than RI, and their reselling options are not available for underused commitments. The simplicity that the Savings Plans offers often leaves you with less control over your commitment duration because you can’t sell out underused commitments.

AWS Reserved Instances

Reserved Instances has been around for over a decade and is still heavily used by many enterprises, including NetflixNRG Energy, and NCR Corporation. The RI demands an instant commit to instance types (M4, T2, T3a, etc.) in exchange for a discount for one year or three years. Plan options are available, including All Upfront, Partial Upfront, and No Upfront options. The RI incorporates Amazon RDS instances, Amazon Redshift, Amazon ElastiCache, Elasticsearch, and Amazon DynamoDB services.

There are two types of RI: Standard RI and Convertible RI.

Standard Reserved Instances

Standard RIs provide up to a 72 percent discount and are designed for steady-state usage. Standard RIs offer the largest discount for a long-term contract with a limit to a particular instance type.

Convertible Reserved Instances

Convertible RIs are also suited for steady-state usage but offer a 66 percent discount on demand. What makes Convertible RIs different from Standard RIs is their flexibility, including permissible changes in OS, tenancies, and families.

If you want to optimize your RIs, you can use ProsperOps as the easiest way to manage RIs and Savings Plans. ProsperOps is a free automated AWS cost management tool that helps you maximize savings and minimize risks.

Advantages of Reserved Instances

RI discounts are available for Amazon RDS and Amazon EC2, but not AWS Fargate.

With RIs, you may not gain an advantage from switching instance type or family because of its usage commit and complex design. But you can leverage the elasticity of its flexible transfer of workloads.

On the Reserved Instance Marketplace, you can transfer underutilized commitments when you no longer need them, which is not possible with the Savings Plans. When you pay upfront for one or three years, a significant discount of 72 percent is available.

Limitations of Reserved Instances

RIs can be challenging to plan and require continuous work due to their complex architecture. For example, when you commit to RIs, you have to run the server for approximately 774 hours per month.

While plan prices may change during your commitment, you may not benefit from changing plans or receive any discounts on your instance commits because RI locks your commitment (instance commit) for the specified period.

Savings Plans vs. RI diagram courtesy of Emmanuel Akin-Ademola

Savings Plans vs Reserved Instances

When choosing which plan is right for you, it’s best not to commit to one but rather a hybrid or open approach, as each has its merits and downsides; you can even use or purchase both plans with the same account. If you end up committing to one, there could be detrimental consequences to your organization. For instance, if you want more control over your commit, you can’t use the Savings Plans because you can’t sell the underutilized commits when you no longer want to use them. In this instance, RIs offer more control but require more human resources to run the infrastructure.

The flexibility that the Savings Plans offers can become a ruse to overcommitment if you don’t actually need that flexibility later on. You should choose your commitment in line with your organization’s goal or objective. With a blend of convertible RIs and Compute Savings Plans, you get more region coverage. If simplicity is all you desire, the Savings Plans is the better choice. On the one hand, RIs don’t incorporate AWS Fargate for serverless applications, which would provide additional application scope. On the other hand, the Savings Plans doesn’t cover Amazon RDS.

Regarding management overhead, Reserved Instances require frequent monitoring, while the Savings Plans is automated and less complex.

Conclusion

The key to making the best decision for your organization’s serverless computing is not necessarily about choosing the Savings Plans over RI or vice versa. The Savings Plans was not created to replace RIs but rather to simplify Amazon’s services in meeting the demands of their customers.

Nevertheless, it makes sense to conclude that both plans have benefits with similar discounts, different architectural management, and different use cases. Using one service doesn’t necessarily restrict you from using the other. You can use both services simultaneously or interchangeably. While RIs have been the convention, the Savings Plans helps you manage costs better.

If you’re looking for additional resources to help you manage your AWS costs, check out CloudForecast. CloudForecast’s focused daily AWS cost monitoring reports help busy engineering teams understand their AWS costs, rapidly respond to any overspends, and promote opportunities to save costs.

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