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Differences between Savings Plans and Reserved Instances

In the previous series about AWS Cost Optimization, there is one term that frequently appears beside AWS tools: Savings Plans. AWS users may already acquire deep knowledge about on-demand pricing model or Reserved Instances, but still have a vague idea about Savings Plans - a recently introduced discount program.


So, what are Savings Plans? What are their strengths and weaknesses in comparison with Reserved Instances? Why are Savings Plans the best choices to optimize the cost of cloud computing? This blog post will answer all of these questions, starting with digging deeper into the essence of these pricing models.



Reserved Instances - Stable but not flexible


For an organization that preaches the power of on-demand, moving to Reserved Instances model may be quite inconvenient. RIs requires you to commit to a specific instance type for 1 to 3 years. To alleviate the negative influence of the inflexible regime on the customer experience, AWS has suggested and supported the customers to convert or resell the unwanted RIs on the marketplace. However, this in turn leads to a great deal of complexity in purchasing and managing the RIs.

AWS Savings Plans - The most flexible pricing model


Described as “a new flexible pricing model” with the same discount percentages and payment options as Reserved Instances, the primary difference between the two programs is that Reserved Instances offer a discount against On-Demand pricing depending on committed utilization, whereas Savings Plans offer a discount depending on committed spend.


There are 2 types of Savings Plans: Compute Savings Plans and EC2 Instance Savings Plans. Compute Savings Plans can be applied automatically regardless of family, size, region. For example, with Compute Savings Plans, you can change from C4 to M5 instances, shift a workload from EU (Ireland) to EU (London) at any time and automatically continue to pay the Savings Plans.


In the case of EC2 Savings Plans, they’re a lot more similar to the classic Reserved Instance, requiring an organization to commit to an individual instance family in a specific region. They differ from RIs in as much as you can change the Instances type within the family. For instance, you can move from c5.xlarge running Windows to c5.2xlarge running Linux, but cannot move to A1 or T3 instances.


To sum up, the differences between 2 Savings Plans are:



How much discount can you get with AWS Savings Plans?


The discounts for AWS’s Savings Plans program vary depending on the length of your commitment and the plan you are committing to. Like RIs, AWS offers 1 or 3 years terms with No Upfront (pay monthly), Partial Upfront (pay some at the beginning and some monthly), and All Upfront (pay for everything right away). The discounts scale with your commitment but can be up to 72%.



Advantage of AWS Savings Plans over AWS Reserved Instances


Reduce the complexity. You don’t need to consider which type of RI, size, family,…you should use before you commit. You also get rid of the complicated processes when you want to manage, convert or resell the RIs on the market place.


Save time for infrastructure planning. Your engineers no longer have to plan complex infrastructure for 1-3 years in advance, they can simply commit to using a certain amount of compute.


Enhance the flexibility. Firstly, Savings Plans unleash you from the burden of using only 1 specific instance for 1 to 3 years despite your changing requirements. Secondly, Savings Plans allow you to transfer workloads between instance types to meet demand and leverage something akin to elasticity, without resulting in downtime. You cannot gain the same advantages when using RIs, which require you to commit 24/7/265 usage of a specific instance type.


Recommend on using Savings Plans


Despite the visible benefits of Saving Plans, it is vital that you plan carefully so that you make a correct commitment, as any usage beyond the commitment will be charged at regular On Demand rates. Or else, you may commit to use more than you actually need. On the other hand, keep in mind that you always have a choice of purchasing a Savings Plan on a month-by-month basis, so that you can have time to get used to this new model.


If you are still in two minds about which pricing model you should apply, don't hesitate to contact OSAM. As an Advanced Partner of AWS, OSAM has a wide range of services and expertise to help you along your cloud journey. Our solution architects can help you to revise and recommend the best pricing model for your system.

References:

1. Gorillastack, 2019. AWS Savings Plans and Reserved Instances. Available at: https://www.gorillastack.com/blog/cost-optimization/aws-savings-plans-reserved-instances/

2. Amazon Web Services (n.d). Pricing with Savings Plans. Available at: https://aws.amazon.com/savingsplans/pricing/?nc1=h_ls


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