Cloud Comparison Migration Optimization Tips

Comparison of Reserved Instances vs. AWS Savings Plans

Our comparison of Reserved Instances vs. AWS Savings Plans illustrates the similarities and differences between AWS’ committed use discount program and its more recent committed spend discount program in order to identify which of the two options will maximize cost efficiencies in their specific circumstances.

In November 2019, Amazon Web Services introduced AWS Savings Plans—a committed spend discount program that mirrored the existing committed use Reserved Instance discount program inasmuch as there are two types of Savings Plans available:

  • EC2 Instance Savings Plans (similar to Standard Reserved Instances)
  • AWS Compute Savings Plans (similar to Convertible Reserved Instances)

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.

A further difference between the AWS Compute Savings Plans and Convertible Reserved Instances is that AWS Compute Savings Plans not only apply to the amount spent on EC2 Instances, but also to the amount spent on AWS Fargate and Lambda. The introduction of AWS Compute Savings Plans is great news for businesses using Fargate because—provided there’s a steady state level of operations—the Savings Plan will reduce AWS costs considerably. As we saw in our report, “How 2020 Changed the Way We Use the Cloud,” container adoption is rising, with CloudHealth customers spending 38.7% more on container services in September 2020 than they did in January 2020.

What about businesses using EC2 Reserved Instances?

However, businesses using Standard and Convertible Reserved Instances for EC2 services might not appreciate the differences between the existing discount program and the new one—especially as the percentage discounts being offered by AWS are exactly the same whichever discount program is used—as are the same full, partial, or no upfront payment options.

Consequently, we’ve prepared a comparison of Reserved Instances vs. AWS Savings Plans to illustrate the similarities and differences between the two discount programs, along with advantages and disadvantages to each. To provide a better like-for-like picture of the discount programs, we’ve divided the comparison into two. The first half compares Standard Reserved Instances vs. EC2 Instance Savings Plans, and the second half compares Convertible Reserved Instances vs. AWS Compute Savings Plans.

First, a couple of things to point out

The first thing to point out in our comparison of Reserved Instances vs. AWS Savings Plans is that at present, only EC2 Instances and Fargate usage is eligible for AWS Savings Plans. If your business is using Reserved Instances to save money on the cost of RDS Instances, AWS Redshift, ElastiCache, Elasticsearch, or DynamoDB services, you will have to continue using Reserved Instances until the new discount program is extended to these services.

The second point to note is that when you commit to a predetermined dollar per hour spend in an AWS Savings Plan, any amount utilized above the amount of the committed spend is charged at on-demand rates. You should also be aware that if you don’t utilize qualifying services to the amount of the commitment, you still have to pay the amount you committed to.

Standard Reserved Instances vs. EC2 Instance Savings Plans

Standard Reserved Instances and EC2 Instance Savings Plans are both family-specific and region-specific (e.g. M5 EC2 instances in N. Virginia), but EC2 Instance Savings Plans can also be applied to different operating systems and tenancies, whereas customers currently need separate Standard Reserved Instances for each operating system or tenancy.

The situation regarding capacity reservations is slightly more complicated. With Standard Reserved Instances, customers have the option of assigning the Reserved Instance to a specific Availability Zone in order to reserve capacity. This option doesn’t exist in the Savings Plans discount program. However, it’s possible to apply Savings Plans discounts to On-Demand Capacity Reservations and thereby indirectly get both the benefits of reserved capacity and a commitment discount.

Comparison of Standard Regional vs. Standard Zonal Reserved Instances vs. EC2 Instance Savings Plans

Convertible Reserved Instances vs. AWS Compute Savings Plans

Customers currently using Convertible Reserved Instances will likely benefit the most by switching to Compute Savings Plans because of the significant reduction in management overhead. Customers can exchange Convertible Reserved Instances for a different size, region, instance family, tenancy, or operating system, but the process is manual. With Compute Savings Plans, discounts are applied automatically, even when making changes—making them a great option for businesses with consolidated accounts across multiple regions.

However, whereas unutilized Convertible Reserved Instances and Standard Reserved Instances can be sold in the Amazon EC2 Reserved Instance Marketplace, the option does not exist (at present) to list unutilized AWS Compute Savings Plans or EC2 Instances Savings Plans in order to recover upfront payments. For some businesses, this may influence the decision to stick with Reserved Instances.

Comparison of Convertible Regional vs. Convertible Zonal Reserved Instances vs. AWS Compute Savings Plans

A few final considerations

There are multiple takeaways from our comparison of Reserved Instances vs. AWS Savings Plans depending on the nature of your business and its current fleet of Standard or Convertible Reserved Instances. We’ve listed a few below, but if you have any specific questions about whether Reserved Instances or AWS Savings Plans may be better for your business, do not hesitate to get in touch.

  • EC2 Instance Savings Plans are applied automatically to spend across any tenancy and any operating system.
  • You can use EC2 Instance Savings Plans against the cost of running On-Demand Capacity Reservations in a single Availability Zone.
  • AWS Compute Savings Plans are applied automatically to any sized EC2 instance in any family, across any tenancy and OS, and in any region.
  • If you’re purchasing both types of Savings Plans (and possibly Reserved Instances too), AWS will apply them in this order: Standard Reserved Instance, Convertible Reserved Instance, EC2 Savings Plan, Compute Savings Plan.
  • Due to their flexibility, AWS Compute Savings Plans eliminate the management overhead of manually modifying and exchanging Convertible Reserved Instances, but may be more challenging to track and allocate benefits.
  • At present, you cannot resell underutilized AWS Savings Plans in the Amazon EC2 Reserved Instance Marketplace.

Finally, if AWS Savings Plans are a better option for your business, you don’t have to wait until existing Reserved Instances expire before being able to take advantage of them. AWS Savings Plans can be added in layers. So, if there are predictable workloads in your AWS environment that are not yet covered by Reserved Instances, it makes sense to purchase a Saving Plan now and add to it as Reserved Instances expire. The minimum commitment per purchase is one-tenth of a cent ($0.001) per hour, so most businesses will be in a position to try the new discount program today.

CloudHealth’s Compute Savings Plans Recommendations break it down for you so you can quickly determine which Compute Savings Plan helps you meet your goal—whether you want to maximize savings, cover a certain amount of usage by discounts, or specify an hourly commitment amount in dollars.

For a complete guide to AWS Savings Plans and how they compare to Reserved Instances, see our eBook: The Ultimate Guide to AWS Savings Plans