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Table of contents
1.
Introduction
2.
What Are Savings Plans?
3.
How to Purchase Savings Plans
4.
Comparing Amazon Reserved Instances to AWS Savings Plans
5.
Are Reserved Instances Going Away? 
6.
FAQs
6.1.
What is AWS?
6.2.
What are the cloud computing models available on AWS?
6.3.
Which pricing model is followed by AWS?
6.4.
What are the advantages of AWS?
6.5.
How to manage the AWS?
7.
Conclusion
Last Updated: Mar 27, 2024
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AWS Savings Plans

Author Komal Shaw
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Introduction

Traditionally, businesses that used the Amazon Web Services cloud used Reserved Instances (RIs) to save money by committing to a specific instance type and operating system inside an AWS region.


AWS has unveiled Savings Plans, a new pricing mechanism for AWS compute services that is more flexible. Densify assists enterprises in managing Reductions Plans and RIs by proactively discovering the best tactics for leveraging AWS Savings Plans and maximizing cloud cost savings.

What Are Savings Plans?

Savings Plans are AWS' flexible pricing strategy that offers reduced costs on EC2 and Fargate in exchange for a one- or three-year commitment to a consistent quantity of use (measured in dollars per hour). You will be charged the lower savings plan pricing up to your commitment when you sign up for Savings Plans.

Source

 

For example, if you commit to $25 of compute consumption per hour, you will be charged at the On-Demand rates for any usage beyond that commitment.

 

AWS has two types of savings plans to choose from-

  1. Compute Your Savings Plans
    This plan offers the most flexibility and can save you up to 66 percent on your EC2 and Fargate usage. This is substantially simpler than the previous RI’s as the discount applies regardless of instance family, size, AZ, location, or tenancy. You no longer have to go through the time-consuming process of figuring out the setups before committing.
    With a Compute Savings Plan, for example, you can switch from a T3 to an M5 instance and relocate your workload from the US to the EU area while still paying the savings plan fee.
     
  2. EC2 Instance Savings Plans
    This plan offers the best value, with savings of up to 72% in exchange for a commitment to use an instance family in a certain location (e.g. C5 usage in North Virginia). This lowers your cost on the specified instance family while also allowing you to change the OS, size, AZ, and tenancy (dedicated or default).
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How to Purchase Savings Plans

AWS Savings Plans can be started immediately via the AWS Cost Explorer management panel or using the AWS API/CLI. Three distinct payment options are offered for Savings Plans:

There is no upfront payment required, and your commitment will be charged on a monthly basis only.

Partial Upfront: gives more savings, but you'll be charged for at least half of your commitment upfront, with the rest due monthly.

All Upfront provides the most savings, with the lowest costs and your whole commitment charged in one payment.

The most important consideration with Purchasing Reductions Plans is how to reconcile the FinOps concerns of maximum cost savings while permitting effective chargeback/showback.

Comparing Amazon Reserved Instances to AWS Savings Plans

 

Compute Savings Plans

EC2 Instance Savings Plans

Convertible RIs

Standard RIs

Savings over On-Demand

Up to 66%

Up to 72%

Up to 66%

Up to 72%

Low price in exchange for monetary commitment

Yes

Yes

No

No

Pricing automatically applies to any instance families

Yes

No

No

No

Pricing automatically applies to any instance size

Yes

Yes

No

No

Pricing automatically applies to any tenancy or OS

Yes

Yes

No

No

Automatically apply to Fargate usage

Yes

No

No

No

Pricing automatically applies across any AWS region

Yes

No

No

No

1- or 3-year term length options

Yes

Yes

Yes

Yes

 

Overall, Compute and EC2 Savings Plans allow us more flexibility in allocating discounts.

Savings Plans cannot be marketed in the RI Marketplace because of this increased flexibility, and there is no distinct marketplace for Savings Plans. To capture all of the savings, the spending per hour must remain at commitment levels for the duration of the plan.

Convertible RIs also enable increasing commitment (buying more RIs to cover more Instances) throughout the agreed time without the need to extend it. This is useful when circumstances change and committing to a new one to three-year term is no longer feasible. Any changes to the previous contract are made with a new contract that begins from day 0 with Savings Plans.

Are Reserved Instances Going Away? 

Reserved Instances will not be phased out in the near future, and clients can still select between RI and Savings Plan obligations.

You'll still need to plan, manage, and optimize your Reserved Instance purchases and exchanges for current reservations, and Densify has a sophisticated solution to help.

The important concern now is how to calculate the appropriate commitment level for the new AWS Savings Plans. It's exceedingly difficult to analyze historical data and anticipate future usage and spending.

FAQs

What is AWS?

AWS is a subsidiary of Amazon that provides on-demand cloud computing platforms on a pay-as-you-go basis.

What are the cloud computing models available on AWS?

There are three cloud computing models available on AWS.

  • Infrastructure as a Service (IaaS)
  • Platform as a Service (PaaS)
  • Software as a Service (SaaS)

Which pricing model is followed by AWS?

AWS follows a pay-as-you-go pricing model.

What are the advantages of AWS?

AWS has many advantages like flexibility, reliability, security, ease to use, scalable, high performance, and cost-effectiveness.

How to manage the AWS?

There are three ways to manage AWS. AWS console, AWS CLI, and AWS SDK. A person should be familiar with all three methods to manage AWS.

Conclusion

In this article, we have extensively discussed the AWS Cost & Usage Report. We hope that this blog has helped you enhance your knowledge regarding AWS Cost & Usage Report.

If you want to learn more, check out our articles on Introduction to AWSAWS FeaturesManaging Devices with AWS IoTAWS AmplifyAWS Cost & Usage Report.

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