Article Save AWS Compute Cost with the new AWS Savings Plans

AWS Compute Cost Overview

Over the years, AWS have released innovative solutions that customers can implement to reduce cloud spend. When the elastic cloud compute service (EC2) first launched, the pricing was on-demand which was suitable for short term and unpredictable workloads. However, the longer the EC2 service is used, the more defined the compute requirements to support the workload become. To further save customers the compute cost of running established workloads in "steady state", AWS introduced the concept of Reserved Instances.

Reserved Instances (RI) are billing constructs that can be used to save up to 72% of the on-demand price within a 1 or 3 year term. The two main types:

• Standard Reserved Instance - which allows for the instance size to be modified to a larger or smaller instance within an instance family. In addition, other parameters such as the scope (region or availability) or change in the availability zone can be modified.
• Convertible Reserved Instance - provide greater flexibility by allowing the instance to be exchanged with a new reserved instance within the reservation term. Furthermore, a convertible RI can be modified, similar to the Standard RI.

Note: The RI features that can be modified are dependent on the scope (i.e. Regional or Availability Zone) of the RI.

What are AWS Saving Plans?

As the scale of the compute resources used in the AWS environment increases, it can introduce a considerable overhead in identifying the optimal reserved instances to setup, as well as managing existing RIs which limits customers from fully benefiting from RI discounts.

To eliminate the heavy lifting required to manage RI and provide flexibility for customers, AWS have recently released AWS Savings Plans. A new flexible pricing model which helps customers save up to 72% of EC2 and Fargate (serverless compute for containers). Simply commit to a consistent usage amount, e.g. $5/hour, over 1 or 3 years period, and in exchange AWS will offer a discount for all usage up to $5 in a given hour. Any usage beyond the commitment will be charged at the regular on-demand prices.

Savings plans will help customers to better manage commitments at scale across AWS compute services (with 200+ instance options across 22+ regions). It will also support changes to the compute usage without requiring any modification or exchange of RIs.

There are two main types of Savings Plans:

• Compute Saving Plan - offers the greatest flexibility, similar to convertible RIs, customers can save up to 66% compared to on-demand pricing. It applies to all EC2 and Fargate compute usage irrespective of the instance family, size, availability zone, region, operating system (OS) or tenancy. For example, customers can move workloads running on dedicated tenancy to default tenancy, or move a workload from US East (Ohio) to US West (Oregon) and still benefit from the saving plans price commitment.
• EC2 Saving Plan - offers the lowest prices, up to 72% compared to on-demand prices in exchange for less flexibility. This savings plan will only apply to selected instance family within a specific AWS region supporting changes to instance size, operating systems (OS) or tenancy. For example, customers can move from m5.xl to m5.4xl or from windows OS to Linux OS and still benefit from the savings plan price commitment.

The Future of Reserved Instances

For now, Reserved Instances will still be available for both existing and new customers. However, with the flexibility and reduced management overhead offered by Savings Plans, the expectation is that customers will gradually move to savings plans for net new or renewal of existing commitments. Furthermore, both RIs and Savings Plans can be used together to attain better savings coverage.

Activating Savings Plans

Savings Plans can be set up and managed within the Cost Explorer and EC2 page of the AWS console. AWS also provides a recommendations engine that uses historical compute usage data across 7, 30 or 60 days to generate purchase options across a 1 or 3 year savings plans term with payment options of: no upfront, partial upfront or all upfront.

Third party cost optimisation tools such as CloudCheckr and CloudHealth have both announced their support for AWS Savings Plans with future roadmaps to simplify the selection of the right discount plan i.e. Savings Plans, Standard RIs, Convertible RIs, and improve visibility into discount coverage for better cost optimisation.

How Insight Can Help

To subscribe to savings plans, customers will need to consider a number of factors to maximise savings while protecting any existing investments on RIs.

• Baseline the current per-hour on-demand cost - this will be a new metric for most customers as there is no reason to have tracked this in the past.
• Understand the current coverage of existing RI fleet with emphasis on preventing any wastage on existing convertible RIs.

Furthermore, when purchasing savings plans and the corresponding management while in term, other factors to consider include:

• Gaining visibility into the instances covered by RIs and Saving Plans
• Planning for end of term of existing RIs i.e. continue with RIs or flip over to saving plans
• How to maximise savings plans

Insight as an AWS Well-Architected Partner is well positioned to provide expert advice to customers that would want to leverage savings plans. Our AWS experts are available to work with customers to review their current AWS environment and make recommendations on how to adopt savings plans, ensuring that the factors highlighted above are taken into consideration in the short and long term.

If you are interested in finding out more, please contact your Insight Account Manager or get in touch via our contact form here.

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