AWS Savings Plans: A Comprehensive Guide to Cost Optimization
Discover AWS Savings Plans, benefits, limitations, and how Forma Cloud Optima maximizes your cloud cost savings.
As cloud computing increasingly becomes the standard for businesses across various industries, managing the cost of cloud services has emerged as a critical concern.
Amazon Web Services (AWS) is a leading cloud computing platform that provides an extensive array of services to organizations; however, the cost of using these services can add up quickly.
To address this challenge and help businesses maximize cost savings, AWS has introduced the AWS Savings Plans. In this all-inclusive guide, we will walk you through the essentials of cost optimization using Savings Plans. We will cover everything from comprehending the different types of plans available, to evaluating your usage patterns and making necessary adjustments to optimize your spending. With our expert guidance, you’ll be well-equipped to make the most of your AWS Savings Plans.
Getting Started with AWS Savings Plans
How AWS Savings Plans Work
When a user signs up for an AWS Savings Plan, they commit to using a certain amount of compute usage, measured in dollars per hour, over a one or three-year period. This usage can be applied to any type of EC2 instance, including On-Demand instances and can also be applied to Fargate and Lambda usage.
Savings Plans function by offering discounts on the hourly rate for a particular instance or resource’s usage. These discounts are applied automatically when instances or resources are utilized, allowing businesses to witness the savings on their monthly invoices. The actual savings are dependent on the committed usage amount and the commitment duration. Businesses can opt for a 1-year or 3-year commitment, with larger commitments yielding greater discounts.
For instance, if a company commits to using $10,000 worth of EC2 Instance usage per month over a 3-year period, they can receive a discount of up to 72% on their monthly AWS cost. The savings plan also allows businesses to change instance types and regions as their requirements evolve, without sacrificing the discount.
Types of AWS Savings Plans: Tailoring Your Savings Strategy
AWS Savings Plans are a flexible pricing model that allows businesses to save up to 72% on their AWS usage by committing to a certain amount of usage for a specified period of time. The savings plans offer three types of pricing models:
EC2 Instance Savings Plans
The EC2 Instance Savings Plans provide the lowest prices, offering savings up to 72% in exchange for commitment to usage of individual instance families in a region. They are designed for businesses that have predictable workloads and use specific instance families.
Compute Savings Plans
Compute savings plans allow you to save money on any EC2 or Fargate and Lambda usage, regardless of region or instance type. You can pay upfront for your usage, or pay hourly. They are designed for businesses that have unpredictable workloads and use a variety of compute resources.
Amazon SageMaker Savings Plans
SageMaker savings plans automatically and simultaneously apply to any eligible SageMaker ML instance usage across all supported AWS Regions up to the hourly commitment. They provide the most flexibility and help to reduce your costs by up to 64%.
Reserved Instances vs Savings Plans
Comparing Billing Structures
Reserved Instances require an upfront payment or partial upfront payment along with a reduced hourly rate for the instance usage over a specific term (e.g., 1 year or 3 years). The billing is based on the instance type, region, and term length chosen.
Savings Plans offer a flexible payment model without any upfront costs. Instead, you commit to a certain amount of usage (measured in dollars per hour) for a specific period (e.g., 1 year or 3 years) and receive a discounted rate on that usage.
Instance Flexibility
Reserved Instances are tied to specific instance attributes such as instance type, region, and platform (Linux/Windows). While they offer significant savings, they can limit flexibility if your workload needs change. You can modify Reserved Instances within the same instance family, but you cannot change the region or instance type.
Savings Plans offer more flexibility as they apply to a broader range of instance types, families, and sizes. They are not tied to specific instance attributes, allowing you to apply the savings across a wide variety of workloads within the same AWS account.
Coverage and Applicability
Coverage
Reserved Instances cover specific instance types and sizes within a particular region and availability zone. They provide capacity reservation and ensure instances are available when needed.
Savings Plans provide flexibility and coverage across instance families and sizes within a region, regardless of availability zones. They provide cost savings for usage across a wide range of EC2 instances, AWS Fargate, and Lambda.
Applicability
Reserved Instances are primarily applicable to EC2 instances and provide the most significant savings for steady-state workloads with predictable usage patterns.
Savings Plans are more versatile and can be applied to EC2 instances, AWS Fargate, and Lambda usage. They are better suited for dynamic workloads or when the usage patterns are less predictable.
Benefits of using AWS Savings Plans
The main benefit of using AWS Savings Plans is that they allow you to pay for only what you use, so there’s no need to worry about paying for unused capacity or resources.
Flexibility and Simplicity: Adapting to Evolving Business Needs
One of the significant advantages of AWS Savings Plans is their flexibility. Unlike Reserved Instances, which require customers to commit to specific instance types and regions, Savings Plans offer more freedom. Users can choose between Compute Savings Plans, which apply to any AWS compute usage, and EC2 Instance Savings Plans, tailored to specific instance families within a region. This flexibility allows businesses to adapt their cloud infrastructure as their needs evolve, without compromising on cost savings.
Predictable Cost Savings: Plan Your Budget with Confidence
AWS Savings Plans offer consistent savings on cloud computing costs for businesses. By committing to a specific amount of usage over a one or three-year term, customers can receive discounts of up to 72% compared to on-demand pricing. This predictability allows businesses to plan their budgets more effectively and allocate resources to other essential aspects of their operations.
Simplified Billing: Streamlined Invoices for Easy Cost Management
Managing cloud costs can be a complex and time-consuming task for businesses. AWS Savings Plans simplify the billing process by consolidating discounts and usage charges into a single invoice. This streamlined approach makes it easier for organizations to understand their cloud spending and identify areas for optimization.
Integration with Cost Explorer
AWS Cost Explorer is a powerful tool that provides businesses with insights into their cloud spending. With the integration of AWS Savings Plans, customers can now analyze their savings plan coverage and utilization, identify opportunities for additional savings, and forecast future costs more accurately. This data-driven approach empowers businesses to make informed decisions about their cloud infrastructure and spending.
Automatic Application of Savings
One of the standout features of AWS Savings Plans is the automatic application of savings to eligible usage. Once a customer commits to a Savings Plan, the discount is applied automatically to any qualifying usage, without the need for manual intervention. This ensures that businesses receive the maximum possible savings on their cloud computing costs.
Limitations of Savings Plans
Limited to AWS Compute Services
Savings Plans apply only to select AWS Compute Services, such as EC2, Fargate, and Lambda, and do not cover other AWS services like RDS, S3, and others.
Restricted Discounts
Savings Plans offer discounts up to a maximum of 72% and are not as flexible as Reserved Instances, which offer higher discounts, especially for longer durations.
Commitment and Usage Requirements
Savings Plans require a commitment (The AWS Service Terms states “Savings Plans are non-cancellable.”) to a specific amount of usage (measured in dollars per hour) on a specific instance family or region, which may not be suitable for organizations with fluctuating usage patterns.
No Marketplace Support
Unlike Reserved Instances, Savings Plans cannot be bought or sold through the AWS Marketplace, which limits the ability to trade or sell them.
Limited Flexibility
Savings Plans have less flexibility than Reserved Instances as they cannot be exchanged or modified once purchased, unlike Convertible Reserved Instances, which offer more flexibility in terms of instance type, family, and region changes.
Loss of Potential Savings
Savings Plans are designed to be used for resources that are running 24/7/365 (or 24/7/1095 for 3-year purchases). Over-provisioning or under-utilizing instances can quickly eat away the potential savings. For instance, if a user is paying $10 per hour on AWS on-demand pricing, but commits to spending only $1 per hour by purchasing a Savings Plan with a 30% discount, the user will now pay:
(10-1/(1-30%) + 1)/h = $9.57/h
- 10: original cost
- 1/(1-30%) the on-demand cost equal to the capacity purchased from the
savings plan
- 1: savings plan cost
Note this cost includes the $1/h savings planEven if a user’s actual usage costs only $0.5 per hour on some days, they are still obligated to pay the committed $1 per hour cost under the AWS Savings Plan.
Forma Cloud Optima: a Comprehensive Approach
We understand that relying solely on AWS Savings Plans and Reserved Instances may not provide the full extent of savings you desire. That’s why our team of experts has developed “Optima”, a tailored solution designed to address the specific needs of our customers. Explore the remarkable capabilities of our comprehensive cost-saving offerings:
Instance Downsizing
Optima optimizes resource allocation to align with the current workload, resulting in efficient utilization and significant cost savings. By scaling down instance resources like CPU, memory, and storage, it prevents over-provisioning and minimizes unnecessary costs. Optima is particularly beneficial for variable workloads, ensuring optimal resource usage. By right-sizing instances to match the workload, organizations can achieve better cost-efficiency and maximize the value of their cloud infrastructure.
Automatic Transactions of Reserved Instances
With Optima, managing Reserved Instances becomes a simplified and automated process. Optima automates the entire lifecycle of Reserved Instances, including purchasing, modifying, exchanging, and selling, based on predefined rules. It continuously evaluates resource usage to optimize Reserved Instances allocation, ensuring maximum cost efficiency.
By leveraging Optima’s automated approach, organizations can streamline their cloud resource management, enhance cost savings, and easily adapt to changing workloads. It also eliminates the need for manual intervention, providing a more efficient and automated experience for managing Reserved Instances.
Savings Plans Management
With Optima, organizations can effectively manage Savings Plans to achieve significant cost savings in their cloud infrastructure. This involves optimizing usage, monitoring costs, and making data-driven decisions to align Savings Plans with workload demands. Through careful planning, utilization analysis, and ongoing optimization, Optima helps organizations maximize the value of their Savings Plans and optimize their cloud computing costs.
Automatically Shut Down Unused Instances
With Optima’s auto-shutdown feature, you can automate the process of shutting down instances that are not actively utilized, eliminating unnecessary expenses associated with idle instances. Optima’s advanced capabilities include idle instance detection, customizable shutdown policies, and graceful shutdown notifications, ensuring a seamless experience. By automatically managing resource allocation during periods of inactivity, Optima helps you achieve significant cost savings and improve resource utilization.
With Forma Cloud, you gain access to an advanced platform that automates the optimization of your cloud bill. Our solution takes the burden off your shoulders by tracking resources, managing teams, and analyzing hundreds of EC2 instances with their pricing plans. In a matter of minutes, our platform can provide actionable insights on your inventory and usage, identifying opportunities to downgrade instances and maximize cost efficiency.
Whether you’re running a small-scale or large-scale cloud environment, Forma Cloud is the trusted companion that streamlines your cost-saving efforts and empowers you with the tools to achieve substantial savings.
Experience the difference with Forma Cloud and take control of your cloud costs today.
Forma Cloud can help you save on cloud costs. Our expert team of AWS engineers and cost management specialists monitor your spending so you can understand and reduce it. We operate via a fast and efficient ChatOps model so we can provide fast and reliable answers to questions about the cost of your AWS environment. Visit us online to learn more or schedule a demo to see our cost management tools in action.
