Finops Update - AWS Savings Plans vs. Reserved Instances: A Comprehensive Comparison !!!

In the ever-evolving landscape of AWS savings opportunities, two key options stand out: Reserved Instances (RIs) and AWS Savings Plans. This document explores the key differences between these two choices, highlighting their features, flexibility, pricing, and how they work.

AWS Reserved Instances (RIs)

Offering Types:

• Standard RIs: One-year or three-year commitments for specific instance types and sizes.
• Convertible RIs: Similar commitment periods but allow flexibility in changing instance types or operating systems.

Discount & Coverage Comparisons:

• Savings up to 72% over On-Demand.
• No lower price for monetary commitment.

Limited applicability to certain instance families, sizes, tenancies, and regions.

• Not applicable to Fargate and Lambda usage.

Feature Comparisons:

• Scoped to regions or availability zones.
• Limited flexibility in instance family, operating system, and tenancy.
• Various payment options were available.
• Capacity reservation and account limit applicability.

Term Comparisons:

Average discounts of 38% for 1-year and 58% for 3-year RIs.

Fixed instance family, size, and geography.

AWS Savings Plans

Offering Types:

• Compute Savings Plans: Flexible, with up to 66% savings, similar to Convertible RIs.
• EC2 Instance Savings Plans: Focused on specific instance families within a region, offering up to 72% savings.

Discount & Coverage Comparisons:

• Savings up to 72% over On-Demand.
• Offers lower prices for monetary commitment.
• Applicable to any family, size, tenancy, OS, and AWS Region.
• Covers Fargate and Lambda usage.

Feature Comparisons:

• Global in scope, applicable to all regions.
• High flexibility in instance family, size, operating system, and tenancy.
• Similar payment options to RIs.
• No capacity reservation or account limit applicability.

Term Comparisons:

• Average discounts of 29% for 1-year and 51% for 3-year Savings Plans.
• Offers flexibility in instance family, size, geography, and OS.

Pricing Comparisons:

Here are some examples showcasing the pricing differences between Standard RIs, Convertible RIs, and AWS Savings Plans for a 1-year commitment on an M5 12xlarge EC2 instance:

• 1-Year Standard Reserved Instance: Upfront cost ranges from $0 to $12,035, with effective hourly rates from $1.3740 to $1.4720, saving up to 40%.
• 1-Year Convertible Reserved Instance: Upfront cost ranges from $0 to $13,840, with effective hourly rates from $1.5800 to $1.6930, saving up to 31%.

How to Purchase an AWS Savings Plan:

1. Review your AWS Savings Plan recommendations.
2. Consider your existing infrastructure needs and active RI commitments.
3. Right-size your infrastructure if necessary.
4. Decide on your AWS Savings Plan commitments.
5. Purchase through the AWS Cost Explorer.
6. Monitor your commitments to maximize use and avoid On-Demand overages.

Understanding AWS Savings Plan Recommendations & Cost:

To make an informed decision, monitor these three primary metrics in your AWS account:

1. Monthly On-Demand Spend: The estimated monthly cost without discounts.
2. Estimated Monthly Spend: A projection based on current commitment recommendations, including forecasted On-Demand usage.
3. Estimated Monthly Savings: The estimated net savings based on current, unpurchased recommendations.

CONCLUSION

AWS Savings Plans represent a more flexible and potentially cost-effective alternative to traditional Reserved Instances. Their global scope, adaptability, and lower pricing for monetary commitments make them a valuable choice for AWS users. By understanding the key differences and closely monitoring your usage and recommendations, you can create a balanced savings portfolio that aligns with your unique business needs.

Ref. Link

https://docs.aws.amazon.com/whitepapers/latest/cost-optimization-reservation-models/savings-plans.html

https://www.cloudbolt.io/guide-to-aws-cost-optimization/aws-savings-plan/