AWS Cost Efficiency
15
mins read
AWS Savings Plans vs. Reserved Instances
Helping You Choose the Best AWS Cost-Saving Option
In today’s cloud-driven environment,managing and controlling cloud costs is a big challenge for companies. In fact, 94% of organizations say rising cloud costs are a major concern, which can make it harder for them to focus on growth and innovation.[1]
To help with this, AWS offers two main cost-saving options: Savings Plans and Reserved Instances. Both can help businesses reduce their cloud expenses while still being flexible enough to meet changing needs. However, AWS Savings Plans are often the better choice for most businesses. They offer similar savings to Reserved Instances but with more flexibility. AWS even encourages users to sign up for Savings Plans, highlighting that they offer the same savings as Reserved Instances, plus added flexibility.
This guide will explain the differences between AWS Savings Plans and Reserved Instances and demonstrate why Savings Plans are usually the best option for getting the most savings across different workloads.
Before diving into Savings Plans and Reserved Instances, it is essential to understand the basic AWS pricing models:
Savings Plans are designed to provide organizations with a flexible way to save on compute costs. They offer significant discounts on EC2, AWS Lambda, and AWS Fargate usage. The core features of Savings Plans include:
Consider checking the links below for more detailed insights on AWS Savings Plans:
DataInsight, a data analytics startup, processes large datasets daily on AWS using EC2 On-Demand instances and AWS Fargate. To optimize costs and support growth, they chose a 3-year AWS Compute Savings Plan with No Upfront payment, offering flexibility across EC2 and Fargate without committing to specific instances.
Current Costs with On-Demand Pricing
Optimized Costs with 3-Year Compute Savings Plan (No Upfront)
Cost Savings
With a 3-year AWS Compute Savings Plan, DataInsight saves $14,040 annually, cutting cloud costs by 30% while maintaining flexibility to scale workloads across EC2 and Fargate, supporting cost-effective growth.
Reserved Instances (RIs) provide significant savings for organizations that can commit to using specific EC2 instances over a defined period. RIs require upfront commitment and are associated with specific instance types, regions, operating systems, and tenancies.
Let’s understand parameters for reserved instances through the table below:
Consider checking the links below for more detailed insights on EC2 pricing and Reserved Instances:
WebInnovate, a startup using 10 m5.large EC2 On-Demand instances, switches to 3-Year Reserved Instances with Partial Upfront payment to save costs as its user base grows, ensuring profitability and consistent performance.
Current Costs
Savings
By switching to 3-Year Reserved Instances with Partial Upfront payment, WebInnovate saves $4,579.20 annually, reducing infrastructure costs by 44% while ensuring consistent performance and predictable rates.
Organizations like Delhivery, Airbnb, Alert Logic and many others have significantly reduced their cloud costs by utilizing Reserved Instances and Savings Plans.
Delhivery achieved an immediate 30-32% savings on OpenSearch and ElastiCache. They also acquired a 3-year Savings Plan, resulting in a 45-50% discount on on-demand usage.[2] Ari Siegel, Senior Finance Manager at Airbnb, stated, “Using Savings Plans has led to a significant improvement in our cloud management process, reducing operational workload while driving meaningful cost savings.”[3] Jamie Parker, Manager of Cloud Operations at Alert Logic has stated that Savings Plans covered nearly 80% of its compute capacity, leading to a 52% reduction in compute costs for its Amazon EC2 resources.[4]
These examples highlight the effectiveness of AWS Savings Plan.
To wrap up, let’s look at a comparison of AWS Savings Plans and Reserved Instances and explain why even AWS often recommends Savings Plans for most users today:
AWS Savings Plans and Reserved Instances each offer unique advantages and can be suited to different business requirements. Here’s how:
AWS Savings Plans offer flexibility across multiple services, providing cost-saving opportunities for diverse and evolving workloads. They are ideal for organizations with dynamic requirements or a mix of services, as they are not bound to specific instance types or regions. With Savings Plans, businesses can benefit from streamlined cloud cost management, especially if their usage patterns or infrastructure needs frequently change.
For organizations seeking a balance between cost savings and operational flexibility, AWS Savings Plans provide a robust, adaptable solution. By allowing commitments across multiple AWS services—including EC2, Lambda, and Fargate—Savings Plans cater to businesses with variable and dynamic workloads, making them an ideal choice for most use cases today.
Stay tuned for our next article where we will dive deep into best practices of buying a savings plan!
2. Delhivery Case Study | AWS Cloud Financial Management
4. Alert Logic Reduces Cloud Costs 28% by Leveraging AWS Financial Management Strategies
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