Cloud Computing since its inception has been used for saving extra costs and allows you to pay for what you use. You tend to overpay for resources that you are not using, regardless of which service provider you use. Talking about the service provider, AWS started way back in 2006, and since then has been a great success among the customers. Initially, the customer had one pricing model i.e. On-Demand. The EC2 instances when first introduced were all based on on-demand pricing for which a user had to pay for per-hour usage. Workloads vary with time which makes it difficult to optimize and predict the capacity. With Amazon EC2 on-demand pricing, there is no use in planning as you pay for the computing capacity you use. This requires no upfront commitment of computing usage. Hourly billing has saved from overcommitting the budget or resources, but in case of increasing demands and constant usage, hourly billing can be costly and difficult to manage. In this article, we will discuss alternatives for pricing, apart from on-demand pricing, and have a comparative analysis on what to use as your best fit.
The Reserved Instances (RIs)
Reservations or Reserved Instance as the name suggests is a billing concept which offers you a discount on the upfront commitment of usage which can be for one year or three-year terms. In exchange for the commitment, a significant discount of up to 72% of on-demand pricing is rewarded. It is the same as paying at a discounted price for a yearly subscription for any paid application compared to what you are paying monthly for it.
Types of Reserved Instances
Initially, the standard reserved instances did not provide upscaling or downscaling, and the instances had to be sold using the marketplaces. Identifying the needs of growing changes AWS also introduced convertible reserved instances.
- Standard RIs – Standard Instances helps with significant discounts up to 72% compared with on-demand pricing. Discounts also depend on the purchasing term. For example, 1 year or 3-year term. Standard RIs provide the flexibility of changing the Availability Zone, the instance size, and the networking type of the existing instance.
- Convertible RIs – Convertible Reserved Instances provide additional flexibility of changing the instance families, operating systems, or tenancies. The discount for convertible RIs is up to 66% depending on the opted term plan.
|RI attributes||Standard RIs||Convertible RIs|
|Instance Size||Linux Only||All OS|
|Sell in AWS marketplace||Yes||No|
The right type of reservation can be tricky to decide based on the variety of combinations available. Attributes of RIs can help make the task of decoding easier.
- Instance Type – Instance types are the availability of a differing combination of CPU, memory, and networking capacity with the flexibility of choosing any desired combination of resources.
- Platform Description – There is a variety of options available for the operating system like Linux/Unix, Microsoft Windows Server and Microsoft SQL Server.
- Tenancy – Using default tenancy, you may share the same virtual server without interacting with others. Dedicated tenancy allows you to operate instances on servers dedicated to your account for use cases security and compliance.
- Availability Zone – Availability Zones are distinct, isolated locations within an AWS region. Availability Zone in the same AWS region provides low-cost, low-latency network connectivity to each other. Whereas the regions are independent of each other. You have an option to select an Availability zone while purchasing an RI. In case Availability Zone is not specified, the RI discount applies to a running instance of any size.
The other attributes that reserved instances depend on are term plans and payment options.
There are two-term plans that can be applied for any reservations one opts for:
- One Year – This commitment lasts for 365 days
- Three Year – This commitment lasts for 1095 days
The following payment options are available for Reserved Instance
- No Upfront – The Pay after usage option, where you are billed based on the hourly discounted rate which you commit to paying monthly as part of a contract but for full tenure.
- All Upfront – You pay all the cost upfront to get heavy discounts without paying for any extra usage later.
- Partial Upfront – This is a combination of both upfront and No Upfront payment options as you pay a portion of the amount as an upfront fee for reserving the instance and the remaining cost are calculated on the hourly discounted rate.
The discount varies based on choices, like three years with all upfront payment will give you maximum discounts. Making higher upfront payments gives you higher discounts.
The Savings plans
AWS introduced a savings plan to simplify the long-term commitments. Savings Plan is a flexible pricing model where you commit to a consistent amount of usage and in exchange, you will receive discounts up to 72 % on that usage. The savings plan offers the same discounts as EC2 RIs with the flexibility to make a monetary commitment instead of making commitments to specific instance configurations. If a customer commits to a said rate/hour of computing usage, then the savings plans apply up to the committed usage. Any usage beyond the commitment will be priced based on ‘on-demand pricing’.
Types of savings plan
- EC2 Instance savings plan – This type of savings plan provides discounts up to 72% on the selected instance family in a specific AWS region.
Provides the lowest prices – EC2 Savings plans are flexible across
- Size – Moving an instance size from m5.xl to m5.4 xl
- Tenancy – Modify the m5.xl Dedicated to m5.xl Default tenancy
- OS – Change from m5.xl windows to m5.xl Linux
- Compute savings plans – This savings plan offers the greatest flexibility and up to 66% discounts which are the same as convertible RIs.
Provides the most flexibility – Compute savings plans are flexible across
- Instance Family – Moving from C5 to M5
- Region – Change from EU (Ireland) to EU (London)
- OS – Windows to Linux
- Tenancy – Switch from dedicated tenancy to default tenancy
- Compute Options – Move from EC2 to Fargate
Reserved Instances vs Savings Plans, Choosing the right fit
To decide what is better, let us look at the features of both the RIs and Saving plans.
|Attributes||Standard RIs||Convertible RIs||EC2 Instance||Compute Savings|
|Discount||Up to 72%||Up to 66%||Up to 72%||Up to 66%|
|Instance Size||Linux Only||Flexible||Flexible||Flexible|
|Geography||Single Region||Single Region||Single Region||Flexible|
|OS||Fixed||Fixed||Any OS||Any Tenancy|
|Commitment||Per Instance||Per Instance||Dollar per hour||Dollar per hour|
|Term commitment||1/3 years||1/3 years||1/3 years||1/3 years|
The obvious answer looks like opting for savings plans with the same amount of savings and more flexibility in terms of what instances can get the discount. But it definitely has some limitations over Reserved Instances that may cause a problem.
- A savings plan cannot be sold in the market., whereas RIs can be sold on the marketplace.
- Once the savings plan limit has been exceeded, on-demand prices are charged.
- The discounts are similar to RIs and not more.
- Savings plans are not applied to ECS, RDS, Redshift.
- Savings plans are non-cancellable.
These drawbacks conclude choosing Reserved Instances. But before concluding let us discuss the limitations of RIs as compared to Savings plans.
- Reserved Instances require additional maintenance as the discounts do not automatically apply.
- There is no regional flexibility in RIs.
But if you ever have chosen a wrong RI instance you can sell it on the AWS Marketplace. Whereas as earlier discussed the savings plans are non-cancellable.
RIs and Savings plan both have their advantages over each other. But before you jump to a conclusion we are not done yet.
SPOT Instance if the above two are not the right fit for you
Apart from both pricing plans, if the user wishes to avail the maximum discounts and for a very short duration, one can also opt for Spot instances. Spot instances work on a bidding mechanism and the winning bid price depends on the demand of the instances. If you are lucky and a good bidder, you can get high processing power at a low price.
Below are some of the key offerings that will make you choose Spot instance
- 90% off on on-Demand Pricing.
- Useful for high-capacity usage.
Disadvantages of Spot instances
- Instances can be terminated anytime, without any advanced notice.
- The price entirely depends on the demand, you can end up paying more than the regular price in case of high demand.
- You can find spot instances in some specific areas where there is less usage.
Spot instances can give amazing discounts only if used smartly, the disadvantages like termination can severely affect the business if there is no backup available.
The choice of selecting the right option depends on the priority of the requirement, the need of the business, and the applicability to organization workloads. Customers can also avail themselves of all the offerings leveraging significant savings with long-term flexibility. The choice of the user majorly depends on their variability and usage. If you have steady usage and no requirement of changing the region you can opt for reserved instances. Whereas if you want a flexible option with the same discounts then the go-to solution is savings plans. If you have a short duration requirement and looking for maximum discounts, then spot instances are the best deal for you. The choice definitely depends on the user’s requirements and preferences but at times it can definitely become overwhelming.
AWS has been coming up with these pricing options and one can get the most of it by having clear visibility. With multiple options to choose from and chaos always prevailing, CloudEnsure makes it easy for organizations and business owners by providing visibility on the usage and savings. CloudEnsure provides you the recommendations based on your consumption and discounts that you can avail of. The complete visibility makes it easier for you to make an informed decision and choose what’s best for you.