Cost-saving with AWS Reserved Instances

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Money-saving with AWS Reserved Instances

Usually, with experience and time, businesses develop a fair idea about how much minimum infrastructure they would need at any given point in time, given how the cloud allows them to be scalable and flexible in managing their IT infrastructure and capabilities. This optimal approach helps them attain better business agility and innovation while ensuring reduced cloud spends.

With cloud offering strategic cost management methods and consumption-based models, it has become easier for organizations to save on the cloud.

Savings with AWS (Amazon Web Services) is a hot topic among users off late and everyone seems to want access and insights into the handling and administration of AWS Reserved Instances for better monetary savings. AWS Reserved Instances, also known as AWS RIs, are nothing but “Discounted Billing”.

AWS RIs are referred to as one of the prime areas of significant savings that offer discounted hourly rates to customers (sometimes up to 72%) when they agree to commit long-term or subscribe to on-demand instances for at least a period of one to three years of service.

Let us dive deeper into the discounting aspects of AWS Reserved Instances –

Time plays a significant role in discounts

The longer you choose to commit to these instances the more you are sure to save. To be able to commit to a long-term billing option, it is necessary to have a predictable and steady utilization pattern. The compute options and configurations when reserved for a fixed long duration, generate more profits as compared to discounts offered by on-demand instances. The hourly usage rate considerably decreases as the longer the term, the higher the discounts.

Complying to specific attributes

Another aspect of saving on the cloud is to make sure your current on-demand instance attributes match the ones eligible for discounts. There are four types of major attributes that need to be considered –

  1. Regional area: Always consider the region or area where the instance was purchased from
  2. Platform: Choose an instance that supports your operating system – Linux (or Unix) and Windows
  3. Instance: The type of instance needs to be determined with the help of two criteria – the instance family, and instance size
  4. Tenancy: Consider tenancy by zeroing in on the type of hardware incorporated into your systems

To ensure that the discounted rate applies to your committed instances, you should have on-demand instances matching the reserved ones. This becomes a significant aspect of monetary saving keeping in mind the above-mentioned attributes. It is important to note that the discounted prices can be availed to the maximum only when organizations are able to match the stated attributes like region, operating system, and so on.

Costing variations determined by payment type

Everyone knows that the base prices of the AWS on-demand instances, as well as the reserved Instances, are the same. However, the additional change in cost occurs depending on the type of payment strategy implemented or chosen at the time of billing. It is understood that the payment option considerably affects the costing and discount percentage. Let us list down all the three types of payment options to understand better –

  • Total Upfront

Here, all payments are made at one go. The entire bill amount as per the agreement is cleared with just one installment. The concept of monthly reminders does not prevail, and AWS offers the highest discount on this type of payment method. However, organizations opting for this payment type have to make sure they have all the calculations and segregations in place with no scope for cloud capacity adjustments.

  • Zero Upfront

If organizations are not willing to make an all-upfront payment, they usually opt for zero or partial payment options. Zero upfront, as the name suggests, enables you to not pay anything beforehand. This plan, however, is the least preferred one if looking for good discounts. Its provisions for payments in installments only after some of the AWS services are tried out initially.

  • Partial Upfront

Partial upfront payments are made by users when the total cost of services overshoot the budget. Here, some part of the amount is paid at the beginning, followed by monthly installments for the remainder amount. This partial payment plan is often found to be more cost-effective and flexible for users. It is affordable and users end up saving more than the zero or nothing upfront payment option.

Some statistical attributes –

  • AWS users can save up to 72 percent of the cost with the adoption of RIs. In addition, the commitment to one zone for a longer time increases the savings further.
  • Users can avail up to 10 percent discount with the upfront payment option if committing for long-term. Discounts get higher as number of years of commitment increase.
  • The savings with total upfront payments work out to around 30 percent more as compared to zero upfront or partial upfront payment options.

Thus, planning and accommodating for RI is simple yet cost-effective. Organizations must be capable of analyzing their needs in terms of the number of instances they require as well as be able to combine the RI types to ensure optimum savings on the cloud. Ascertaining which attributes and payment options work best for you is the key to minimizing cloud spending and enhancing AWS cost management practices.

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