Reserved EC2 instances allow you save costs in Amazon's cloud if you commit for one or three years. AWS Savings Plans have a similar purpose but offer more flexibility. In this post, you will learn about the differences, advantages, and disadvantages of Reserved EC2 instances and AWS Savings Plans.

At the beginning, there were On-Demand Instances, which were a good fit for short-term, spiky and/or unpredictable usage, dev/test environments. These usage patterns were flexible and didn't cost much.

Then, the Reserved Instances purchasing option was introduced, which can potentially result in savings of up to 72% off the On-Demand price with a one- or three-year commitment to the instances; this has saved a lot of money for customers with steady-state usage. Reserved instances not only target Amazon EC2, but also Amazon RDS, Amazon Redshift, Amazon ElastiCache, and Amazon Elasticsearch (OpenSearch).

The Savings Plans purchasing options were added two years ago to give more flexibility in cost savings. Savings Plans not only target Amazon EC2, but also AWS Fargate, AWS Lambda, and Amazon SageMaker.

It is clear that the only overlap for savings between Reserved Instances and Savings Plans is Amazon EC2. Therefore, you need to know what kind of service you would like to save costs on before deciding on the purchasing option you want, because it might be available in one purchasing option but not the other.

What are Reserved Instances? ^

The Reserved Instances purchasing option provides discounted pricing of up to 72% off On-Demand pricing in return for a commitment you make to utilization for one or three years.

Reserved Instances are available in two scopes:

  • Regional: With this scope, you can place the reserved instance in any availability zone within the region in which you've bought it.
  • Zonal: With this scope, you can place the reserved instance in a specific availability zone.

There's no price difference between the different scopes or the two offering classes:

  • Standard: This offering class offers significant cost savings of up to 72%; however, it is less flexible than the convertible offering class. For example, you can't change the instance family, instance type, or instance size (unless the platform is Unix/Linux).
  • Convertible: This offering class is more flexible in that you can exchange the instance family, instance type, instance size, platform, and scope. However, it offers lower cost savings than the standard offering class, up to as much as 66%.

Reserved Instances offer different payment options:

  • No Upfront: This payment option doesn't require any payments when you purchase reserved instances; however, it offers a discounted hourly rate for the instances you reserved regardless of its usage, and this hourly rate will be added to the monthly bill.
  • Partial Upfront: For this payment option, you pay a specific amount when you purchase. Once consumed, you will pay according to the same model as in No Upfront.
  • All Upfront: You pay it all at once without extra cost charges in the future.

Note: The higher the payment option, the more discounts you get.

What are Savings Plans? ^

Unlike Reserved Instances, you don't commit to utilizing instances with certain specifications; instead, you commit to a dollar spend for one or three years. Based on that commitment, you get a discount.

Savings Plans are available in three types:

  • EC2: This type can only be applied to Amazon EC2. It can save up to 72% off On-Demand pricing for EC2 instances in specific families chosen in a certain region. It is flexible across size, OS, and tenancy.
  • Compute: This type can be applied to Amazon EC2, AWS Fargate, and AWS Lambda. It offers more flexibility than EC2 and can save up to 66% of the aforementioned services' costs. It's flexible across instance families, regions, OS, and tenancy.
  • SageMaker: This type can be applied to Amazon SageMaker only. It can save up to 64% compared to On-Demand pricing.

Savings Plans offer different payment options:

  • No Upfront: This payment option doesn't require any payments initially, and you will be charged on a monthly basis.
  • Partial Upfront: This payment option offers more savings than No Upfront, and you will have to pay at least 50% of the spend commitment upon purchase. Once consumed, you will pay according to the same model as No Upfront.
  • All Upfront: This payment option offers the most savings compared to the other options, and you will have to pay all at once.

How are Reserved Instances and Savings Plans applied? ^

Reserved Instances and Savings Plans are applied to EC2 instances as follows:

  • Zonal RI
  • Regional non-size flexible RI
  • Regional flexible RI
  • EC2 Instance Savings Plans
  • Compute Savings Plans
  • On-Demand pricing (for the remaining usage)

Notes:

  • A Compute Savings Plan gives you almost the same savings as a Convertible Reserved Instance, and an EC2 Instance Savings Plan gives you almost the same amount of savings as a standard Reserved Instance.
  • Savings Plans and Reserved Instances are applied first to the purchasing account's usage, then to other accounts' usage based on the application order, and then to the largest discount rate every hour.
  • Savings Plans don't apply to spot instances.

Reserved Instances and Savings Plans for EC2 Instance—Examples ^

In the following examples, I walk you through different use cases where you can see your savings by using Savings Plans and Reserved Instances.

Example 1: Two c6g5.2xlarge (8 vCPUs, 16 GiB memory, up to 10 Gigabit network performance) instances, RHEL-based OS, located in the us-east-1 (N. Virginia) region. These two instances cost 3,521.52 USD per year and 10,564.56 USD per 3 years if deployed using On-Demand pricing.

RIs and Savings Plans1 Yr./No Upfront Payment ($)1 Yr./All Upfront Payment ($)3 Yr./No Upfront Payment ($)3 Yr./All Upfront Payment ($)
Standard Reserved Instance2,640.242,540.006,504.486,104.00
Convertible Reserved Instance2,875.082,760.006,867.006,548.00
EC2 Savings Plan2,640.242,539.526,504.486,104.84
Compute Savings Plan2,875.082,759.406,867.006,548.98
Estimated % Standard RI Savings vs. On-Demand~ 25%~ 28%~ 38%~ 42%
Estimated % Convertible RI Savings vs. On-Demand~ 18%~ 22%~ 35%~ 38%
Estimated % EC2 Savings vs. On-Demand~ 25%~ 28%~ 38%~ 42%
Estimated % Compute Savings vs. On-Demand~ 18%~ 22%~ 35%~ 38%

Example 2: Five m5.16xlarge (64 vCPUs, 256 GiB memory, 20 Gigabit network performance) instances, Windows-based OS, located in the eu-central-1 (Frankfurt) region. These five instances cost 290,131.20 USD per year and 870,393.60 USD per 3 years if deployed using On-Demand pricing.

RIs and Savings Plans1 Yr./No Upfront Payment ($)1 Yr./All Upfront Payment ($)3 Yr./No Upfront Payment ($)3 Yr./All Upfront Payment ($)
Standard Reserved Instance230,475,60223,725.00595,767.60568,655.00
Convertible Reserved Instance260,960,40252,155.00679,338.00652,215.00
EC2 Savings Plan230,475,60223,730.40595,767.60568,699.20
Compute Savings Plan260,960,40252,156.60679,338.00652,269.60
Estimated % Standard RI Savings vs. On-Demand~ 21%~ 23%~ 32%~ 35%
Estimated % Convertible RI Savings vs. On-Demand~ 10%~ 13%~ 22%~ 25%
Estimated % EC2 Savings vs. On-Demand~ 21%~ 23%~ 32%~ 35%
Estimated % Compute Savings vs. On-Demand~ 10%~ 13%~ 22%~ 25%

Note: The cost savings heavily depend on the guest OS (Windows, Red Hat Linux, other Linux).

How to purchase a Reserved Instance ^

Navigate to the Amazon EC2 console.

Under the Instances section, choose Reserved Instances.

Click Purchase Reserved Instance.

Then specify the Platform, Tenancy, Offering Class, Instance Type, Term, and Payment option.

Specify the desired quantity, and add it to the cart. If you don't want to add anything else to the cart, go ahead and click View cart.

Reserved Instance specifications

Reserved Instance specifications

Select the item you want to buy from the shopping cart, and click Order all.

Purchase Reserved Instance

Purchase Reserved Instance

How to purchase a Savings Plan ^

Before purchasing the savings plan, navigate to this page: https://aws.amazon.com/savingsplans/compute-pricing/

On this page, you need to specify the savings plan and some other terms, as shown in the following screenshot:

Retrieving the Savings Plan rate

Retrieving the Savings Plan rate

Be sure to save the Savings Plan rate, as you will need it later.

Navigate to the AWS Cost Management Console.

Under Savings Plans, choose Purchase Savings Plans.

Choose the Savings Plan type and specify the Term (Region and Instance Family, if applicable), hourly commitment (the savings plan rate we retrieved earlier), the payment option, and, optionally, you can specify a start date for the savings plan; otherwise, it will be applied immediately.

Savings Plan specifications

Savings Plan specifications

Once you've provided the needed info, click Add to cart.

Finally, select the Savings Plan in the Cart and click Submit Order.

Purchase Savings Plan

Purchase Savings Plan

When is it better to use Reserved Instances or Savings Plans? ^

As you have seen, Reserved Instances and Savings Plans overlap in their support for EC2 instances, and they offer almost the same cost savings.

However, Savings Plans offer:

  • More flexibility when it comes to working with them. For example, they are applied automatically, so there's no management overhead compared to Reserved Instances.
  • The Compute Savings Plan is not restricted by region.

On the other hand, the Standard Reserved Instance can be sold in the marketplace if you decide not to use the Reserved Instance anymore and want to sell it to other AWS consumers. With this flexibility in selling the Standard Reserved Instances, you can sometimes find Reserved Instances available for short-term (a few months) commitments if you don't think you'll need it for one or more years. Moreover, Reserved Instances can offer more discounts than Savings Plans if the OS of the EC2 instance you want to use is SUSE.

In a nutshell, Reserved Instances and Savings Plans work better together because they are not only about EC2 instances but also about the various AWS services that each purchasing option supports.

Conclusion ^

In this article, we've gone through Reserved Instances and Savings Plans, what every purchasing option offers, in what manner they are applied to Amazon EC2, some examples for the cost savings you can make using Reserved Instances and Savings Plans, and when to use one purchasing option over the other.

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DISCLAIMER: This article represents my own viewpoints and not those of my employer, Amazon Web Services.

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