AWS Savings plan

Saving plans offer a flexible pricing model that provides savings on AWS usage. You can save up to 72 percent on your AWS compute workloads.

!!! note "Please don't make Jeff Bezos even richer, try to pay as less money to AWS as you can."

Savings Plans provide savings beyond On-Demand rates in exchange for a commitment of using a specified amount of compute power (measured per hour) for a one or three year period.

When you sign up for Savings Plans, the prices you'll pay for usage stays the same through the plan term. You can pay for your commitment using All Upfront, Partial upfront, or No upfront payment options.

Plan types:

• Compute Savings Plans provide the most flexibility and prices that are up to 66 percent off of On-Demand rates. These plans automatically apply to your EC2 instance usage, regardless of instance family (for example, m5, c5, etc.), instance sizes (for example, c5.large, c5.xlarge, etc.), Region (for example, us-east-1, us-east-2, etc.), operating system (for example, Windows, Linux, etc.), or tenancy (for example, Dedicated, default, Dedicated Host). With Compute Savings Plans, you can move a workload from C5 to M5, shift your usage from EU (Ireland) to EU (London). You can continue to benefit from the low prices provided by Compute Savings Plans as you make these changes.

• EC2 Instance Savings Plans provide savings up to 72 percent off On-Demand, in exchange for a commitment to a specific instance family in a chosen AWS Region (for example, M5 in Virginia). These plans automatically apply to usage regardless of size (for example, m5.xlarge, m5.2xlarge, etc.), OS (for example, Windows, Linux, etc.), and tenancy (Host, Dedicated, Default) within the specified family in a Region.

  With an EC2 Instance Savings Plan, you can change your instance size within the instance family (for example, from c5.xlarge to c5.2xlarge) or the operating system (for example, from Windows to Linux), or move from Dedicated tenancy to Default and continue to receive the discounted rate provided by your EC2 Instance Savings Plan.

• Standard Reserved Instances: The old reservation system, you reserve an instance type and you can get up to 72 percent of discount. The lack of flexibility makes them inferior to the new EC2 instance plans.

• Convertible Reserved Instances: Same as the Standard Reserved Instances but with more flexibility. Discounts range up to 66%, similar to the new Compute Savings Plan, which again gives more less the same discounts with more flexibility, so I wouldn't use this plan either.

Understanding how Savings Plans apply to your AWS usage⚑

If you have active Savings Plans, they apply automatically to your eligible AWS usage to reduce your bill.

Savings Plans apply to your usage after the Amazon EC2 Reserved Instances (RI) are applied. Then EC2 Instance Savings Plans are applied before Compute Savings Plans because Compute Savings Plans have broader applicability.

They calculate your potential savings percentages of each combination of eligible usage. This percentage compares the Savings Plans rates with your current On-Demand rates. Your Savings Plans are applied to your highest savings percentage first. If there are multiple usages with equal savings percentages, Savings Plans are applied to the first usage with the lowest Savings Plans rate. Savings Plans continue to apply until there are no more remaining usages, or your commitment is exhausted. Any remaining usage is charged at the On-Demand rates.

Savings plan example⚑

In this example, you have the following usage in a single hour:

• 4x r5.4xlarge Linux, shared tenancy instances in us-east-1, running for the duration of a full hour.
• 1x m5.24xlarge Linux, dedicated tenancy instance in us-east-1, running for the duration of a full hour.

Pricing example:

They've included other products in the example but I've removed them for the sake of simplicity

Scenario 1: Savings Plan apply to all usage⚑

You purchase a one-year, partial upfront Compute Savings Plan with a $50.00/hour commitment.

Your Savings Plan covers all of your usage because multiplying each of your usages by the equivalent Compute Savings Plans is $47.13. This is still less than the $50.00/hour commitment.

Without Savings Plans, you would be charged at On-Demand rates in the amount of $59.10.

Scenario 2: Savings Plans apply to some usage⚑

You purchase a one-year, partial upfront Compute Savings Plan with a $2.00/hour commitment.

In any hour, your Savings Plans apply to your usage starting with the highest discount percentage (30 percent).

Your $2.00/hour commitment is used to cover approximately 2.9 units of this usage. The remaining 1.1 units are charged at On-Demand rates, resulting in $1.14 of On-Demand charges for r5.

The rest of your usage are also charged at On-Demand rates, resulting in $55.10 of On-Demand charges. The total On-Demand charges for this usage are $56.24.

Scenario 3: Savings Plans and EC2 reserved instances apply to the usage⚑

You purchase a one-year, partial upfront Compute Savings Plan with an $18.20/hour commitment. You have two EC2 Reserved Instances (RI) for r5.4xlarge Linux shared tenancy in us-east-1.

First, the Reserve Instances covers two of the r5.4xlarge instances. Then, the Savings Plans rate is applied to the remaining r5.4xlarge and the rest of the usage, which exhausts the hourly commitment of $18.20.

Scenario 4: Multiple Savings Plans apply to the usage⚑

You purchase a one-year, partial upfront EC2 Instance Family Savings Plan for the r5 family in us-east-1 with a $3.00/hour commitment. You also have a one-year, partial upfront Compute Savings Plan with a $16.80/hour commitment.

Your EC2 Instance Family Savings Plan (r5, us-east-1) covers all of the r5.4xlarge usage because multiplying the usage by the EC2 Instance Family Savings Plan rate is $2.40. This is less than the $3.00/hour commitment.

Next, the Compute Savings Plan is applied to rest of the resource usage, if it doesn't cover the whole expense, then On demand rates will apply.

EC2 Instance savings plan versus reserved instances⚑

I've been comparing the EC2 Reserved Instances and of the EC2 instance family savings plans and decided to go with the second because:

• They both have almost the same rates. Reserved instances round the price at the 3^rd decimal and the savings plan at the fourth, but this difference is neglegible.
• Savings plan are easier to calculate, as you just need to multiply the number of instances you want times the current rate and add them all up.
• Easier to understand: To reserve instances you need to take into account the instance flexibility and the normalization factors which makes it difficult both to make the plans and also to audit how well you're using it.
• Easier to audit: In addition to the above point, you have nice dashboards to see the coverage and utilization over time of your ec2 instance savings plans, which are at the same place as the other savings plans.

Understanding how reserved instances are applied⚑

WARNING: Don't use reserved instances, use EC2 family savings plans.

A Reserved Instance that is purchased for a Region is called a regional Reserved Instance, and provides Availability Zone and instance size flexibility.

• The Reserved Instance discount applies to instance usage in any Availability Zone in that Region.
• The Reserved Instance discount applies to instance usage within the instance family, regardless of size—this is known as instance size flexibility.

With instance size flexibility, the Reserved Instance discount applies to instance usage for instances that have the same family, generation, and attribute. The Reserved Instance is applied from the smallest to the largest instance size within the instance family based on the normalization factor.

The discount applies either fully or partially to running instances of the same instance family, depending on the instance size of the reservation, in any Availability Zone in the Region. The only attributes that must be matched are the instance family, tenancy, and platform.

The following table lists the different sizes within an instance family, and the corresponding normalization factor. This scale is used to apply the discounted rate of Reserved Instances to the normalized usage of the instance family.

For example, a t2.medium instance has a normalization factor of 2. If you purchase a t2.medium default tenancy Amazon Linux/Unix Reserved Instance in the US East (N. Virginia) and you have two running t2.small instances in your account in that Region, the billing benefit is applied in full to both instances.

Or, if you have one t2.large instance running in your account in the US East (N. Virginia) Region, the billing benefit is applied to 50% of the usage of the instance.

Limitations:

• Supported: Instance size flexibility is only supported for Regional Reserved Instances.
• Not supported: Instance size flexibility is not supported for the following Reserved Instances:
  • Reserved Instances that are purchased for a specific Availability Zone (zonal Reserved Instances)
  • Reserved Instances for G4ad, G4dn, G5, G5g, and Inf1 instances
  • Reserved Instances for Windows Server, Windows Server with SQL Standard, Windows Server with SQL Server Enterprise, Windows Server with SQL Server Web, RHEL, and SUSE Linux Enterprise Server
  • Reserved Instances with dedicated tenancy

Examples of applying reserved instances⚑

Scenario 1: Reserved Instances in a single account⚑

You are running the following On-Demand Instances in account A:

• 4 x m3.large Linux, default tenancy instances in Availability Zone us-east-1a
• 2 x m4.xlarge Amazon Linux, default tenancy instances in Availability Zone us-east-1b
• 1 x c4.xlarge Amazon Linux, default tenancy instances in Availability Zone us-east-1c

You purchase the following Reserved Instances in account A:

• 4 x m3.large Linux, default tenancy Reserved Instances in Availability Zone us-east-1a (capacity is reserved)
• 4 x m4.large Amazon Linux, default tenancy Reserved Instances in Region us-east-1
• 1 x c4.large Amazon Linux, default tenancy Reserved Instances in Region us-east-1

The Reserved Instance benefits are applied in the following way:

• The discount and capacity reservation of the four m3.large zonal Reserved Instances is used by the four m3.large instances because the attributes (instance size, Region, platform, tenancy) between them match.
• The m4.large regional Reserved Instances provide Availability Zone and instance size flexibility, because they are regional Amazon Linux Reserved Instances with default tenancy.

An m4.large is equivalent to 4 normalized units/hour.

You've purchased four m4.large regional Reserved Instances, and in total, they are equal to 16 normalized units/hour (4x4). Account A has two m4.xlarge instances running, which is equivalent to 16 normalized units/hour (2x8). In this case, the four m4.large regional Reserved Instances provide the full billing benefit to the usage of the two m4.xlarge instances.

The c4.large regional Reserved Instance in us-east-1 provides Availability Zone and instance size flexibility, because it is a regional Amazon Linux Reserved Instance with default tenancy, and applies to the c4.xlarge instance. A c4.large instance is equivalent to 4 normalized units/hour and a c4.xlarge is equivalent to 8 normalized units/hour.

In this case, the c4.large regional Reserved Instance provides partial benefit to c4.xlarge usage. This is because the c4.large Reserved Instance is equivalent to 4 normalized units/hour of usage, but the c4.xlarge instance requires 8 normalized units/hour. Therefore, the c4.large Reserved Instance billing discount applies to 50% of c4.xlarge usage. The remaining c4.xlarge usage is charged at the On-Demand rate.

Scenario 2: Reserved Instances in a single account using the normalization factor⚑

You are running the following On-Demand Instances in account A:

• 2 x m3.xlarge Amazon Linux, default tenancy instances in Availability Zone us-east-1a
• 2 x m3.large Amazon Linux, default tenancy instances in Availability Zone us-east-1b

You purchase the following Reserved Instance in account A:

• 1 x m3.2xlarge Amazon Linux, default tenancy Reserved Instance in Region us-east-1

The Reserved Instance benefits are applied in the following way:

• The m3.2xlarge regional Reserved Instance in us-east-1 provides Availability Zone and instance size flexibility, because it is a regional Amazon Linux Reserved Instance with default tenancy. It applies first to the m3.large instances and then to the m3.xlarge instances, because it applies from the smallest to the largest instance size within the instance family based on the normalization factor.

• An m3.large instance is equivalent to 4 normalized units/hour.

• An m3.xlarge instance is equivalent to 8 normalized units/hour.
• An m3.2xlarge instance is equivalent to 16 normalized units/hour.

The benefit is applied as follows:

The m3.2xlarge regional Reserved Instance provides full benefit to 2 x m3.large usage, because together these instances account for 8 normalized units/hour. This leaves 8 normalized units/hour to apply to the m3.xlarge instances.

With the remaining 8 normalized units/hour, the m3.2xlarge regional Reserved Instance provides full benefit to 1 x m3.xlarge usage, because each m3.xlarge instance is equivalent to 8 normalized units/hour. The remaining m3.xlarge usage is charged at the On-Demand rate.

Standard or convertible reserved instances⚑

When you purchase a Reserved Instance, you can choose between a Standard or Convertible offering class.

• Standard Reserved Instance: Enables you to modify Availability Zone, scope, networking type, and instance size (within the same instance type) of your Reserved Instance.
• Convertible Reserved Instance: Enables you to exchange one or more Convertible Reserved Instances for another Convertible Reserved Instance with a different configuration, including instance family, operating system, and tenancy.

There are no limits to how many times you perform an exchange, as long as the target Convertible Reserved Instance is of an equal or higher value than the Convertible Reserved Instances that you are exchanging.

Standard Reserved Instances typically provide the highest discount levels. One-year Standard Reserved Instances provide a similar discount to three-year Convertible Reserved Instances.

Convertible Reserved Instances are useful when:

• Purchasing Reserved Instances in the payer account instead of a subaccount. You can more easily modify Convertible Reserved Instances to meet changing needs across your organization.
• Workloads are likely to change. In this case, a Convertible Reserved Instance enables you to adapt as needs evolve while still obtaining discounts and capacity reservations.
• You want to hedge against possible future price drops.
• You can’t or don’t want to ask teams to do capacity planning or forecasting.
• You expect compute usage to remain at the committed amount over the commitment period.

Monitoring the savings plan⚑

Monitoring is an important part of your Savings Plans usage. Understanding the Savings Plan that you own, how they are applying to your usage, and what usage is being covered are important parts of optimizing your costs with Savings Plans. You can monitor your usage in multiple forms.

• Using the inventory: The Savings Plans Inventory page shows a detailed overview of the Savings Plans that you own, or have queued for future purchase.

  To view your Inventory page:

  • Open the AWS Cost Management console.
  • In the navigation pane, under Savings Plans, choose Inventory.

• Using the utilization report: Savings Plans utilization shows you the percentage of your Savings Plans commitment that you're using across your On-Demand usage. You can use your Savings Plans utilization report to visually understand how your Savings Plans apply to your usage over the configured time period. Along with a visualized graph, the report shows high-level metrics based on your selected Savings Plan, filters, and lookback periods. Utilization is calculated based on how your Savings Plans applied to your usage over the lookback period.

  For example, if you have a 10 $/hour commitment, and your usage billed with Savings Plans rates totals to $9.80 for the hour, your utilization for that hour is 98 percent.

  You can find high-level metrics in the Utilization report section:

  • On-Demand Spend Equivalent: The amount you would have spent on the same usage if you didn’t commit to Savings Plans. This amount is the equivalent On-Demand cost based on current On-Demand rates.
  • Savings Plans spend: Your Savings Plans commitment spend over the lookback period.
  • Total Net Savings: The amount you saved using Savings Plans commitments over the selected time period, compared to the On-Demand cost estimate.

  To access your utilization report:

  • Open the AWS Cost Management console.
  • On the navigation pane, choose Savings Plans.
  • In the left pane, choose Utilization report.

• Using the coverage report: The Savings Plans coverage report shows how much of your eligible spend was covered by your Savings Plans and how much is not covered by either Savings plan or Reserved instances based on the selected time period.

  You can find the following high-level metrics in the Coverage report section:

  • Average Coverage: The aggregated Savings Plans coverage percentage based on the selected filters and look-back period.
  • Additional potential savings: Your potential savings amount based on your Savings Plans recommendations. This is shown as a monthly amount.
  • On-Demand spend not covered: The amount of eligible savings spend that was not covered by Savings Plans or Reserved Instances over the lookback period.

  To access your utilization report:

  • Open the AWS Cost Management console.
  • On the navigation pane, choose Savings Plans.
  • In the left pane, choose Coverage report.

  The columns are a bit tricky:

  • "Spend covered by Savings Plan": Refers to the on demand usage amount that you would have paid on demand that is being covered by the Savings Plans. Not the Savings Plan amount that is applied to on demand usage.

  The coverage report of the reserved instances has the same trick on the columns:

  • "Reservation covered hours": the column does not refer to your RI hours. This column refers to your on demand hours that was covered by Reserved Instances.

• Using the Reserved Instance Coverage report: In this report the column "Reservation covered hours" is also misleading as it does not refer to your Reserved instance hours. It refers to your on demand hours that was covered by Reserved Instances.

Doing your savings plan⚑

Important notes when doing a savings plan:

• Always use the reservation rates instead of the on-demand rates!
• Analyze your coverage reports. You don't want to have many points of 100% coverage as it means that you're using less resources than you've reserved. On the other hand it's fine to sometimes use less resources than the reserved if that will mean a greater overall savings. It's a tight balance.
• The Savings plan reservation is taken into account at hour level, not at month or year level. That means that if you reserve 1$/hour of an instance type and you use for example 2$/hour half the day and 0$/hour half the day, you'll have a 100% coverage of your plan the first hour and another 1$/hour of on-demand infrastructure cost for the first part of the day. On the second part of the day you'll have a 0% coverage. This means that you should only reserve the amount of resources you plan to be using 100% of the time throughout your savings plan. Again you may want to overcommit a little bit, reducing the utilization percentage of a plan but getting better savings in the end.

Go to the AWS savings plan simulator and check the different instances you were evaluating.