Beyond Reserved Instances: Leveraging AWS Savings Plans for Flexible Cost Reduction Across Compute Services
In the quest for cloud cost optimization, many organizations start with AWS Reserved Instances (RIs). For years, RIs have been the go-to mechanism for significant discounts on predictable, steady-state compute usage. However, as cloud environments become more dynamic, diverse, and driven by serverless and container technologies, the rigidity of traditional RIs can present challenges, leading to underutilization and missed savings opportunities.
This is where AWS Savings Plans emerge as a more modern, flexible, and powerful alternative for flexible AWS cost optimization compute. Savings Plans offer substantial discounts (up to 72%) on your AWS compute usage in exchange for a commitment to a consistent amount of compute usage (measured in USD/hour) for a 1-year or 3-year term. Unlike RIs, which apply to specific instance types or services, Savings Plans provide a truly cross-service, flexible AWS cost optimization compute strategy.
This guide will compare AWS Savings Plans vs. Reserved Instances, explain how to use AWS Savings Plans effectively, and demonstrate why they are becoming the preferred method for achieving deeper, more adaptable cost reductions across your entire compute footprint.
AWS Savings Plans vs. Reserved Instances: A Key Comparison
Understanding the differences between these two powerful cost-saving mechanisms is crucial for choosing the right strategy for your organization.
| Feature | AWS Reserved Instances (RIs) | AWS Savings Plans (SPs) |
| Commitment | Specific instance type/family, region, and sometimes AZ/platform. | Consistent hourly spend (USD/hour) on compute services. |
| Flexibility | Low: Tied to specific EC2 attributes (e.g., m5.large, Linux). Limited flexibility with size/AZ. | High: Applies to any EC2 instance type/family, region, AZ, OS, tenancy, Fargate, and Lambda usage. |
| Discount Scope | Primarily EC2. | EC2, AWS Fargate, AWS Lambda. |
| Management | Requires active management to ensure matching of RI purchases to actual usage. Can lead to “RI sprawl” and wastage if usage patterns change. | Simpler management; automatically applies to eligible usage across services. |
| Risk of Waste | Higher if instance types or usage patterns change. | Lower, as it covers a broad range of compute usage. |
| Refunds/Exchange | Convertible RIs offer some flexibility, but still complex. Standard RIs are non-refundable/non-exchangeable. | No direct refunds/exchanges, but inherent flexibility reduces waste. |
| Pricing | Up to 75% discount. | Up to 72% discount. |
How to Use AWS Savings Plans: The Two Types
AWS offers two types of Savings Plans, each tailored for different flexibility needs:
1. Compute Savings Plans
- Coverage: Provides the most flexibility, applying to any EC2 instance family, size, operating system, tenancy, and AWS Region. It also automatically applies to AWS Fargate and AWS Lambda usage.
- Best For:
- Organizations with diverse compute usage patterns.
- Workloads that frequently change instance types or move between regions.
- Environments with significant Fargate or Lambda consumption.
- Maximizing flexible AWS cost optimization compute across your entire account.
- Example: A $10/hour Compute Savings Plan could cover
m5.largeinstances inus-east-1,c6g.xlargeinstances ineu-west-1, and Fargate/Lambda usage, as long as the total combined usage (at On-Demand rates) matches the $10/hour commitment.
2. EC2 Instance Savings Plans
- Coverage: Less flexible than Compute Savings Plans, but offers potentially higher discounts for commitment to a specific EC2 instance family within a region (e.g.,
M5family inus-east-1).- The discount applies to any size within that family (e.g.,
m5.large,m5.xlarge), OS, and tenancy.
- The discount applies to any size within that family (e.g.,
- Best For:
- Workloads with stable usage within a particular EC2 instance family (e.g., consistently running
M5instances). - Organizations transitioning from traditional RIs but still want some family-level consistency.
- Workloads with stable usage within a particular EC2 instance family (e.g., consistently running
- Example: A $5/hour EC2 Instance Savings Plan for the
M5family inus-east-1would apply to anym5.xlarge,m5.2xlarge, etc., running inus-east-1.
Implementing and Optimizing Your Savings Plans Strategy
Successfully leveraging Savings Plans involves a few key steps and considerations:
- Analyze Your Usage (AWS Cost Explorer):
- Start with Recommendations: AWS Cost Explorer is your best friend. It provides personalized Savings Plan recommendations based on your historical On-Demand usage (typically the last 7, 30, or 60 days).
- Commitment Level: The recommendation will suggest an optimal hourly commitment (e.g., $X/hour) for 1-year or 3-year terms, with options for All Upfront, Partial Upfront, or No Upfront payment.
- Compute vs. EC2 Instance: Cost Explorer will recommend both types, allowing you to compare potential savings and flexibility. Start with Compute Savings Plans for maximum flexibility if your usage is highly varied.
- Choose Your Term and Payment Option:
- 1-year vs. 3-year: 3-year commitments offer higher discounts but less flexibility. Choose based on your long-term confidence in compute usage.
- Payment Options:
- No Upfront: Smallest discount, but zero upfront cost.
- Partial Upfront: Medium discount, pay some upfront.
- All Upfront: Largest discount, pay entire commitment upfront.
- Consider Cash Flow: “No Upfront” is often preferred for maximum flexibility, even if the discount is slightly lower.
- Purchase Your Savings Plan:
- Via the AWS Cost Management console (under Savings Plans).
- Once purchased, it automatically starts applying discounts to eligible usage. No need to assign it to specific instances or services.
- Monitor Your Coverage and Utilization:
- Savings Plans Utilization Report: In the Cost Management console, monitor your utilization. Aim for close to 100% utilization. Under-utilization means you’re paying for compute you’re not using.
- Savings Plans Coverage Report: This shows how much of your eligible On-Demand usage is being covered by a Savings Plan. Aim for high coverage (e.g., 80-90%+) to maximize savings.
- Adjust as Needed: If your usage patterns change significantly, consider purchasing additional Savings Plans or adjusting your strategy at the end of your term.
- Consider Reserved Instances for Niche Workloads (If Applicable):
- While Savings Plans are broadly superior for compute, RIs still have a place for specific, stable workloads that require very specific attributes (e.g., a dedicated tenancy database instance or certain Redshift/RDS instances where Savings Plans don’t apply). Savings Plans cover EC2, Fargate, and Lambda, but other services still rely on RIs.
Why Savings Plans are the Future of Flexible AWS Cost Optimization Compute
Savings Plans represent a strategic shift in how AWS encourages customers to commit to usage. Their key advantages drive this trend:
- Simplicity: No need to match RIs to specific instances; the discount applies automatically across a broad range of compute. This drastically reduces operational overhead.
- Adaptability: As your architecture evolves (e.g., migrating from EC2 to Fargate or Lambda, changing instance families), your Savings Plan continues to provide discounts, unlike rigid RIs. This is the essence of flexible AWS cost optimization compute.
- Comprehensive Coverage: Extending discounts to Fargate and Lambda is a huge win for serverless and container-first strategies.
- Reduced Waste: The flexibility inherently minimizes the risk of purchasing commitments that become unutilized due to changing technical requirements.
Conclusion: Mastering AWS Savings Plans for Maximum Impact
Moving beyond Reserved Instances to embrace AWS Savings Plans is a crucial step for any organization serious about flexible AWS cost optimization compute. By committing to a consistent hourly spend, you unlock significant discounts that seamlessly apply across your EC2, Fargate, and Lambda usage, regardless of instance type, operating system, or even region for Compute Savings Plans.
Understanding how to use AWS Savings Plans – from analyzing recommendations in Cost Explorer to continuously monitoring utilization – empowers you to achieve deeper and more resilient cost reductions. In today’s dynamic cloud environments, Savings Plans aren’t just a cost-saving feature; they are an essential tool for smart cloud financial management, ensuring you get the most value from your AWS compute investments.
