AWS Savings Plan 101 – All You Need to Know

With the help of the cost-saving AWS Savings Plan, users can reduce their AWS consumption charges by committing to a fixed quantity of usage (such as a set number of instance hours) over the course of one or three years. This flexible pricing structure offers a reduction on AWS consumption fees in exchange for a commitment to consume a certain amount of compute resources, assisting businesses in reducing their overall expenditures.

Adarsh RaiFebruary 22, 2023 · 8 mins Read

AWS Savings Plan 101 – All You Need to Know

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What is AWS Savings Plan?

AWS Savings Plan is a cost optimization solution that allows users to save money on their AWS usage costs by committing to a consistent amount of usage (e.g. a certain number of instance hours) over a one or three-year term. It’s a flexible pricing model that helps companies lower their overall costs by providing a discount on their AWS usage costs in exchange for a commitment to use a specified amount of compute capacity.

AWS Savings Plan are easy to manage with flexible payment options and offer the most cost-optimized solution for all AWS services and regions.

How Does AWS Savings Plan Work?

AWS Savings Plan allows users to make a commitment to a consistent amount of usage for a specific term, in exchange for a lower rate on AWS services usage. Users can choose from three different types of AWS Savings Plans: Compute Savings Plan, EC2 Instance Savings Plan, and Sage Maker Savings Plan

AWS Savings Plan Explained, Compute Savings Plan, EC2 Instance, SageMaker Savings plan, Amazon Web Services, Cost Optimization — Source: AWS

Benefits of using AWS Savings Plan

Cost Savings: Savings up to 72% compared to On-Demand prices.

Flexibility: Switch between eligible instance types and sizes, as well as regions, without having to renegotiate their commitment.

Predictability: Enjoy consistent, predictable costs by committing to a specific amount of usage.

Easy to Use: Manage your AWS Savings Plan through the AWS Management Console or the AWS Command Line Interface (CLI).

Types of AWS Savings Plans

There are three different types of savings plan offered by AWS, each with a different functionality and a different purpose.

Amazon EC2 Savings Plan

The EC2 Savings Plan is designed for workloads that use Amazon Elastic Compute Cloud (EC2) instances. This type of savings plan offers a discount on EC2 usage in exchange for a commitment to use a consistent amount of EC2 usage for a 1 or 3-year term. EC2 Instance Savings Plan is ideal for users who want to save specifically on EC2 instance usage, regardless of the region or operating system used.

Use cases for EC2 Savings Plan include:

Web applications that require a consistent number of EC2 instances to run 24/7.
Batch processing jobs that run on EC2 instances on a regular schedule.

AWS Compute Savings Plan

The Compute Savings Plan is a flexible type of savings plan that can be applied to any eligible compute services, including EC2 instances and AWS Fargate. This type of savings plan is ideal for users with multiple compute services and who want to optimize their overall compute costs. Compute Savings Plan is ideal for organizations that want to lower their overall costs by committing to a specific amount of compute capacity across multiple services, including EC2 instances, Fargate, and Lambda.

Use cases for Compute Savings Plan include:

Companies use both EC2 instances and AWS Fargate for their compute needs.
Organizations who have a mix of on-demand and reserved instances and want to optimize their overall compute costs.

AWS Savings Plan vs Reserved Instances

Both AWS Savings Plan and AWS Reserved Instances offer cost discounts in exchange for committing to a certain level of usage over a period of time. Although both services focus on reducing costs, Savings Plan offers more flexibility over reserved instances. The major difference between AWS Savings Plan vs Reserved Instance is:

Savings Plan apply automatically to EC2, Fargate, Lambda, etc depending on the type of plan chosen, across any region and instance family, within the same instance family for Compute Savings Plans.
Reserved Instances are more restrictive as you need to commit to specific instance types within a region. Users can modify attributes like instance size within the same family, or shift between regions in the case of Convertible RIs, but these require active management.

SageMaker Savings Plan

The SageMaker Savings Plan is designed for businesses that use Amazon SageMaker, a fully managed platform for building, training, and deploying machine learning models. This type of savings plan offers a discount on Amazon SageMaker usage in exchange for a commitment to use a consistent amount of usage for a 1 or 3-year term.

Use cases for SageMaker Savings Plan include:

Workloads that use Amazon SageMaker for building, training, and deploying machine learning models on a regular basis.
Companies that have a consistent amount of Amazon SageMaker usage and want to optimize their overall machine learning costs.

Comparision of Different AWS Savings Plan Pricing

Here are the differences and features between the three types of AWS plans:

Savings Plan	Differences	Features	Pricing
Compute Savings Plan	Provides lower rates for usage of EC2 and Fargate services	Can be applied to any EC2 or Fargate usage in an AWS region	Pay a lower rate for every hour that an EC2 or Fargate service is used
EC2 Instance Savings Plan	Provides lower rates for usage of EC2 instances	Can be applied to any EC2 instance usage in an AWS region	Pay a lower rate for every hour that an EC2 instance is used
SageMaker Savings Plan	Provides a discount on Amazon SageMaker usage	Can be applied to any Amazon SageMaker usage in an AWS region	Pay a lower rate for every hour that Amazon SageMaker is used

Coverage: Compute Savings Plan covers a wider range of compute services, while EC2 Instance Savings Plan is more focused on EC2 instances.
Savings Amount: The specific savings amount will depend on the rate and usage committed to, but both plans offer cost savings compared to On-Demand pricing.
Flexibility: Compute Savings Plan provides more flexibility in terms of the services it covers and the instances that are eligible.

AWS Savings Plan Prerequisites and How to Apply

Prerequisites

In order to use AWS Savings Plan, you must have an AWS account and be subscribed to one or more eligible AWS services.
The eligible services include Amazon EC2 instances, Fargate, Lambda, and Sagemaker.
It is important to note that AWS Savings Plan only applies to these specific services and cannot be used with other AWS services.

How to Apply for an AWS Savings Plan

To apply for an AWS Savings Plan, follow these simple steps:

Navigate to the AWS Cost Explorer service.

Select the “Savings Plans” option.

Choose the type of plan you want to purchase.

Select the usage type, region, and instance family.

Set the commitment amount and duration.

Review and purchase the plan.

How to View Savings Plan

To view your AWS Savings Plan usage and details, follow these steps:

Navigate to the AWS Cost Explorer service.

Select the “Savings Plans” option.

Choose the plan you want to view.

View the usage and details of the plan.

How to Calculate AWS Savings Plan Discounts?

To calculate AWS Savings Plan discounts effectively, understanding the potential cost savings over on-demand prices is crucial. Our AWS Savings Plan Calculator simplifies this process, enabling you to visualize the financial benefits of committing to a Savings Plan.

Calculating AWS Savings Plan Discounts:

Access the Calculator: Begin by accessing our AWS Savings Plan Calculator, a tool designed to provide clear insights into the savings you can achieve by adopting a Savings Plan.

Input Details: Input the necessary details such as your preferred Instance-Type, Region, Number of Instances, and their Usage Duration. These inputs are critical in tailoring the calculation to your specific cloud usage pattern.

Compare Costs: The calculator then compares the estimated Monthly Costs for on-demand usage with those under 1 to 3-year Savings Plans. This comparison is pivotal in determining the most cost-effective cloud computing solution for your needs.

Make Informed Decisions: Armed with this information, you can make an educated decision on whether a Savings Plan aligns with your cloud usage and financial objectives. It’s a strategic step towards optimizing your AWS expenditure.

Conclusion

AWS Savings Plans are an excellent way for AWS users to save on costs, especially if you have a lot of AWS usage. With the ability to select different plan types and coverage, you can find the perfect savings plan for your needs.

Additionally, implementing a FinOps strategy helps businesses align their technology spending with their business objectives, enabling them to optimize costs in the long run while maximizing value from their resources.

How can we help?

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Adarsh Rai

FinOps enthusiast

Adarsh Rai, author and growth specialist at Economize. He holds a FinOps Certified Practitioner License (FOCP), and has a passion for explaining complex topics to a rapt audience.