Introduction
AWS is the leading cloud computing platform that offers a wide range of services and resources to support businesses of all sizes. However, as the usage of AWS resources grows, so does the cost. AWS provides various options to reduce the cost of cloud computing, including Savings Plans and Reserved Instances. Cost optimization is crucial to ensure the sustainability and profitability of any cloud deployment.
In this blog, we will focus on two of the most effective cost optimization methods available in AWS: Savings Plans and Reserved Instances. We will explain what these options are, how they work, and the benefits they offer. We will also compare the costs of each method and provide real-life examples to help you understand the best fit for your specific needs.
What is a Savings Plan?
A Savings Plan is a flexible pricing model offered by AWS that helps users save money on their AWS usage by committing to a certain amount of compute usage over a period of time. Savings Plans allow users to pay lower prices for their AWS resources, as long as they are using them within the committed usage amount.
With Savings Plans, there are no upfront payments or long-term commitments required. Users can choose the type of compute usage they want to commit to, such as EC2, Fargate, or Lambda, and the duration of the plan, either 1 or 3 years. The committed usage amount can be adjusted at any time, making Savings Plans a simple and flexible way to reduce cloud costs.
The cost savings offered by Savings Plans can range from 5% to 72% depending on the type of plan and the committed usage amount. For example, by committing to $100/hr of EC2 usage for a period of 1 year, users can save up to 36% compared to On-Demand pricing.
What is a Reserved Instance?
A Reserved Instance is a cost-saving option that allows users to reserve capacity for their EC2 instances by making an upfront payment. Reserved Instances allow users to pay lower prices for their EC2 instances, as long as they are using them within the reserved capacity.
Reserved Instances are available for a duration of 1 or 3 years, and users can choose the EC2 instance type, region, and payment options that fit their needs. There are three payment options available for Reserved Instances: No Upfront, Partial Upfront, and Full Upfront. Each option offers different discounts and upfront costs.
The cost savings offered by Reserved Instances can range from 42% to 75% depending on the duration, payment option, and EC2 instance type. For example, by reserving a t3.large instance for a period of 3 years with a Partial Upfront payment, users can save up to 60% compared to On-Demand pricing.
Cost Comparison Table: Reserved Instances
The following table compares the costs of different EC2 instance types with Reserved Instances, with a duration of 1 and 3 years and different payment options: No Upfront, Partial Upfront, and Full Upfront.
| Instance Type | Service Type | 1-Year RI | 3-Year RI | % Savings (1-Year) | % Savings (3-Year) | Partial Upfront | Full Upfront | No Upfront |
|---|---|---|---|---|---|---|---|---|
| t3.large | EC2 | $816 | $2,232 | 20% | 30% | $408 | $816 | $1,224 |
| r4.large | EC2 | $1,152 | $3,168 | 25% | 35% | $576 | $1,152 | $1,728 |
| r5.large | EC2 | $1,296 | $3,672 | 28% | 38% | $648 | $1,296 | $1,944 |
| r6g.large | EC2 | $1,408 | $3,936 | 30% | 40% | $704 | $1,408 | $2,112 |
| c4.large | EC2 | $960 | $2,640 | 22% | 32% | $480 | $960 | $1,440 |
| c5.large | EC2 | $1,120 | $3,120 | 25% | 35% | $560 | $1,120 | $1,680 |
| db.t3.large | RDS | $1,440 | $3,888 | 25% | 35% | $720 | $1,440 | $2,160 |
| db.r4.large | RDS | $1,920 | $5,184 | 30% | 40% | $960 | $1,920 | $2,880 |
| db.r5.large | RDS | $2,160 | $5,760 | 33% | 43% | $1080 | $2,160 | $3,240 |
| t3.large | Elasticsearch | $1,440 | $3,888 | 25% | 35% | $720 | $1,440 | $2,160 |
| r4.large | Elasticsearch | $1,920 | $5,184 | 30% | 40% | $960 | $1,920 | $2,880 |
| r5.large | Elasticsearch | $2,160 | $5,760 | 33% | 43% | $1080 | $2,160 | $3,240 |
This table shows the cost savings associated with purchasing Reserved Instances for 1-Year and 3-Year periods. The column “Partial Upfront” represents the cost when paying a portion of the RI upfront, “Full Upfront” represents the cost when paying the entire RI upfront, and “No Upfront” represents the cost when paying nothing upfront.
As you can see, the savings increase with the length of the RI term, with 3-Year RIs providing the highest cost savings compared to On-Demand instances. Additionally, paying for the RI upfront (either partially or in full) results in even greater cost savings compared to paying for the RI with no upfront payment.
It’s important to note that these cost savings may vary based on a number of factors such as the instance type, region, and availability. To determine the most cost-effective RI option for your specific use case, it is recommended to use the AWS Cost Explorer tool.
Cost Comparison Table: Savings Plans
The following table compares the costs of EC2 usage with Savings Plans, with a duration of 1 and 3 years and different committed usage amounts: $100/hr and $200/hr.
| Committed Usage Amount | 1 Year | 3 Years |
|---|---|---|
| $100/hr | 36% savings | 45% savings |
Cost Management Tools
AWS provides a range of cost management tools to help users monitor, control, and optimize their AWS expenses. Some of the most useful tools are:
- AWS Cost Explorer: This tool provides a visual representation of your AWS usage and cost trends, enabling you to identify cost drivers and potential savings opportunities.
- AWS Budgets: This tool allows you to set custom budgets for your AWS expenses and receive alerts when your usage exceeds the budgeted amount.
- Trusted Advisor: This tool provides recommendations for cost optimization, security, performance, and fault tolerance based on your AWS usage.
Setting up a Budget and Alarms
Setting up a budget and alarm in AWS is a simple process that can help you control your AWS expenses and avoid unexpected bills. Here is a step-by-step guide to setting up a budget and alarm in the AWS Management Console:
- Sign in to the AWS Management Console and navigate to the AWS Budgets service.
- Create a new budget by specifying the budget name, budget type, and budget amount.
- Choose the budget type as “Cost” and specify the budget amount and time period.
- Select the “Create Alarm” option and configure the alarm settings, such as alarm threshold and alarm action.
- Save the alarm and budget settings.
You can also set up a budget and alarm using the AWS CLI. Here is an example of how to set up a budget and alarm for an AWS cost of $500 per month using the AWS CLI:
- Install the AWS CLI and configure your credentials.
- Run the following command to set up a budget:
aws budgets create-budget --account-id=123456789012 --budget={ "BudgetName": "MonthlyCostBudget", "BudgetLimit": { "Amount": 500.0, "Unit": "USD" }, "TimeUnit": "MONTHLY", "CostFilters": { "Service": "AmazonEC2" } }
Run the following command to set up an alarm:
aws cloudwatch put-metric-alarm --alarm-name "MonthlyCostAlarm" --metric-name "EstimatedCharge" --statistic "Maximum" --threshold 500.0 --comparison-operator "GreaterThanOrEqualToThreshold" --evaluation-periods 1 --alarm-actions arn:aws:sns:us-west-2:123456789012:my-sns-topicWith these steps, you will receive an SNS notification if your AWS cost exceeds $500 in a given month.
Conclusion
By using Savings Plans and Reserved Instances, users can save a significant amount on their AWS expenses. Additionally, by using the cost management tools provided by AWS and setting up budgets and alarms, users can have more control and visibility over their AWS costs. If you need help saving money on AWS, feel free to reach out to us at sales@zerosandones.us.
Resources
- AWS Cost Explorer: https://aws.amazon.com/cost-explorer/
- AWS Budgets: https://aws.amazon.com/aws-cost-management/aws-budgets/
- Trusted Advisor: https://aws.amazon.com/premiumsupport/trustedadvisor/
- CLI: https://aws.amazon.com/cli/
- AWS Management Console: https://aws.amazon.com/console/
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