In the realm of cloud computing, the term 'Savings Plans' refers to a pricing model offered by cloud service providers, such as Amazon Web Services (AWS), that allows users to commit to a consistent usage amount, in return for significant discounts. This model is designed to provide cost predictability and savings over on-demand pricing.
Savings Plans are a flexible pricing model that offer significant savings on AWS usage. This model provides you with the flexibility to change instances types, operating systems, and regions throughout the plan term, to meet your evolving needs. Understanding Savings Plans and how they work is crucial for software engineers and other professionals who work with cloud computing services.
Definition of Savings Plans
Savings Plans are a type of pricing model that allows AWS customers to save up to 72% on their AWS compute usage by committing to a consistent amount of usage, measured in $/hour, for a term of 1 or 3 years. The two types of Savings Plans are Compute Savings Plans and EC2 Instance Savings Plans.
Compute Savings Plans provide the most flexibility and help to reduce your costs by up to 66%. These plans automatically apply to any EC2 instance regardless of region, instance family, size, OS, tenancy or even some AWS compute services. EC2 Instance Savings Plans, on the other hand, provide a discount of up to 72% and automatically apply to EC2 instances within a chosen instance family and region.
Compute Savings Plans
Compute Savings Plans are a flexible pricing model that reduces your AWS costs. They apply to a broad range of compute usage including EC2, Fargate, and Lambda regardless of instance family, size, OS, tenancy and region. This gives you the flexibility to use the compute option that best meets your needs and still benefit from cost savings.
With Compute Savings Plans, you simply commit to a consistent amount of compute usage, measured in $/hour, for a 1 or 3 year term. AWS will automatically apply the savings to the compute usage across your account. This makes it easier to manage your costs and can result in significant savings.
EC2 Instance Savings Plans
EC2 Instance Savings Plans are another type of Savings Plans that apply to a specific instance family within a region. They provide the deepest discounts, up to 72%, and are ideal if you have a steady state of usage and require a specific instance family in a particular region.
Like Compute Savings Plans, with EC2 Instance Savings Plans you commit to a consistent amount of usage, measured in $/hour, for a 1 or 3 year term. AWS will automatically apply the savings to the EC2 instances that match your commitment, making it easier to manage your costs and potentially resulting in significant savings.
History of Savings Plans
Savings Plans were introduced by AWS in November 2019 as a new flexible pricing model that offers significant savings on AWS compute usage. This was a shift from the previous model, Reserved Instances, which required users to commit to using a specific instance type, potentially limiting their flexibility and efficiency.
The introduction of Savings Plans was a response to customer feedback and a reflection of AWS's commitment to innovation and cost efficiency. Since their introduction, Savings Plans have been widely adopted by AWS customers due to their flexibility and potential for cost savings.
Transition from Reserved Instances
Before the introduction of Savings Plans, AWS offered Reserved Instances as a way for customers to save on their AWS compute usage. Reserved Instances required customers to commit to using a specific instance type for a term of 1 or 3 years, in return for a significant discount.
However, Reserved Instances had limitations. They lacked flexibility as they required customers to commit to a specific instance type, and they did not apply to other AWS compute services. The introduction of Savings Plans addressed these limitations and provided customers with a more flexible and cost-effective pricing model.
Use Cases of Savings Plans
Savings Plans are ideal for customers with a steady state of usage and who are looking for a flexible pricing model that offers significant savings. They are particularly beneficial for businesses that have predictable workloads and want to reduce their AWS compute costs.
For example, a software company that runs large-scale data processing workloads on EC2 instances can benefit from Compute Savings Plans. By committing to a consistent amount of compute usage, the company can save up to 66% on their AWS compute costs. Similarly, a web hosting company that requires a specific instance family in a particular region can benefit from EC2 Instance Savings Plans and save up to 72% on their EC2 costs.
Benefits for Software Engineers
For software engineers, understanding and utilizing Savings Plans can lead to significant cost savings and efficiency gains. By committing to a consistent amount of compute usage, software engineers can ensure cost predictability and manage their resources more effectively.
Furthermore, the flexibility of Savings Plans allows software engineers to adapt to changing needs and requirements. They can change instance types, operating systems, and regions throughout the plan term, ensuring they always have the compute resources they need while still benefiting from cost savings.
Examples of Savings Plans
Let's consider a specific example to illustrate how Savings Plans work. Suppose a software company commits to $10 of compute usage per hour with a 1-year Compute Savings Plan. This commitment applies to any EC2 instance regardless of region, instance family, size, OS, or tenancy.
If the company's compute usage in a particular hour is $15, they would pay the Savings Plans rate for the first $10 and the on-demand rate for the remaining $5. If their usage in another hour is $8, they would pay the Savings Plans rate for the entire $8 and the commitment for the remaining $2 would be considered unused.
Example with EC2 Instance Savings Plans
Now let's consider an example with EC2 Instance Savings Plans. Suppose a web hosting company commits to $20 of usage per hour with a 3-year EC2 Instance Savings Plan for the m5 instance family in the US East (N. Virginia) region.
If the company's usage of m5 instances in the US East (N. Virginia) region in a particular hour is $25, they would pay the Savings Plans rate for the first $20 and the on-demand rate for the remaining $5. If their usage in another hour is $15, they would pay the Savings Plans rate for the entire $15 and the commitment for the remaining $5 would be considered unused.
Conclusion
In conclusion, Savings Plans are a flexible and cost-effective pricing model offered by AWS that allows customers to commit to a consistent amount of compute usage, in return for significant discounts. They offer the flexibility to change instances types, operating systems, and regions throughout the plan term, to meet evolving needs.
Understanding Savings Plans and how they work is crucial for software engineers and other professionals who work with cloud computing services. By utilizing Savings Plans, they can achieve cost predictability, manage their resources more effectively, and potentially realize significant savings.