What Is an AWS Savings Plan?

AWS Savings Plans are a financial instrument designed to give you significant discounts in exchange for committing to a certain level of compute usage. AWS Savings Plans stand out against On-Demand pricing once you have some confidence in your general usage trends. The best part is that they don’t require changes to your underlying infrastructure and can offer significant savings.

AWS Savings Plans: Term, Prepayment, Compute

AWS Savings Plans were initially introduced in 2019, and in the best-case scenario, offer up to 72% savings on certain EC2 instances.

While 72% savings may seem like a large number, getting there requires taking advantage of the unique configuration options available along with AWS Savings Plans. In the majority of cases, savings might be closer to 30%, but the exact amount is contingent on three basic factors:

• What term you’re willing to commit to—1 year or 3 years.
• What prepayment amount you’re willing to make—none, some, or all.
• What compute options your organization uses—EC2, Lambda, Fargate, etc.

Let’s take a closer look at this pricing model, understand how it works, and define a clear path to obtaining that steep discount.

Factor 1: The Term

The first factor you’ll want to consider when making a Savings Plan purchase is the term of your commitment. Ultimately, when you purchase a Savings Plan, you’re committing to either 1 or 3 years of usage to get a discount. The longer the commitment you make, the bigger the savings.

In most cases, the discount level you get from moving from a 1- to 3-year commitment doubles the discount rate. As an example, if you commit to 1 year of an AWS Fargate Savings Plan, you’ll see a ~20% savings versus On-Demand pricing. That same exact configuration with a 3-year term commitment has a ~45% savings over On-Demand. This is demonstrated in the table below, for a Fargate Compute Savings Plans (No Upfront), with Linux X86 architecture in US East (Ohio).

1 year vs. 3 years with Savings Plans

Factor 2: The Prepayment Amount

The second factor to consider is how much you prepay (if anything) for your commitment. AWS gives you three different prepayment options: No Upfront, Partial Upfront, or All Upfront. Similar to when you commit to a longer term and get better discounts, the amount that you’re willing to pay upfront considerably increases the discount versus On-Demand prices.

One popular Savings Plan option we often see customers select is the No Upfront option, which kicks off savings, usually at 20% for 1 year and 45% for 3 years. Doing a Partial or All Upfront prepayment only marginally helps on a discount rate, typically, about an additional 5% savings when you go from committing No Upfront to Partial Upfront, and an additional few percent when going from Partial Upfront to All Upfront. Using the same Fargate example from before, you can see this exemplified in the table below.

1 year vs. 3 years across prepayment options with Savings Plans

In general, we find that customers tend to opt for No Upfront Savings Plans, and when there is additional budget they’re looking to use, they’ll do a smaller All Upfront payment to yield maximum savings on a smaller budget.

Factor 3: Compute Options

AWS Savings Plans are available only for certain compute workloads and have three different options: Compute Savings Plans, EC2 Instance Savings Plans, and Amazon SageMaker Savings Plans.

• Compute Savings Plans: Apply to usage across Amazon EC2, AWS Lambda, and AWS Fargate. Compute Savings Plans provide a lot of flexibility because they apply to any instance family, size, AZ, Region, etc., meaning you can change size or switch workloads between Regions, and these plans still apply. This might be preferred over other commitment options, like Reserved Instances that are not similarly flexible.
• EC2 Instance Savings Plans: With this type of Savings Plan, you can potentially realize the most savings—up to 72%; however, unlike Compute Savings Plans, you do need to commit to a specific family (e.g., c4 in US East (Ohio)) to realize these savings. You can move between different instance types within the same family and Region (e.g., c4.large to c4.xlarge) as the original instance.
• Amazon SageMaker Savings Plans: This type applies to SageMaker usage commitments. They also offer flexibility between family, Region, and size.

Within each Savings Plan type, Amazon applies different savings rates based on which Region you’re running the instance in and what compute types you’re using. Each EC2 instance type has a different discount rate, which can make the process of even understanding what amount of savings you can yield a challenge in and of itself.

Realizing the Savings

So now that you have a better understanding of how Savings Plans work, you may be wondering, how do you realize the savings? The great thing about Savings Plans is that after they’re purchased, Amazon will automatically begin applying the savings to your account. As you use certain compute workloads and different instance types, Amazon will grant the highest discount possible to you, which is what Amazon means by being “flexible.”

For example, if you have two instances—a c5.xlarge and an m5.xlarge—and Amazon grants a 30% savings rate for c5 and a 25% savings rate for m5, they first apply the 30% savings rate to ensure you yield the most savings possible. This means that as your organization makes changes to your infrastructure, you can rest assured that some level of savings will be automatically applied, even if you have to switch instance types.

Manage Your AWS Savings Plans with Vantage

While AWS offers native tools for managing your Savings Plans, a third-party solution like Vantage can provide a more comprehensive and integrated overview, making it easier to optimize and track your savings across all your cloud resources. You can use the following features in Vantage to help plan for and optimize your Savings Plans purchases.

View Past and Present Commitments

Financial Commitment Reports provide a clear view of your committed spend versus actual usage, helping you track your savings performance. You can use these reports to understand your discounted coverage and effective savings rate. Financial Commitment Reports provide a unified view of all your AWS financial commitments, with the ability to filter or create custom aggregations and groupings. Analyze your historical data to ensure your commitments are aligned with your current and future needs.

Model Future Commitments

Savings Planner helps you model your future cloud costs and guides you in selecting the right Savings Plans. Use it to model different commitment scenarios and identify the most cost-effective strategy for your workloads. Create models to identify the impact of potential Savings Plans purchases.

Automate Savings Plan Purchases

Autopilot for AWS Savings Plans helps you to automate AWS Savings Plans purchases. This tool can make recommendations for optimal Savings Plans purchases or, when enabled, automatically make those purchases for you.

Conclusion

AWS Savings Plans offer a powerful way to significantly reduce your cloud costs by committing to various terms like prepayment, term, etc. By using other tools like Vantage, you can also gain deeper insights into your commitments and spending, automate your Savings Plans management, and maximize your savings.