How to Minimize the Risk of AWS EC2 Discount Plans and Maximize Savings

Read More >

Even though AWS cloud computing is known for its flexibility, most cloud users fail to fully capitalize on this potential, resulting in significant costs and underutilized resources. AWS Discount Plans, designed to address this gap, offer up to 72% savings compared to On-Demand prices in exchange for a one to three-year commitment. However, selecting the appropriate plan is challenging due to the difficulty of precise usage forecasting. 

Each plan varies, with some offering fixed hourly rates regardless of usage, while others can be adjusted according to the usage. Some plans offer limited scope for resource modification but the duration of the commitment remains fixed, whereas others do not even permit the changes. The risk of over-committing and being left with unused discounts typically causes people to under-provision AWS Discount Plans, where they run a higher number of instances on the premium pricing tier of On-Demand, significantly driving up costs. This blog provides a detailed walkthrough on minimizing the risks associated with discount plans and maximizing savings through Zesty’s Commitment Manager. Read through!


Understanding AWS Discounts: Reserved Instances and AWS Savings Plan!

Understanding AWS Discounts involves two key options: Reserved Instances and Savings Plans. Reserved Instances are best suited for predictable workloads, offering deeper discounts on specific instance types for one or three years. The AWS Savings Plan, in contrast, offers more flexibility, accommodating for varied usage across services with a consistent spending commitment. 

RIs are further divided into Standard and Convertible types. Here’s a concise comparison of these three options:

Basis of Comparison Standard Reserved Instances Convertible Reserved Instances AWS EC2 Savings Plan AWS Compute Savings Plan
Discount Level Up to 72% Up to 66% Up to 72% Up to 66%
Instance Flexibility Can modify AZ, instance size within family, scope. Can split/combine RIs. No usage adjustment based on demand. Can modify similar attributes as Standard RIs; exchangeable for different attributes; allows usage adjustment based on demand. Applies to specific family and region. No modification, but flexible in application. Applies across different families, OS, regions. No modification, but flexible in application.
Usage Scope Specific instance type, platform, region, and tenancy Broader flexibility with exchange options Specific to EC2 instance families and regions, provide OS flexibility Broader scope across various families, OS, and regions
Fixed Payment vs. Demand Fixed payment based on term and instance commitment. No demand-adjusted billing. Flexible; can exchange RIs to adjust to new usage patterns, offering demand-adjusted billing. Fixed $/hour payment regardless of actual usage; not suitable for volatile workloads that may use less than the committed amount. Fixed $/hour payment regardless of actual usage; more suited for steady or predictable usage patterns


Recommended Allocations for Different Types Of Workloads

Stable workloads

For managing stable workloads, it’s suggested to leverage AWS Savings Plans (SPs) for 40-70% of the workload. This will provide substantial cost savings of up to 72% and are ideal for consistent usage patterns. The flexibility to scale up and down is managed through 1-year Convertible Reserved Instances (CRIs), providing the operational adaptability needed for varying demands.

Zesty’s Commitment Manager supports this strategy by managing the workload drop tolerance, and enhancing the ability to scale as needed. Zesty overcomes the challenge of the financial risks associated with long-term commitments. It automatically adjusts commitments to match the environment’s needs, ensuring efficient discount allocation across workloads. This approach enables a more flexible allocation of resources, reducing daily charges and enhancing the ability to scale down when necessary, thus balancing cost efficiency with operational flexibility​. 

Periodic workloads

For organizations with volatile or periodic workloads, a balanced approach in selecting AWS discount plans is crucial. AWS Savings Plans, while offering higher discounts, have a fixed dollar-per-hour commitment that doesn’t get moderated with changing demands, potentially leading to overcharges during low usage periods. Conversely, Convertible Reserved Instances can be adapted to varying usage, varying the daily consumption rate, which is ideal for erratic workloads. 

As the above graph depicts, Zesty’s Commitment Manager allocates 20-30% of the workload to Savings Plans for consistent cost savings. Then, assigns 40-60% to 3-year Convertible Reserved Instances (CRIs) and another 20-40% to 1-year CRIs. The CRIs can be increased and diffused to track alongside actual consumption rates. This strategic distribution ensures that while some baseline savings are achieved through Savings Plans, the bulk of the workload remains flexible and cost-effective through CRIs, suitable for the unpredictable nature of the application.

Zesty’s customers see great success with this approach in this holiday season, end-of-month batches, and many other use cases.

Smaller workloads

For smaller workloads, which are stable and don’t change a lot, Standard Reserved Instances (RIs) are recommended to maximize savings, offering up to 72% off compared to On-Demand rates. These RIs are ideal for smaller, stable operations due to their significant discount levels and because of their liquidity through the secondary EC2 RI market which provides great flexibility. While they can be sold very easily if necessary, there is a limit to how much can be sold. 

For instance, a small-scale application consistently using a specific instance type, like an m5.large, can significantly benefit from Standard RIs. By committing to this instance type for a three-year term, the application secures a lower hourly rate, translating into considerable long-term savings.

Zesty’s technology adds value by dynamically managing these Standard RIs to ensure they align with real-time demands. If, for example, the application’s resource needs drop, Zesty automatically sells off any unnecessary allocation of SRIs to the secondary market. This ensures that discount plans always match the current needs, optimizing cost efficiency and resource utilization.

Larger workloads

For larger workloads, a strategic combination of AWS Savings Plans (SPs) and 1-year & 3-Year Convertible Reserved Instances (CRIs) is recommended to optimize cost savings while maintaining flexibility. SPs, with discounts up to 72%, are ideal for the stable, predictable portion of these workloads, like maintaining a fleet of m5.2xlarge instances for baseline operations, ensuring consistent cost reduction. Meanwhile, CRIs stand out for their inherent versatility for the more dynamic portion of workload activity. This flexibility enables businesses to adapt their computing resources efficiently, scaling up or down without incurring additional costs or wasting resources. CRIs provide the necessary adaptability, allowing changes in instance types and regions, which is essential for scaling or evolving needs, but unlike SPs they have the added flexibility of being able to adjust the daily rate in which they are consumed.

The daily consumption rate of CRIs can both be increased and decreased making them a valuable asset for flexible discount management. Let’s say a three-year CRI was initially purchased for $360,000, translating to a daily value of $10,000. After one year, with 24 months remaining on the CRI term, the company has $240,000 of future commitment available to consume. To adjust to decreased workload volumes, the company can merge the CRI with another 36 month-term CRI, this will effectively reduce the daily cost to $6,667. Conversely, should the company need to augment their workload, they have the option to increase their CRI units. This would raise the daily commitment to $20,000, effectively increasing the total value of their allocation to $480,000, while keeping the same start date of the CRI contract (24 months).

This flexibility to modify the daily consumption rate, allowing an increase or decrease as needed, ensures that large-scale workloads receive comprehensive and cost-effective coverage, tailored to their varying operational demands. 


Zesty’s Commitment Manager: Takes the Pain out of Commitments!

Zesty’s Commitment Manager redefines financial risk management in cloud investments by integrating with AWS’s discount structures through:

  • Automated Optimization: Leveraging real-time workload monitoring to adjust commitments, ensuring investments are always aligned with current demands.
  • Risk Coverage: Supporting optimal commitment allocation with a blended use of discount plans.
  • ML-Intelligent Platform: Utilizing predictive analytics to make informed decisions, maximizing the value of your cloud resources without unnecessary overhead.

Zesty enhances savings by dynamically aligning cloud investments with actual usage. It significantly reduces the risk of overcommitting resources by adapting discounts as workloads fluctuate, thus avoiding unnecessary expenses. Additionally, Zesty simplifies cloud management by automating the allocation and optimization process. This means less manual intervention and more focus on core business functions. 

Zesty empowers businesses to build greater flexibility into cloud usage, avoiding the pitfalls of long-term financial lock-ins. This strategic approach delivers a practical, no-nonsense pathway to cloud cost management, bringing more flexibility into your cloud infrastructure!

Explore more details about Zesty’s Commitment Manager or Book a demo now!