Cloud buying is getting renewed attention as enterprises seek added cost savings after migrating systems to the cloud in response to COVID-19. It’s time for corporate cloud buyers to learn more about the Amazon Web Services (AWS) Savings Plans, launched in November 2019, which provide cost savings of up to 72% for cloud buyers.
A recent survey of more than 50 IT executives on Pulse.qa, a social research platform, showed that only 16% of IT executives believe that AWS Savings Plans are saving them money on their cloud spending. While the potential for cost cutting is real, you need to understand the nuances of this offering to ensure you’re reaping the biggest savings.
How AWS Savings Plans work
AWS Savings Plans involve a one-year to three-year commitment to a consistent amount of usage measured in dollars per hour. For example, if you commit to $100 of compute usage per hour, you will get the Savings Plans prices on that usage up to $100, and AWS will charge you on-demand rates for any usage beyond the commitment. AWS offers two Savings Plans:
- The Compute Savings Plan is the most flexible of the two plans. Compute pricing on this plan are up to 66% off on-demand rates.
- The EC2 Instance Savings Plan provides savings up to 72% off on-demand rates. As a customer, you must commit to a specific instance family in your chosen AWS region. This plan applies automatically to usage regardless of size, operating system, and tenancy within the specified family in the region.
You can’t increase a Savings Plan budget in the middle of a period of performance. Instead, you’ll need to provision a new and separate Savings Plan.
If you’re running a new AWS account, you may encounter some limitations to your Savings Plans. If this happens to you, it’s best to work with your system integrator or AWS account representative to resolve any restrictions you might be facing.
One advantage of AWS Savings Plan is being able to apply savings to on-demand instances, instead of only reserved instances. Compute Savings Plans can apply to instances across different AWS regions. You can also apply Savings Plans to Fargate (instance-based PaaS for containers) and Lambda.
AWS Savings Plans don’t apply to Relational Database Service (RDS), Redshift, or ElastiCache (in-memory database and cache). Savings Plans also don’t cover any services you provision from the AWS Marketplace.
Visualizing the spend is vital to both you as the end customer and your systems integrator. Your AWS utilization and coverage reports offer the ability to understand AWS Savings Plans cost and usage better. These reports show an aggregate Savings Plan utilization trending over time. You can also use these reports to view each of your Savings Plans with their respective utilization, costs, and savings in a tabular format.
Navigating AWS Savings Plans
As a cloud buyer who wants to take full advantage of AWS Savings Plans, you need to “shift left” with cloud spending management. While your organization may not have a cloud economist on staff (or even contract), you can use your cloud management platform to track your cloud spending over the past three to six months to get a historical perspective. That historical data should feed your decision-making process to determine if Savings Plans save you money. The data should serve you well in any service provider negotiations.
You can get started with AWS Savings Plans from your AWS dashboard by using the AWS Cost Explorer or by using the API/CLI. If you’re buying cloud services through a systems integrator, then it’s best to inquire about their use of Savings Plans.
Understanding your cloud workloads is key to making good use of AWS Savings Plans, according to Venkat Ramasamy, COO for FileCloud, an enterprise file sharing, sync, backup, and remote access solution provider. Ramasamy stresses knowing if you’re running a variable or static workload. Unless you’re building and operating SaaS applications, chances are you’re running static loads, so AWS Savings Plans would make sense for you and could save you a lot of money.
Scott Dix, senior solutions delivery manager for Cloudtamer.io, a cloud management platform provider, suggests using a cloud roadmap to guide your decision-making process about AWS Savings Plans. With a cloud roadmap in place, you can model your savings from reserved and on-demand instance spending from the early phases of your cloud projects—not after your first cloud billing surprise.
AWS Savings Plans and your system integrator
The AWS Savings Plan, when used by a system integrator, has the potential to create more profit margin when a customer orders on-demand EC2 Instances. The aforementioned Pulse.qa survey of IT executives showed that 64% negotiated hard with their system integrators for the best discounts on their cloud spending. Negotiating is essential because Savings Plans can deliver around 25% savings overall for the SI.
System integrators run into risks when they don’t put themselves in their customers’ shoes, according to Amir Shariff, VP of product and marketing at Opsani, a cloud optimization solutions provider. He said that SIs need to be an agent for their customer when managing AWS Savings Plans. “Use the golden rule and guide them through bringing their cloud costs down through shifting their cloud resources,” Shariff advises.
Shariff emphasizes the need for the SI to know about the customer’s business so they can best advise them on how to lower their cloud spending. You should expect as much from your system integrator.
AWS Savings Plans and you
Dix from Cloudtamer.io recommends erring on the side of caution when committing to reserved instances and AWS Savings Plans. “What ends up happening is folks jump in and think the savings are incredible, so let’s go to the maximum and pay for the long term,” he explains. Proceed slowly, keeping a close eye on your usage and savings.
Beyond the commitment that Dix mentioned, treat AWS Savings Plans as a cloud economics exercise. Take a systematic approach. Do the historical analysis and make the process adjustments and reporting changes necessary to give you and your stakeholders the full confidence that AWS Savings Plans are working to deliver significant savings on your AWS bill.