Committing to AWS Savings Plans is like walking a tightrope in your cost optimization efforts.
Every hour that your team uses fewer cloud resources than the contracted amount is an hour of lost value. And if you approach this carefully and end up under-committing, you’ll wind up paying for the resources your team needs in the highest AWS price tier.
Luckily, automated rightsizing and cloud optimization offer a way out.
Keep on reading to find out how you could eliminate the effort around AWS Savings Plans and reduce your cloud bill even more.
Check out my guide:
- The Catch-22 of AWS Savings Plans
- Forecasting cloud costs is hard
- AWS Savings Plans won’t optimize your cloud bill by themselves
- Using Savings Plans with Amazon EKS? There’s a way to cut more of your bill
The Catch-22 of AWS Savings Plans
To understand the tricky nature of AWS Savings Plans, you need to know how they work.
You buy Savings Plans based on hourly commitment. AWS uses the Cost Explorer to automatically calculate how that commitment will look like as a monthly charge on your AWS bill.
Here’s an example:
Your On-Demand monthly bill for one EC2 instance is $2,000. Let’s say that the Savings Plan combination of term and payment options gives you 30% savings. Then the recommended commitment will be c. $1.92 per hour - or $1,400 per month.
Problems begin when the hourly resource usage of the specific EC2 machine families you’re using starts to fluctuate.
If you commit to more resources than you need, every hour your teams use less than the committed level is a waste of some of the value you paid for. If you under-commit to a Savings Plan and constantly go over it, you’ll end up paying for extra resources in the highest pricing tier, On-Demand.
When using the AWS Savings Plan, you still get a discount on the cost of whatever EC2 instances your teams provisioned. If you over-provision an EC2 instance, you won’t be taking full advantage of the Savings Plan discount program.
And unlike Reserved Instances, you can’t resell the capacity purchased via AWS Savings Plans in the AWS Marketplace. That’s why it’s smart to buy Savings Plans incrementally. This helps to avoid over-committing to more resources than your company gets to use each month.
I shared some more insights about these two AWS offers in this article: Do AWS Reserved Instances and Savings Plans really reduce costs?
Forecasting cloud costs is hard
AWS Savings Plans are by no means easier to manage than Reserved Instances. To reap full benefits of them, you need the same skill set and toolkit for forecasting your AWS costs.
Savings Plans are a great option for accounts where you’re able to predict a minimum amount of usage for the entire duration of the commitment period (one or three years). If you’re dealing with an application that has an unpredictable baseline, it’s a good practice to start by gathering usage data and then gradually committing to Savings Plans.
The above might sound straightforward, but imagine doing that at the scale of the entire enterprise.
Large organizations may easily end up investing a lot of time and effort into the planning and procurement of Savings Plans:
- Multiple project or application teams need to provide an estimate of how much compute resources they will require in the upcoming period.
- DevOps and/or FinOps teams then need to review these plans and confirm that the planned projects actually require the requested resources.
- Finally, the finance team needs to go over the specific solutions like Savings Plans and make sure that the reserved capacity matches the requirements (and won’t result in over- or under-committing).
Much of the above requires going over separate spreadsheets, reviewing historical cloud usage, and carrying out complex forecasting of the expected compute capacity needs.
If you’re running on AWS Savings Plan right now, you’ve probably done most or all of these tasks.
Is there a way to save up even when you’ve already committed to a certain level of resource usage? There is, and it starts with rightsizing.
AWS Savings Plans won’t optimize your cloud bill by themselves
Savings Plans can help to reduce your AWS bill, but you’re still the one in charge of infrastructure optimization.
That’s why rightsizing is such a critical initiative. And if you’re running a large cloud environment, you need a solution that automates rightsizing tasks for you.
Tracking down which resources are running, in which families, and which teams own them is time-consuming. And trying to make sense of all the 400 EC2 instances AWS offers (together with their pricing schemes) is no small feat. And it might take you days or weeks to analyze your inventory and utilization to learn which instances can be downgraded.
An AI-based cloud cost optimization solution like CAST AI can quickly identify underutilized pieces of your infrastructure and downgrade or terminate assets without you having to lift a finger.
Using Savings Plans with Amazon EKS? There’s a way to cut more of your bill
This won’t get you out of your contract, but it’s the #1 option to get more out of your Savings Plan if you’re running EKS clusters.
You can get a free Savings Report to see how much you could potentially save as well as actionable suggestions to do so.
And if you want to free your team to focus on other tasks than cost optimization, there’s also the automated version. The tool will keep on optimizing your setup for optimal cost and performance automatically and you will get more out of your savings plan.