Aws Reserved Instances (RI) & Savings Plans

#aws

Great question 🙌 — Reserved Instances (RI) and Savings Plans are both ways to save money on EC2 (and some other services), but they work a bit differently. Let’s compare them clearly:

🔹 1. Reserved Instances (RI)

Commitment: 1 year or 3 years.
Scope: Apply to specific instance families in a specific region (example: m5.large in us-east-1).
Flexibility:
- Standard RI → least flexible, highest discount.
- Convertible RI → lets you change instance families, but with less discount.
Discount: Up to ~72%.
Sharing: Can share across accounts in AWS Organizations (with RI sharing enabled).
Applies to: EC2 instances only.

✅ Best when:

You know exactly what instance family and region you’ll use for 1–3 years.
Example: You always run m5.large in us-east-1 for your production DB.

🔹 2. Savings Plans

Commitment: Commit to spend \$X/hour on compute for 1 or 3 years.
Scope: Broader than RIs.
- Compute Savings Plan: Applies to any EC2 instance, Fargate, or Lambda across any region.
- EC2 Instance Savings Plan: Applies to a specific family (e.g., m5) in a chosen region, but still flexible within that family.
Flexibility: Much more flexible than RIs (especially Compute SP).
Discount: Up to ~66% (slightly less than RIs).
Applies to: EC2, Fargate, Lambda (Compute SP).

✅ Best when:

You want flexibility (change instance family, OS, region).
Example: You don’t know if you’ll use m5.large in us-east-1 or c5.xlarge in eu-west-1, but you know you’ll spend \$10/hour on compute.

🔹 3. Side-by-Side Comparison

Feature	Reserved Instances (RI)	Savings Plans
Discount	Up to 72%	Up to 66%
Commitment	1 or 3 years	1 or 3 years
Applies to	EC2 only	EC2, Lambda, Fargate
Scope	Specific family, region	Flexible (depending on type)
Flexibility	Low (except Convertible RI)	High
Best for	Predictable, steady workloads	Dynamic, evolving workloads

🔹 4. Simple Analogy

RI = A year-long lease for a specific car (e.g., Toyota Corolla, red, in New York). Cheap, but you’re locked in.
Savings Plans = A budget: “I’ll spend \$500/month on cars.” You can change cars anytime (sedan, SUV, any city), as long as you don’t exceed the budget.

🔑 Takeaway

Use RIs if you’re sure of your instance type & region (max savings).
Use Savings Plans if you want flexibility across services, instance families, and regions.
Many companies today prefer Savings Plans because workloads change.

No problem 👍 — let’s untangle this step by step.

2️⃣ What is RI Sharing?

By default, RI discounts apply only to the AWS account that purchased the RI.
But in many companies, there are multiple AWS accounts (for dev, prod, different teams, etc.).
With RI Sharing, unused RI discounts can be shared across accounts in the same AWS Organization.

“Establish an AWS Organization in the AWS account that purchased the RI and hosts the remaining active EC2 instances. Invite the other AWS accounts to join this organization from the management account.”

👉 This means:

In the RI purchaser account, create an AWS Organization (this becomes the management/payer account).
Invite the other AWS accounts (e.g., dev, test, prod) to join.
Once linked, all accounts share the same billing family, and RIs can be shared.

5️⃣ Why This Matters

Without this setup:

If Account A buys an RI, only Account A gets the discount.
If Account B runs EC2s of the same type, it pays full price.

With this setup:

If Account A isn’t fully using its RI, Account B (or any linked account) automatically gets the discount.
✅ No wasted money.

🔑 Takeaway

RI (Reserved Instance) = a billing discount for EC2.
RI Sharing + AWS Organizations = lets multiple AWS accounts share unused RI discounts, making it cost-optimized.