Concepts
On-Demand Instances allow users to pay for compute capacity by the hour or the second, depending on the instance type, with no long-term commitments or upfront payments. This purchasing option offers maximum flexibility and is ideal for workloads that are unpredictable, cannot be interrupted, and do not require sustained usage.
Use Case Example:
- Developing and testing applications on EC2 where the workload is not expected to run 24/7.
Spot Instances
Spot Instances give customers the ability to purchase unused EC2 capacity at significant discounts compared to On-Demand pricing, sometimes up to 90%. Spot prices fluctuate based on supply and demand. While Spot Instances offer considerable cost savings, they can be interrupted by AWS with a two-minute notification when AWS requires the capacity back.
These instances are well-suited for fault-tolerant, flexible, and stateless applications such as big data processing jobs, containerized workloads, or development and test environments.
Use Case Example:
- Running high-performance computing (HPC) workloads where tasks can be paused and resumed without any detrimental effect on the end result.
Reserved Instances (RIs)
Reserved Instances provide a discount (up to 75%) compared to On-Demand pricing in exchange for a commitment to use a specific instance type in a region for a one-year or three-year term. There are different types of RIs—Standard and Convertible—and payment options that include All Upfront, Partial Upfront, or No Upfront.
Standard RIs are meant for steady-state workloads, where usage is predictable, and Convertible RIs offer the flexibility to change instance family types while still benefiting from the discount.
Use Case Example:
- Running a database on an EC2 instance that needs to be operational 24/7 for the next three years.
Savings Plans
Savings Plans are a flexible pricing model that offers lower prices on EC2, Fargate, and Lambda usage, in exchange for a commitment to a consistent amount of usage (measured in $/hour) over a one or three-year period. Savings Plans provide the flexibility to use different instance types, operating systems, and AWS regions and still receive the cost benefits.
There are two types of Savings Plans: Compute Savings Plans, which provide the most flexibility and can reduce costs by up to 66%, and EC2 Instance Savings Plans, which offer the lowest prices in exchange for the commitment to use individual instance families in a region.
Use Case Example:
- A mix of microservices running on different instance types but consistently exceeding a certain amount of compute spend over a year.
Comparison Table
| Purchasing Option | Upfront Cost | Commitment | Flexibility | Use Case |
|---|---|---|---|---|
| On-Demand | None | None | High | Irregular & unpredictable workloads |
| Spot Instances | None | None | Medium | Interruptible workloads & batch processing |
| Reserved Instances | Optional | 1 or 3 years | Low | Steady-state or continuous workloads |
| Savings Plans | Optional | 1 or 3 years | High | Consistent usage across different services |
It’s important to note that while cost savings are a significant factor, the choice of purchasing option should also be guided by the specific application requirements and the associated risk tolerance for interruptions (especially relevant for Spot Instances). By strategically combining these purchasing options, it’s possible to optimize both cost and performance of AWS cloud workloads.
Answer the Questions in Comment Section
True or False: Spot Instances can be terminated by AWS at any time when AWS needs the capacity back.
- True
- False
Answer: True
Explanation: Spot Instances provide the ability for customers to purchase unused EC2 capacity at a lower price, but AWS can terminate these instances when it requires the capacity back for on-demand customers with just a two-minute notification.
Which AWS purchasing option allows customers to commit to a consistent amount of usage (e.g., $10/hour) in exchange for a lower price?
- On-Demand Instances
- Spot Instances
- Reserved Instances
- Savings Plans
Answer: Savings Plans
Explanation: Savings Plans provide a lower price in exchange for a commitment to a consistent amount of usage (e.g., compute usage or $/hour) over a 1 or 3 year period.
True or False: Reserved Instances require upfront payment for the entire term of the reservation.
- True
- False
Answer: False
Explanation: Reserved Instances offer several payment options including All Upfront, Partial Upfront, or No Upfront payments. You don’t necessarily have to pay for the entire term upfront.
Which of the following AWS purchasing options typically provides the highest discount compared to On-Demand pricing?
- Spot Instances
- Convertible Reserved Instances
- Standard Reserved Instances
- On-Demand Instances
Answer: Standard Reserved Instances
Explanation: Standard Reserved Instances offer a significant discount (up to 75%) off On-Demand pricing when you commit to a specific instance type over a 1 or 3-year term.
What can AWS customers use to manage and reduce costs by identifying unused or underutilized resources?
- AWS Trusted Advisor
- AWS Cost Explorer
- AWS Budgets
- All of the above
Answer: All of the above
Explanation: AWS Trusted Advisor, AWS Cost Explorer, and AWS Budgets all provide different functionalities to help customers optimize costs by highlighting underutilized resources or allowing budget tracking and forecasting.
True or False: With Reserved Instances, you are limited to changing Availability Zones or instance sizes after the purchase.
- True
- False
Answer: False
Explanation: With Reserved Instances, AWS offers instance size flexibility within the same instance family and Availability Zone changes for Linux/UNIX RIs.
On which of the following factors does the price of Spot Instances primarily depend?
- Fixed pricing model regardless of the demand
- The region where the EC2 instance is launched
- Real-time supply and demand for EC2 capacity
- Length of term commitment
Answer: Real-time supply and demand for EC2 capacity
Explanation: Spot Instance pricing fluctuates based on real-time supply and demand for AWS capacity, rather than being a fixed price like On-Demand Instances.
Which AWS purchasing option provides the flexibility to change families, operating systems, and tenancies for EC2 instances?
- On-Demand Instances
- Standard Reserved Instances
- Convertible Reserved Instances
- Spot Instances
Answer: Convertible Reserved Instances
Explanation: Convertible Reserved Instances offer the option to change the instance family, operating system, or tenancy during their term, which is not possible with Standard Reserved Instances or On-Demand Instances.
True or False: Savings Plans are applicable to both EC2 instances and AWS Fargate.
- True
- False
Answer: True
Explanation: AWS Savings Plans apply to usage across Amazon EC2, AWS Lambda, and AWS Fargate, giving customers flexibility in where to apply savings.
What is the primary benefit of using AWS Spot Instances?
- Guaranteed availability
- Ability to reserve instances for a specific time
- Cost savings compared to On-Demand Instances
- Fixed performance
Answer: Cost savings compared to On-Demand Instances
Explanation: The primary benefit of using AWS Spot Instances is the significant cost savings they provide compared to On-Demand Instances prices.
True or False: AWS Spot Instances can only be used for fault-tolerant, stateless applications.
- True
- False
Answer: False
Explanation: While it is recommended to use Spot Instances for fault-tolerant and stateless applications due to their potentially ephemeral nature, they can be used for a broader range of applications if handled appropriately.
Which statement is true regarding AWS Reserved Instances?
- Reserved Instances can only be purchased for a 3-year term.
- Reserved Instances can be sold in the AWS Marketplace if no longer needed.
- Reserved Instances cannot be cancelled once purchased.
- Reserved Instances reduce prices by a fixed percentage for all instance types.
Answer: Reserved Instances can be sold in the AWS Marketplace if no longer needed.
Explanation: AWS provides the flexibility for Reserved Instances to be sold on the AWS Marketplace to another party if they are no longer needed, which is particularly useful for reducing sunk costs when the commitment is no longer required.
Great blog post on AWS purchasing options! Really helped me understand the differences between Spot Instances, Reserved Instances, and Savings Plans.
Thanks for the detailed insight. Could anyone explain how Spot Instances can save costs but what are the associated risks?
I prefer Reserved Instances for predictable workloads. The savings can be substantial over longer periods.
Can anyone share their experience with AWS Savings Plans? Are they better than Reserved Instances?
Just want to say, this post is fantastic. Thanks!
Awesome resource! Perfect timing for my SAA-C03 exam preparation.
I heard Spot Instances can be difficult to manage. Is there any tool to automate this process?
For compute-intensive applications like big data analytics, which purchasing option is the most cost-effective?