Price model adoptions (for example, Reserved Instances, Savings Plans)

What are the primary differences between Reserved Instances and Savings Plans in AWS, and how would you advise a client to choose between them?

Reserved Instances provide a capacity reservation for a specific instance type in a particular region and availability zone, with discounts based on term length, payment option, and instance type. Savings Plans offer flexible discounts across various AWS services, regardless of region, with the commitment based on the total compute usage (Compute Savings Plans) or usage for specific instance families (EC2 Instance Savings Plans). The choice between the two often depends on the flexibility needed and commitment willingness; if a customer has predictable usage for specific instance types, RIs may be more suitable. Conversely, if they desire more flexibility and have a consistent compute spend, Savings Plans might be more beneficial.

How does the payment model affect the discount received for Reserved Instances, and what options are available?

The discount for Reserved Instances varies based on the payment option chosen: All Upfront, Partial Upfront, or No Upfront. All Upfront RIs offer the highest discount as the customer is paying the entire cost at the start. Partial Upfront offers a lower discount, with a portion paid upfront and the rest billed monthly. No Upfront has the lowest discount but does not require an initial payment. The best payment model is typically guided by the customer’s cash flow and desire for discounts.

Can you convert a Reserved Instance to a different instance type after purchase, and if so, what is the process?

Yes, Reserved Instances can be modified to different instance types within the same instance family, operating system, tenancy, and region, though it is subject to the ‘Convertible RI’ feature. However, the instance size flexibility feature allows automatic application of the RI’s discounted rate when dimensions such as instance size change. The Convertible RI allows changes to instance family, OS, and tenancy but often comes with a lower discount compared to Standard RIs.

Under what circumstances would you recommend AWS customers to consider a Convertible Reserved Instance over a Standard Reserved Instance?

Convertible Reserved Instances are recommended when a customer requires flexibility to change instance attributes such as family, operating system, or tenancy, and is willing to accept a slightly lower discount than that offered by Standard RIs. This can be an excellent choice for businesses that anticipate changes in their workloads or the potential need to adopt newer AWS technologies.

How do regional and zonal Reserved Instances differ in terms of their application and flexibility?

Regional Reserved Instances apply to any instance of the specified family within the purchased region, offering flexibility in where the instance can be launched. However, they don’t provide capacity reservations. Zonal Reserved Instances apply to a specific Availability Zone and offer a capacity reservation, assuring that the customer can launch the instances whenever needed within that zone, which is crucial for applications that require consistent performance and availability.

What impact does the commitment term of a Reserved Instance or Savings Plan have on the discount rate?

Typically, the longer the commitment term – whether it’s 1 year or 3 years – the greater the discount rate the customer will receive. It’s because AWS can better predict and optimize their infrastructure based on longer-term commitments, allowing them to pass on the savings to the customer.

How would you manage the potential complexity that can arise from having a mix of On-Demand Instances, Reserved Instances, and Savings Plans in an AWS environment?

It requires careful monitoring and management through AWS Cost Explorer and other cost management tools. A well-architected framework should be in place to track instance utilization, cost effectiveness, and to make adjustments as necessary. Automation and alerts can also be utilized to ensure optimal use of RIs and Savings Plans. It’s essential to regularly review the overall environment and reallocate or purchase additional RIs or Savings Plans as needed.

Can AWS Savings Plans be shared across multiple accounts within an organization, and if so, how?

Yes, AWS Savings Plans can be shared with accounts within an AWS Organization. To do so, the master account in an organization must set the ‘Shared with’ setting to include all accounts within the organization. This enables cost benefits to be shared and applied across multiple accounts whenever applicable.

Explain the difference between Compute Savings Plans and EC2 Instance Savings Plans.

Compute Savings Plans provide a discount up to 66% and apply to any usage of EC2, Fargate, and Lambda regardless of region, instance family, operating system, or tenancy, as long as the usage matches the plan’s committed spend. EC2 Instance Savings Plans offer a discount up to 72% but are restricted to a specific instance family within a region, although they provide flexibility across size, OS, and tenancy.

In what scenario might an AWS customer decide to sell their Reserved Instances on the AWS Reserved Instance Marketplace?

An AWS customer may choose to sell their Reserved Instances on the AWS Reserved Instance Marketplace if they no longer need the capacity they reserved, typically due to changes in their technology stack, company reorganization, or reduced demand for their services. Selling allows them to recoup some of the costs associated with the unused Reserved Instances.

How do convertible Reserved Instances offer benefits in terms of cost management, and what limitations should customers be aware of when purchasing them?

Convertible Reserved Instances offer the benefit of cost savings similar to Standard RIs but with the added flexibility to change RI attributes throughout the term. However, customers should be aware that the discount is generally smaller compared to Standard RIs, and there might be limitations on convertibility, such as the need for the new RIs to be of equal or greater value than the original ones.

How can an organization determine whether to invest in Reserved Instances or Savings Plans when they have variable and unpredictable cloud usage?

Organizations with unpredictable usage patterns should conduct a thorough analysis of their past usage and future projections using tools like AWS Cost Explorer or engaging with AWS trusted advisors. They might opt for Savings Plans for a portion of their predictable baseline usage and complement this with On-Demand Instances for variability, or consider features like Instance Size Flexibility provided by regional RIs to account for fluctuations while still committing to some level of usage.