Choosing between Standard or Convertible Reserved Instances and Savings Plans

In AWS, the pay-as-you-go On-Demand pricing model offers flexibility, allowing you to scale up or down without long-term commitments. However, this convenience comes at a higher cost, making it less ideal for predictable, long-running workloads. To address this, AWS provides commitment-based pricing options such as Reserved Instances (RIs) and Savings Plans, which offer significant discounts—up to 72%—in exchange for committing to a specific usage pattern over a one- or three-year term.

The primary difference lies in the trade-off between cost and flexibility: On-Demand resources provide the freedom to run any instance type or service without prior commitments, while Reserved Instances and Savings Plans lock you into specific usage parameters to achieve lower costs. These options allow organizations to optimize their cloud spending based on workload stability, predictability, and operational flexibility. Choosing the right commitment option can significantly reduce operational expenses, especially for businesses with consistent compute requirements.

The different types of long term commitments

When considering optimizing costs on Amazon Web Services (AWS), it’s essential to understand the available commitment options: Standard Reserved Instances (RIs), Convertible Reserved Instances, and Savings Plans. Each offers unique benefits and trade-offs.

Standard Reserved Instances (RIs)

Standard RIs provide significant discounts—up to 72%—compared to On-Demand pricing. These reservations are specific to an instance type, operating system, and tenancy within a particular region. While they offer capacity reservations when assigned to a specific Availability Zone, they lack flexibility; modifications are limited, and they cannot be exchanged.

Convertible Reserved Instances

Convertible RIs offer flexibility to exchange the reservation for another instance type, operating system, or tenancy during the term, accommodating changing workload requirements. However, the discounts are slightly lower than Standard RIs, with savings up to 66%.

Savings Plans

Introduced as a more flexible alternative, Savings Plans provide cost reductions in exchange for a commitment to a consistent amount of compute usage (measured in $/hour) over a one- or three-year term. There are two primary types:

• Compute Savings Plans: Offer the most flexibility, automatically applying to EC2 instance usage regardless of instance family, size, region, operating system, or tenancy, as well as to AWS Fargate and AWS Lambda usage. They provide savings up to 66%.
• EC2 Instance Savings Plans: Provide higher savings—up to 72%—but require commitment to a specific instance family within a region. They allow changes in instance size, operating system, and tenancy within the chosen family and region.

Pros and Cons

Let’s dig deeper into when each commitment would make more sense by looking at the pros & cons of each.

Standard Reserved Instances

Pros

• Highest potential savings

Standard RIs offer discounts of up to 72% compared to On-Demand pricing, making them ideal for steady-state workloads. For example, a business running web applications on a t2.micro instance in a single Availability Zone for 24/7 operations can achieve substantial savings over a three-year term.

• Capacity reservation in specific Availability Zones

Assigning a Standard RI to an Availability Zone ensures capacity is reserved for your instance type. This is particularly beneficial for applications requiring guaranteed compute capacity during peak traffic, such as e-commerce sites during holiday sales.

Cons

• Limited flexibility

Once purchased, Standard RIs are tied to specific attributes such as instance type, region, and operating system. For example, if you purchase an m5.large instance in one region but later need an m5.xlarge in a different region, you cannot modify or exchange the RI.

• Applies only to specific configurations

Organizations with rapidly changing workloads may find it challenging to align their needs with the rigid nature of Standard RIs.

Convertible Reserved Instances

Pros

• Flexibility to change instance attributes

Convertible RIs allow you to exchange an RI for another that better suits your evolving needs. For example, if you initially commit to an m5.large instance and later require a c6g.medium instance for a new project, you can make the switch during the RI term. This is particularly helpful for organizations scaling their workloads or experimenting with new architectures.

• Capacity reservation in specific Availability Zones:

Like Standard RIs, Convertible RIs offer capacity reservations, ensuring availability for high-priority applications.

Cons

• Lower savings compared to Standard RIs

Convertible RIs offer up to 66% savings, which is less than the 72% potential savings of Standard RIs. For example, this difference might be significant if you’re running hundreds of instances over a long period.

• Complex management due to manual exchanges

While Convertible RIs are flexible, exchanges must be initiated and managed manually through the AWS Management Console or API. This can be time-consuming, especially for teams without robust AWS expertise.

Compute Savings Plans

Pros

• Highest flexibility across services, regions, and instance types

Compute Savings Plans apply to EC2, AWS Fargate, and AWS Lambda. For example, if you migrate workloads from EC2 to Fargate containers or expand to new regions, your savings still apply without modification.

• Automatic application of savings

Savings are applied automatically to eligible compute usage, eliminating the need to monitor or adjust plans manually. For instance, a development team running diverse workloads across multiple regions can reduce costs without tracking instance types.

Cons

• No capacity reservation

Compute Savings Plans do not guarantee capacity, which might be problematic for applications requiring reserved resources, such as critical APIs during peak demand. Organizations must use On-Demand Capacity Reservations to ensure availability.

• Slightly lower savings than Standard RIs

Compute Savings Plans provide up to 66% savings, which may be less attractive for organizations with predictable, long-term workloads requiring maximum cost reduction.

EC2 Instance Savings Plans

Pros

• High savings with some flexibility

EC2 Instance Savings Plans allow switching between different instance sizes within the same family and region. For example, if you commit to the m5 family, you can switch from m5.large to m5.xlarge as your workload grows, providing both cost efficiency and adaptability.

• Simpler management compared to RIs

Unlike RIs, Savings Plans do not require manual exchanges or modifications. The plan dynamically applies to usage within its scope, reducing administrative overhead.

Cons

• Tied to a specific instance family and region

While flexible within a family (e.g., m5), EC2 Instance Savings Plans do not allow switching between families (e.g., m5 to c6g). This can be limiting if your application architecture changes significantly during the commitment period.

• No capacity reservation

Like Compute Savings Plans, these plans do not include capacity reservation. Businesses with mission-critical applications, such as real-time analytics platforms, must pair them with On-Demand Capacity Reservations to ensure reliability.

In conclusion, choosing between Standard RIs, Convertible RIs, and Savings Plans requires careful consideration of your organization's specific needs, workload patterns, and flexibility requirements. Standard RIs offer the highest potential savings for stable, predictable workloads. Convertible RIs provide a balance between savings and flexibility. Compute Savings Plans deliver the most versatility across AWS services, while EC2 Instance Savings Plans combine good savings with moderate flexibility within instance families. The key is to analyze your usage patterns, future growth plans, and operational requirements to select the commitment option that best aligns with your business objectives and cost optimization strategy.

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