If you have been using Amazon Web Services (AWS) for a while, you are probably familiar with AWS reserved pricing. The concept is well-liked because of EC2-reserved instances. However, it applies to other AWS services as well. This guide walks you through some fantastic tips to save money using EC2. In addition, there are a bunch of other attractive ways that allow you to save significantly on reserved capacity purchases in AWS. What’s more, you will find some live examples and calculations and a series of steps to follow to save some bucks in EC2. Read on!
Hack 1: Pay for EC2 Using Your Amazon Credit Card
If you are a frequent shopper on Amazon, you probably have heard about Amazon credit cards. This giant online retailer offers different types of credit cards, including Amazon Prime Rewards, Amazon Rewards Visa Signature, Amazon Store Card, and Amazon Prime Store Card. If you have an Amazon Prime Rewards Visa card, you are eligible for 5% cashback for all purchases made through Amazon.com.
In addition, this card entitles you to 2% cashback at restaurants, drug stores, and gas stations and 1% cashback on other purchases. For Prime members, the card doesn’t involve any annual fee. Moreover, it features a welcome bonus – leveraging this, you can earn a $200 Amazon gift card upon approval. The card also allows you to transfer your balance. The APR varies from 18.49-26.49%.
Offered through Chase, this credit card allows you to save a sizable amount on your EC2 purchases. If you don’t have a Prime membership, you can consider Amazon Rewards Visa Signature card. It also allows you to save significantly for every purchase made through Amazon, including EC2 hosting. You can expect to enjoy a generous 3% cashback.
In addition, you can enjoy benefits like zero foreign transaction fees, specific travel benefits, and 2% cashback at restaurants, gas stations, and drug stores.
Besides the two mentioned above, you can also check the Amazon Store and Prime Store Cards to enjoy lucrative savings on your purchases from Amazon.
Hack 2: Leverage Reserved Pricing
To amplify the benefits and price-saving opportunities offered by Amazon credit cards, you can leverage AWS reserved pricing. However, before you go ahead and follow the trick, let’s take you through a detailed technical analysis of the concept so that you can make the most out of your purchase.
What Does AWS Reserved Pricing Refer To?
Reserved pricing is a simple strategy. If you agree to a one-year or three-year commitment for a specific AWS resource type, you can save up to 75% more than the default pricing alternative. While it’s a fantastic saving vehicle, there are a number of considerations associated.
The reserved pricing concept is available with AWS services like RedShift, EMR, RDS, etc. Though there are no official statistics from AWS about EC2, several reports state that EC2 is the highest-spent area of AWS. Thus, if you can cut the EC2 costs, you are expected to reduce your holistic AWS bill.
Understanding the Payment Alternatives and Terms
With reserved pricing, you can buy compute capacity in one-year or three-year terms. The payment options you can expect to come across include the following –
- All upfront: A lump sum payment for the entire one or three-year period.
- Partial: A partial payment for one or three years and then switching to monthly payments.
- No upfront: Zero upfront payment with regular monthly charges for one or three years.
The more upfront payment you make, the greater savings you bag. The following chart may help you understand the difference better.
Note that you are less likely to experience a huge difference between the three alternatives. However, the amount may depend on the cost of the service, which, in turn, may raise the percentage of difference. Ideally, before making any substantial payment, you should compare it thoroughly with the no-upfront alternative.
In some cases, the ‘no upfront option’ may enable you to save an equal amount of money as the upfront alternative. As an added benefit, you won’t have to make a big hole in your pocket when the reserved period starts.
Identifying the Scope
Before you proceed with a reserved alternative, it’s crucial to figure out the scope of the reservations. They usually include the following alternatives.
- Availability zone: Here, you can access a specific discount applied to different instances under one specific availability zone. Here you can expect a guaranteed EC2 capacity, but you won’t have the flexibility to update the instance size.
- Regional: This alternative allows you to access discounts on any EC2 instance of an applicable instance family and operating systems under any availability zone within the AWS region. This alternative doesn’t involve any reserved capacity. Therefore, it will prioritize other buyers who have paid for reserved capacity in case of hardware shortages.
The following example will help you understand both cases or scopes better:
Suppose you have decided to buy an m5.xlarge Amazon Linux, regional scope. In this scenario, you are permitted to launch two m5.large instances using Amazon Linux.
You can achieve significant cost savings over the long term by applying the reserved discount on both instances, regardless of the availability zone. However, if you purchase a reservation with a specific availability zone scope, such as m5.xlarge in US-east-1B, it cannot be applied to other instances outside that zone. However, you may launch a new instance in the same zone if EC2 capacity is low in that region.
To simplify, choosing a regional scope that prioritizes flexibility over capacity and does not affect the cost is recommended. Unless critical capacity requirements exist, sticking to a regional scope offers more flexibility and helps reduce costs.
In AWS, you will typically encounter two offering classes, including the following.
- Standard: This less flexible alternative requires you to commit to a particular EC2 instance type. Once you are done with the commitment, you cannot change the instance family. While you can change the instance size, it’s possible only for regional reservations and Linux instances.
- Convertible: This alternative is way more flexible than the standard one. It allows you to try various families and sizes. However, the convertible offer class makes you less likely to save money.
The offering classes generally strive to help you manage risk. While the convertible alternative allows you to reduce a portion of the risk by offering flexibility, the standard one lacks this parameter. However, the standard offering class is much more affordable than the convertible. In addition, it allows you to sell reserved capacity in the reserved instance marketplace.
The price differences between the convertible and standard alternatives typically start at around 10% or higher.
Why Is It Crucial to Choose the Appropriate AWS Region?
The amount of savings for EC2 reserved instances may vary depending on the AWS region you choose. Thus, you should exercise a little caution when executing the task. When choosing the region, you may consider the following factors.
Latency: Low network latency can substantially enhance the user experience. Therefore, always choose an AWS region close to the user base location. This way, you may increase communication quality as the network packets need to travel through fewer exchange points.
Features: While every AWS region tends to have the same service level agreement, you can expect larger regions to launch newer features and services more frequently.
Compliance: If your data is bound by local regulations, you should check for regional compliance when choosing your AWS region.
Cost: AWS services feature different prices for different regions. Some regions have lower costs than others. Therefore, check thoroughly to enjoy a reduced cost for the same deployment.
You may find it complicated to evaluate all the said factors. However, it’s important for making an informed decision. Ideally, you need to allow your business priorities to influence your decision.
Does Reserved Pricing Pose Any Risk?
While the best-case scenarios with reserved pricing expose you to massive savings, there are trade-offs. The cost or benefit consideration associated with reserved pricing may include the following.
You can alter your applications’ commute capacity and instance type when you walk with the default payment alternative for your EC2 instances. If your business adapts to any changes and you don’t find your current EC2 capacity adequate, you can add more instances or cut some of them. This provisioning is, however, not available with reserved pricing.
Therefore, you should always analyze system metrics before investing in reserved instances. This will help you choose the right instance type for your workload. Furthermore, you can consider the regional scope and increase the capacity gradually.
For application owners, it’s crucial to understand how their applications relate to their business. Indeed, you will always find it lucrative to save up to 75% on your EC2 spending lucrative, but it’s important to note that a reserved purchase can make you spend thousands of dollars upfront. If you find this huge expenditure rational and value-generating because of tax or accounting reasons, go ahead!
On the other hand, if you have just started and are yet to develop solid finance, you may probably use your money on other essential areas like product development, testing, advertising, hiring, etc. As such, you should devise a perfect calculation before proceeding with the investment.
More Affordable Generations of EC2
EC2 keeps on introducing newer and better versions. However, you cannot switch to those upgraded versions if you have already committed to a one- or three-year reserved purchase. Moreover, you can miss the modified cost benefits. For example, the latest c5.large instance is 15% more affordable than its previous generation. However, those already invested in reserved purchases can’t leverage these cost benefits.
Considering this possibility, choosing a one-year reservation over a three-year reserved term is wise. Besides, if you find holding a particular reserved capacity useless, sell it out in the reserved instance marketplace. This alternative is available only with the standard offering class. Moreover, you must hold a US-based bank account to sell a reserved capacity in the reserved instance marketplace.
3 Vital Metrics to Consider When Committing to Reserved Purchases
Before you go ahead to commit a reserved purchase, it’s crucial to consider the following metrics.
The Recovery Span
This is a crucial metric to evaluate when committing to a reserved purchase. It lets you know how long you will have to wait before you enjoy seeing the savings you have grabbed by dodging the default pricing. In most cases, the span ranges from 8-12 months. However, it may vary depending on the payment alternative, your EC2 instance type, and the AWS region you have chosen.
Comparing On-Demand and Savings
You should always figure out the percentage and the amount you could save by investing in reserved purchases. You should compare the alternative with the default one to calculate the benefits.
Savings vs. Upfront Fee
The upfront payments for reserved purchases may have various degrees, including everything upfront, no upfront, or partial upfront. Before investing, you should carefully analyze which alternative will help you save the most in the long run.
Steps to Save With EC2
Now that you know the primary components and savings fundamentals of EC2, let’s help you figure out the ultimate strategy to save with EC2. All you need to do is follow the steps given below.
Step 1: Start With Relevant Data Collection
The entire saving methodology is dependent on this important pillar. Committing long-term to an EC2 instance type involves numerous variables. Therefore, you won’t be able to make the right decision without analyzing adequate data. The said data may include the following.
- System metrics: You can analyze and gather system metrics by executing detailed load tests. These tests will help you determine how your applications are expected to perform when they go live.
- Billing data: You can configure usage reports and AWS costs by scrutinizing the billing data. To execute the job, you can leverage the dedicated AWS cost explorer. Your calculation should include two primary considerations – how much you pay for EC2 every year and what EC2 instance type allows you to justify the cost.
Besides the above-mentioned metrics, you should also check the network usage, disc i-o, and throughput to ensure data relevance.
Step 2: Performance Optimization
Here, you should configure auto-scaling to compute your baseline capacity. Autoscaling allows you to configure a fleet of EC2 instances, which may increase performance and reduce costs later. Once you are done with the autoscaling, you should monitor the system and customer experience metrics to ensure that you are not under/over-utilizing the EC2 instances.
Step 3: Calculation
This is the final step in the decision-making pyramid. Once you are sure your application has the right number, size, and family of EC2 instances, you can calculate the baseline cost and determine if you are investing in the right instances. Besides, figuring out the instance size and calculating the number of instances will enable you to choose the right scope, payment alternative, offering class, and duration. This way, you can make a rational decision that helps you save significantly.
To Sum Up
To save on Amazon EC2 hosting, you must be calculative and rational. You should start with getting the system and billing data and then move forward to analyzing the gathered data. Once done, you can apply performance optimization and verify if you have chosen the right EC2 instance type and number. Finally, you can calculate the baseline instance and choose the right EC2 alternative. This way, you may enjoy saving thousands on your Amazon EC2 hosting.
Can you save money on Amazon EC2 hostings?
Amazon EC2 costs are variable, and you can enjoy saving significantly by implementing the right strategy. You can refer to AWS saving plans. Besides, you can switch to EC2 versions with updated pricing. Moreover, you can rightsize your workloads with the right instances to enjoy big savings. Finally, you can enjoy cashbacks on your purchase by paying using Amazon credit cards.
What is the downside of Amazon EC2?
EC2 comes with a default resource limit. This may vary from one AWS region to another. You can launch a specific number of instances per area. In such cases, you can miss out on hardware-level changes or upgrades, leading to poor performance.
How much does EC2 cost?
EC2 instances are available in different sizes and different pricing options. The sizes include micro, small, and medium. On the other hand, there is on-demand and reserved pricing. For detailed cost breakup, you can refer to the official website of AWS.
Will you lose data if you stop your EC2 instance?
Once you stop your EC2 instance, all information on the local hard drive will be lost. However, the data you store on your EBS volume will still be available. In fact, it will continue to persist in its availability zone.
How to schedule EC2 to save money?
AWS instance scheduler manages AWS EC2 scheduling. It usually works with the idea that you use only what you need and when you need it. The technology allows you to set a time of operation for a specific AWS EC2 instance which automatically spins up once the time expires. This helps you use EC2 in a cost-efficient manner.
Featured Image Credit: Joshua Brown; Pexels: Thank You!