Your Guide to Understanding the Different AWS Pricing Options

Amazon Web Services (AWS) offers businesses the ultimate set of effective cloud solutions to help them grow their business and reach their goals faster and more efficiently. So, migrating to AWS is often the right choice for any business. However, after migration, you need to pay attention to the price of using AWS services. AWS offers you various pricing options so you can adjust them to fit your financial needs. To successfully take full advantage of their services you need to understand the different AWS pricing options.

In this post, we’ll break down the different AWS pricing plans and their principles, as well as give some tips for cost optimization so you can make the most of your AWS cloud environment.

AWS Pricing Principles

Pay-as-You-Go

This is what most think of when we talk about the cloud. This provides you with complete flexibility over how many machines you run and for how long. You don’t need to buy any physical infrastructure or worry about over or under-provisioning servers. However, this can easily incur high costs if you’re not paying attention.

Use More, Pay Less

Some Amazon services are tiered based on your usage. So basically, the more you use, the less you pay. This principle is great for any business looking to grow, as you will find yourself in some cases paying less as you scale.

Save When You Reserve

Amazon provides you with significant discounts if you reserve some services in advance. These discounts can range between 30% to 72% in some cases. However, this means that you’re committed for however long you paid, regardless of whether or not you end up using all of the reserved capacity. So, you need to be sure of your usage for at least a year before you commit.

AWS Pricing Plans

On-Demand

This offers to let you spin up instances without paying in advance, as you pay by the hour or by the second. So, the longer you use the instance, the more you’ll pay.

Advantages

• • The most flexible option
  • No upfront payments are required
  • Great for scalability

Disadvantages

• • The most expensive option
  • Bills can get out of control

When to Use?

This option is most ideal for unpredictable workloads and for new users testing the environment before they migrate.

Spot Instances

These are unused EC2 instances that you can use for your workloads for up to 90% off cost savings. They offer the biggest discounts especially if you’re looking to scale quickly. However, spot instances can be terminated at any moment whenever AWS needs them. You get a two-minute warning before terminating the instance, so it’s best with workloads that can afford interruptions.

Advantages

• • The most possible savings
  • Perfect for scaling quickly and getting spare capacity

Disadvantages

• • Can be terminated at any minute with only a two-minute warning beforehand
  • Not applicable to all instances

When to Use?

It’s best to use with workloads that can afford interruptions, as AWS has a Hybernate option that starts your instance again once the spare capacity is available again.

Reserved Instances (RIs)

This option offers you significant discounts in exchange for committing to AWS for a one-to-three-year period. There are three ways to pay for these instances, no upfront, partial upfront, or all upfront. Naturally, the more you pay upfront the larger your discount will be.

Advantages

• • Easy to set up and maintain
  • Cost savings up to 75%

Disadvantages

• • You pay for the reserved capacity, regardless of whether or not you use all of it
  • The more RIs you have, the more complicated the management will be

When to Use?

They are ideal for predictable workloads, especially if you are sure of your capacity usage for the next year or three years.

Savings Plan

This option is fairly new compared to the rest as they were announced in 2019 as a simpler way to work on AWS. Here you commit to a certain compute usage measured in $ per hour for a 1 or 3-year term. And the discounts are applied to all usage up to that point, any more is on-demand.

Advantages

• • Up to 66% cost savings
  • They remove most of the effort that goes into managing RIs
  • Great option for flexibility, simplicity, and price

Disadvantages

• • Relatively new and has a somewhat limited usage compared to the rest
  • You still pay a fixed cost, regardless of whether or not you use all your capacity

When to Use?

This is also ideal for somewhat predictable workloads where usage peaks occasionally but not always.

Dedicated Hosts

This is when you rent physical servers from AWS. Typically, more than one company will share a single host in AWS. However, if you only want your business to make use of several servers, then you can use this option.

Advantages

• • Highly secure and reliable
  • No administrative tasks on your part, as AWS is still responsible for cleaning and maintaining the hardware

Disadvantages

• • The most expensive option

When to Use?

If you have the budget for it and security and reliability are your top priority, then this option is ideal for you.

Conclusion

In your environment, not all workloads are going to require the same compute capacity so it’s important to know all your pricing options and understand them on AWS. Picking the right option and making you of all of AWS pricing options is essential to save costs, as we’ve mentioned above. Aside from that, here are our top tips for cost savings:

1. 1. Terminate Any Unused Instances: Pay attention to what instances are currently running in your environment. Are you actively using them or not? If you’re not using them, then terminate them immediately to avoid racking up unnecessary costs.
   2. Right Size Your AWS Services: Analyze your resources, see if you are using servers with the CPU, memory, storage, and networking needed. You might find that you’re paying for more than what you need. In that case, don’t be afraid to scale down, you can always scale up again when your business grows.
   3. Use CloudWatch and AutoScaling: Make use of CloudWatch to monitor your usage. Then use this information to use AutoScaling to automate scaling up or down instances to your business needs.

AWS is a flexible cloud provider, and you can see its flexibility in the various AWS pricing options available to you. Whether you’re a small business or a large enterprise, you can adjust your spending to fit your needs. And remember that it’s okay to start small in AWS to test the waters first. You can always grow later. And if you’re not sure where to start with AWS, then look for an AWS partner to help you. Partners have the experience and knowledge needed to help you better navigate AWS.

FORTE CLOUD is an advanced AWS partner with SAP competency and our team is always here to help you regardless of where you are in your journey.