We often see clients paying 1.5–2 times more for AWS resources than necessary. The root cause: no usage analysis and buying Reserved Instances or Savings Plans "by eye." Over 5 years of AWS work, we have executed 50+ optimizations and know how to save 30%–60% without sacrificing performance. According to AWS documentation, Savings Plans can reduce costs up to 72% compared to on-demand.
How to Choose Between Reserved Instances and Savings Plans?
Reserved Instances (RI) commit you to a specific instance type in a region/AZ. Maximum discount with minimal flexibility. Savings Plans (SP) commit you to a certain hourly spend. They flexibly apply to EC2, Fargate, and Lambda. Lower discount, more freedom. SP offer better flexibility than RI, but if your workload is stable, RI is more cost-effective.
| Parameter | Reserved Instances | Savings Plans |
|---|---|---|
| Discount | 30–60% | 20–50% |
| Flexibility | Low (type + region) | High (any EC2, Fargate, Lambda) |
| Applicability | EC2, RDS, ElastiCache | EC2, Fargate, Lambda |
| Recommended For | Stable database servers | Flexible compute |
Why Baseline Analysis is Critical?
Buying without analysis is risky. Common mistake: purchase RI for 20 instances, then scale down to 5. Unused RI still incur charges. Correct approach:
- Collect metrics for at least 2–4 weeks using AWS Cost Explorer.
- Determine the baseline—the number of instances running 24/7.
- Cover only the baseline with RI/SP; leave the rest on-demand or Spot.
Example: for 10 constantly running m6i.xlarge instances, the baseline is 10. Savings Plans on that amount yield roughly $1,200 monthly savings.
def calculate_savings_plan_commitment( instance_hours_per_day: dict, on_demand_rates: dict, savings_plan_discount: float = 0.32 ) -> float: total_on_demand_per_hour = sum( hours / 24 * on_demand_rates[instance_type] for instance_type, hours in instance_hours_per_day.items() ) return total_on_demand_per_hour * 0.80 * (1 - savings_plan_discount) Which Payment Type to Choose for Reserved Instances?
Payment type affects discount and cash flow:
| Payment Type | Upfront | Monthly Payment | Discount |
|---|---|---|---|
| No Upfront | 0% | Yes | ~20–30% |
| Partial Upfront | Partial | Yes | ~30–45% |
| All Upfront | 100% | No | ~40–60% |
Term: 1 or 3 years. Three-year terms offer significantly higher discounts but require confidence in long-term architecture.
Compute Savings Plans: Practical Example
Baseline: 10 m6i.xlarge instances in us-east-1 running constantly. On-demand price: $0.384/hour. Commitment via Compute Savings Plans: ~$0.261/hour, which is 32% less than on-demand. The actual discount ranges from 20% to 50% depending on commitment level.
RDS Reserved Instances
For databases, RI are especially beneficial—databases run 24/7, so paying on-demand makes no sense. RDS Multi-AZ with a 1-year RI yields a 30–40% discount; ElastiCache Reserved Nodes give 30–50%. Important: RDS RI do not transfer between instance families.
Marketplace for Unused RI
If your infrastructure changes and you have unused RI, sell them on the AWS Marketplace for Reserved Instances. The selling price is usually lower than on-demand but helps recover part of the cost.
Regular Review
Quarterly:
- Check utilization of purchased RI/SP (target > 90%).
- Assess architectural changes expected in the next 12 months.
- Decide on renewal or modification of commitments.
What's Included in the Work
- Usage audit: collect metrics for 4 weeks, identify baseline.
- Recommendations: choose RI/SP type, optimal combination, and term.
- Implementation: purchase via console or API, configure options.
- Monitoring: track utilization, set alerts for drops below 90%.
- Savings report: transparent with calculations.
How We Do It
Our process includes: analysis of current usage (4 weeks of metrics), baseline determination, selection of optimal RI/SP type, purchase, and effectiveness monitoring. We guarantee savings start from the first month. To reduce your AWS costs, contact us—we will conduct a free preliminary analysis.
Timelines
- Usage analysis: 1–2 days.
- Recommendation preparation: 1 day.
- RI/SP purchase (after approval): 1–2 hours.
- Discount application verification: 1–3 days.
Order a cloud cost audit: we guarantee savings start from the first month. Over 5 years of AWS experience, 50+ cost optimization projects. Get a consultation: our team will analyze your account and propose concrete steps.