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A Guide to AWS Compute Savings Plan for Strategic Cloud Spending

Originally Published December, 2023 · Last Updated January, 2024
A Guide to AWS Compute Savings Plan for Strategic Cloud Spending

As an Amazon Web Services (AWS) customer, you’re always looking for ways to optimize your cloud spending and get the most out of your budget. 

One effective solution for reducing AWS costs is to use Compute Savings Plans. 

These flexible pricing models offer savings of up to 66% by committing to a fixed hourly spend for one or three years. 

In this article, you’ll learn more about Compute Savings Plans and how ProsperOps can help you optimize your cloud cost strategy. 

Understanding AWS compute savings plans

AWS designed its Compute Savings Plans as a flexible pricing model that helps you save on your AWS compute costs. They introduced these plans in 2019 as a response to customers seeking more flexible discount options, and many users consider them an “easy button” for effortless savings.

With these plans, you make a commitment to a specific, consistent hourly amount (in $/hour) for either a 1-year or 3-year term. In return, compared to on-demand pricing, you enjoy discounts on Amazon EC2, AWS Lambda, and AWS Fargate use. 

Compute Savings Plans pricing differs significantly from other AWS savings options, such as Reserved Instances (RIs). 

Both options provide savings over on-demand prices. But Compute Savings Plans offer greater flexibility—they automatically reduce your bills on compute usage across any AWS region and adapt to changes in your usage patterns. 

This way, you can continue saving on your bills without constantly performing exchanges or modifications, which often come with Reserved Instances.

The financial benefits of an AWS Compute Savings Plan

In this section, we’ll talk about the four main benefits of Compute Savings Plans:

  1. Matching usage
  2. Increased operational agility
  3. Flexibility in payment options
  4. Customization to usage patterns

Matching usage

By understanding your usage patterns, you can select a Compute Savings Plan that offers the most savings and flexibility. Here are some key steps for optimizing your usage:

  1. Monitor your compute instance usage regularly to identify fluctuations and trends.
  2. Consolidate similar workloads in the same compute instances to minimize idle time and maximize resource use.
  3. Use automation and auto-scaling features to better align resources with demand.
  4. Right-size instances based on your specific workload requirements, which may change over time.

You can also optimize your usage patterns for extra savings with the help of tools like ProsperOps

ProsperOps is an autonomous cost optimization service that uses machine learning algorithms to analyze your usage and recommend cost-effective solutions. It can help you purchase and manage your Compute Savings Plan more efficiently.

Increased operational agility

Traditional models, like Reserved Instances, provide some level of cost efficiency.

But Compute Savings Plans offer a more flexible approach, giving you discounts on AWS while maintaining your operational agility.

Savings Plans provide both flexibility and significant cost savings. You can apply these plans across multiple compute services instead of being tied to specific instances or services. 

The table below gives a brief comparison between Savings Plans and Reserved Instances:

Savings PlansReserved Instances
Flexible usage across AWS servicesTied to specific instances or services
Discounts applied to the hourly compute usagePurchased per instance
Make changes anytimeLimited capacity to change after purchase

Again, ProsperOps can help you with improving operational agility. 

By using ProsperOps tools, you ensure your commitment strategy can pivot as operational demands change. So you’ll be able to maintain your agility while benefiting from Savings Plans’ discounts.

Flexibility in payment options

You have three main payment options when it comes to Compute Savings Plans. These are:

  1. No upfront: You won’t have to pay anything upfront. And your savings plan commitment will be charged purely on a month-by-month basis. 
  2. Partial upfront: Offers lower prices on Savings Plans, where AWS will charge you at least half of your commitment upfront and then will charge the remaining balance monthly. 
  3. All upfront: You’ll get the lowest prices, and AWS will charge the entire commitment in one full payment. 

As you can see, different options offer different levels of discounts, commitment terms, and flexibility. 

Customization to usage patterns

Every organization has different compute capacities and demands. Because of this, designing a customized plan can help optimize cost savings. By selecting the right savings plan, you’ll align spending with your actual needs and ensure you get the best value for your budget.

ProsperOps helps you identify the most cost-efficient options for your business. Our platform also ensures your carefully crafted savings plan aligns with your resource needs. 

The result? 

You get the most bang for your buck and avoid wasted expenditure on underused services.

The potential downsides of an AWS compute savings plan

When considering an AWS Compute Savings Plan, it’s important to weigh the pros and cons before making an investment. While these plans offer significant cost savings in some cases, there are potential downsides to be aware of. 

These include:

  • Commitment requirement
  • Complexity of choices
  • Opportunity costs
  • Risk of over- or under-provisioning
  • Administrative overhead
  • Opportunity costs

Commitment requirement

When considering a Compute Savings Plan, you need to understand the commitment requirement involved. Remember, while such savings may sound appealing, you need to evaluate whether the long-term commitment aligns with your business’s growth and demand forecast.

One potential risk of committing to a Savings Plan is changes in your organization’s compute needs. 

For example, suppose your company experiences fast growth or large shifts in technology requirements. In that case, you might find yourself locked into a plan that doesn’t fully support your evolving needs. On the other hand, if your demand for compute resources decreases, you may end up paying for unused services.

That’s where ProsperOps can step in to lend a helping hand.

By using ProsperOps to examine your business’s forecasted growth and demand, you can determine whether a Savings Plan is the right fit for you.

Complexity of choices

When it comes to choosing between Savings Plan options, you might find yourself in a maze of complexity and confusion. Multiple factors need to be considered, such as commitment period, discount savings plan rates, and flexibility in resource use.

AWS provides two types of Savings Plans – Compute Savings Plans and EC2 Instance Savings Plans. Each plan has its own set of advantages and trade-offs based on the level of flexibility and potential savings offered. 

Balancing these factors can be quite challenging! But solutions like ProsperOps come in handy to help you navigate this complex landscape. 

ProsperOps specializes in helping you make data-driven decisions by analyzing your specific usage patterns and automatically adjusting your discount instruments so you only pay for what you need. Our platform will maintain the SP amount you specify, and the remainder of coverage will be provided by the flexible Convertible RI layer.

This frees you to focus on other critical aspects of your cloud infrastructure without worrying about optimizing costs. 

Risk of over- or under-provisioning

Right-sizing your commitment is crucial for Savings Plans. Over-provisioning may result in spending more than necessary, while under-provisioning could lead to unexpected costs. 

By using ProsperOps, you can better evaluate your compute usage and make smart decisions about where and when to commit.

Let’s take a look at some features:

  • Usage analysis: ProsperOps examines your historical usage patterns to identify trends and variances. With this information, you can better anticipate your future compute needs.
  • Appropriate commitments: Based on your usage analysis, ProsperOps applies the appropriate commitment levels for your Savings Plans.
  • Proactive monitoring: To make sure you stay on track, ProsperOps continuously monitors your compute usage and proactively alerts you if there’s a significant deviation from projections.

Choosing the right commitment level for your Savings Plans will ensure your organization optimally uses its resources while minimizing expenses.

Administrative overhead

An important aspect to consider when implementing a Compute Savings Plan is the administrative overhead. Managing and monitoring Savings Plan use can be a lot of effort. 

To keep track of your savings and ensure cost efficiency, you may need to spend time analyzing reports and fine-tuning your commitments.

While you can gain significant cost savings with a Savings Plan, it can be challenging to strike the right balance between commitment and flexibility. 

The primary task is making sure you use your Savings Plan effectively. But, constantly monitoring and adjusting your plan can be time-consuming, and it can distract you from your primary business objectives.

Here’s the good news—ProsperOps can help you reduce this burden through automation and optimization services. By leveraging ProsperOps’ expertise, you can minimize the time and effort required to optimize your Compute Savings Plan.

When you reduce manual intervention, you can focus on what truly matters—your business and its growth.

Opportunity costs

When you commit to a Compute Savings Plan, be aware of the opportunity costs that come with it. 

One of the potential downsides to using these plans is the possible loss of financial flexibility. 

Since you commit to a specific hourly rate, your capital may get tied up in the plan, even if your usage decreases below the commitment level. So, you might not have the funds available to allocate to other projects or resources that could potentially provide better returns or higher priority.

But there are proactive approaches to managing your finances, like the ones offered by ProsperOps. Our platform ensures AWS is optimally allocating your funds, lowering the risk of being stuck with unused resources. 

How ProsperOps can help maximize your AWS compute savings plan value

By using AI and automation, ProsperOps helps you achieve substantial savings on cloud compute services like EC2, Fargate, and Lambda, which can significantly impact your AWS budget.

With ProsperOps, you can automate cost optimization and keep track of your commitment levels without hassle.

Because Savings Plans apply where they provide the best discount, they’ll always apply to EC2 first and Lambda and Fargate last. This leaves costs for these services at On-Demand rates.

However, with ProsperOps’ ability to cover almost all EC2 with the flexible Convertible RI layer, Savings Plans are effectively displaced away from EC2, toward Lambda and Fargate.  

This is because AWS applies RI discounts before Savings Plan discounts. Through this methodology, customers get great coverage on all compute services—not just EC2.

You can also rely on ProsperOps’ expert support to guide you through the process. The ProsperOps team is adept at handling expert support requests, addressing concerns specific to your cloud infrastructure, and ensuring you receive the maximum value from your AWS Compute Savings Plans. 

Lead the charge toward AWS savings with ProsperOps today

Making the right choice for your Savings Plan might seem daunting, but with the help of a platform like ProsperOps and a comprehensive understanding of your usage types and patterns, you’ll be on the right path to huge savings.

Before you purchase Savings Plans, be sure to learn more about AWS Savings Plans recommendations. Become familiar with the two types: Compute Savings Plans and EC2 Savings Plans. Then, continuously monitor your usage reports and adjust your cloud cost management strategy to ensure maximum value.

Don’t miss the opportunity to boost your cloud ROI and reduce spending with the help of ProsperOps. Request a demo today to get started on your path toward AWS cost optimization.

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