The AWS Enterprise Discount Program, Savings Plan or Reserved Instances: Which Is Right for You?

Amazon Web Services (AWS) empowers businesses to harness the power of the cloud, revolutionize their processes, and secure a competitive edge, even in the most demanding landscapes. However, determining the ideal cost structure can be a complex maze for business leaders, and this challenge tends to intensify with their burgeoning cloud usage.

Maximizing your AWS cost savings starts with understanding AWS’ Enterprise Discount Program (EDP) and Savings Plan, as well as other options, such as Mission Cloud’s Reserved Instance Optimization Program.

Each of these choices offers distinct advantages, but the right answer depends on your strategic goals and how you expect those objectives to evolve. Learn more about each of these cost-saving opportunities including how and when to use each option to determine which makes the most sense for your business. 

Cost-Saving Options With AWS

Saving on AWS requires knowing how you plan to leverage the cloud and what level of commitment you can make. Here are three key ways businesses can save with AWS pricing programs:

Enterprise Discount Program

EDP is a pricing program designed for large-scale AWS customers. It offers discounts on AWS services in exchange for one- to five-year commitments to a specific dollar amount and level of growth during the period. Amazon determines a discounted rate based on the total annual commitment and growth.  

To qualify for this program, customers are required to commit to a minimum expenditure of $1 million annually on services from the AWS portfolio. An Enterprise Discount Program (EDP) entails a greater level of commitment and thus poses more risk than options such as Savings Plans or Reserved Instances (RIs). Upon agreeing to an EDP, you promise to spend a specified minimum amount on AWS services, irrespective of your actual usage. Consequently, if your actual usage falls short of this commitment during any contract year, you will have to bear the extra costs.

The Enterprise Discount Program (EDP) differs significantly from other AWS pricing strategies. Notably, EDP discounts apply broadly to most AWS expenditures, rather than being linked to particular types of spending commitments like specific instance types or compute-related discounts. The discount rates provided by EDP escalate in correlation with your commitment to higher spending levels, and they apply to almost the entire range of AWS services.

Before choosing this option, it's crucial to acknowledge the substantial upfront financial commitment required. Moreover, it necessitates having a detailed understanding of your costs and usage patterns over a long-term period, which may pose a challenge for companies with fluctuating workloads.

Savings Plans

AWS Savings Plans help customers minimize their AWS costs by committing to a steady usage level over one or three years. Customers can select from various savings plans, including Compute Savings Plans and EC2 Instance Savings Plans.

Compute Savings Plans provide the highest level of flexibility, accompanied by discounts of up to 66% compared to on-demand pricing. These discounts are applied automatically to Amazon EC2, Fargate, and Lambda usage, irrespective of the instance family, size, region, operating system or tenancy.

On the other hand, EC2 Instance Savings Plans offer discounts of up to 72%, but these apply exclusively to specific instance families within a chosen region. These discounts are applied automatically within the region, regardless of instance size, operating system, or tenancy. Compared to Reserved Instances (RIs), which offer similar savings, EC2 Instance Savings Plans have an added advantage as they permit size and operating system alterations.

In addition, AWS offers SageMaker Savings Plans, which automatically grant up to 64% off on-demand rates for eligible SageMaker instance usage without any restriction on instance family, size, component or region.

Reserved Instances

For certain services like EC2, AWS provides RIs that allow customers to reserve compute capacity on AWS for a duration of one to three years. This reservation system lets customers avail themselves of discounts up to 75% on their compute resources for the entirety of their reservation period.

RIs offer three payment schemes — All Upfront (AURI), Partial Upfront (PURI), and No Upfront (NURI). The size of the discounts increases with the amount of the upfront payment. Additionally, there are three types of EC2 RI instances — Standard, Convertible, and Scheduled.

Standard RIs, offering discounts up to 72% off on-demand prices, require a commitment to a specific instance type and size. Convertible RIs, while offering a lesser discount up to 54%, allow for flexibility in changing attributes provided the new RIs are of equal or higher value. Scheduled RIs are available during pre-booked times, enabling you to align capacity reservations with a predictable, recurring schedule.

While RIs can generate significant savings, the common challenge for businesses lies in buying enough, but not more than you need. This is where Mission Cloud steps in with its AWS Reserved Instance Optimization program. It alleviates the tracking burden from customers and implements a more proactive strategy for RI utilization.

Similar to EDPs, RIs promise potential cost savings but also entail risk. RIs require businesses to commit to specific instance types and usage volumes within a designated timeframe. The more a business pays upfront, the higher the possible savings. Although three-year agreements yield the greatest potential savings, they represent a major commitment that calls for thoughtful deliberation. Your business should be ready to commit in terms of usage, resources, and financial expenditure.

When to Use AWS EDP

AWS EDP can deliver deep discounts for businesses ready for a long-term commitment to AWS growth. However, these agreements can be complex, and companies risk overcommitting if they don’t understand their usage and spending forecasts. The preparation stage of an EDP is essential.

An EDP is best suited for organizations with a long-term cloud strategy and who need cost savings at scale. By working with an AWS Premier Tier Services partner such as Mission Cloud, you can get the most out of setting up an EDP. A trusted advisor and partner can assess use cases, determine requirements and work with AWS to find the optimal pricing.  

If your workload is unoptimized or unpredictable, however, or you’re just starting with AWS and figuring out your resource requirements, you’ll probably want to start with Savings Plans or Reserved Instances.  

When to Use AWS Savings Plans

AWS Savings Plans are well-suited for businesses with stable and predictable usage patterns, as the commitment involved can lead to substantial cost savings. By default, AWS employs an on-demand pricing model where businesses only pay for the services they actually use. This flexible structure is beneficial for organizations compared to buying servers. To those businesses that find predicting their usage challenging, however, it doesn't provide the same level of savings as some other pricing options.

Businesses that know what amount of usage is guaranteed often find Savings Plans to be an optimal choice. Under these plans, discounts are applied to usage until the committed level is reached. Once this commitment level is fulfilled, any additional usage incurs charges at the regular on-demand rate.

When to Use Reserved Instance Optimization

Mission Cloud’s Reserved Instance Optimization (RIO) de-risks RIs with your specific workload needs automatically. This optimization strategy ensures your RIs are used effectively, eliminating the hassle of daily management and the financial risks to your business.

Consider the case of Storyblocks, a platform offering stock images, videos, and audio. The company aimed to decrease the cost of its AWS infrastructure without overtaxing its internal IT resources. Storyblocks engaged Mission Cloud and used their Mission Cloud Foundation and RIO services to achieve this. Through this collaboration, Storyblocks received the services of a dedicated FinOps cloud analyst to pinpoint areas for cost reduction and capital for purchasing AWS RIs.

As a result of this arrangement, the Storyblocks engineering team could concentrate on improving customer-oriented applications and delivering value at the product and infrastructure levels to their subscribers. Meanwhile, with Mission Cloud's assistance, the company achieved over $46,000 in monthly savings, despite a significant surge in usage.

How to Make the Right Choice for Your Business

While an Enterprise Discount Program (EDP) may be the most beneficial for certain businesses, it should not be chosen as the default option without proper analysis. Evaluate your historical usage patterns and anticipate your future needs. Ask yourself whether you're ready to commit to a set increase in your total spending.

Once you understand your business's cloud spending and usage patterns, it would be wise to explore other options, such as RIs and Savings Plans, instead of continuing with solely on-demand prices.

As your expenditure grows and you accumulate more data on your business usage, you'll be able to anticipate costs more accurately and be proactive about savings. At this stage, consider harnessing RIs further, which generally offer a higher savings rate than Savings Plans.

While longer-term commitments yield more savings with RIs, it doesn't necessarily imply that a three-year RI is the most reasonable choice for your business. Evaluate your business needs comprehensively and consider all the variables and possible outcomes before making these decisions.

This process involves making an informed decision on how to strike a balance between risk and reward. The more commitment your business can offer, the more savings you can accrue. However, these savings are only achievable if the risks are managed wisely.

Mission Cloud's RIO program allows your business to delegate this risk. By handing the responsibility to Mission Cloud, you can avoid making critical judgments and fretting over potential over-commitments or insufficient savings. We aid businesses in achieving higher levels of optimization. 

We assist companies like yours in maximizing savings, minimizing risk, and refocusing on core business operations. With the Mission Cloud RIO program, existing AWS customers with RIs and Savings Plans have observed a 210% average increase in optimization and a 7% to 24% cost reduction in their overall monthly AWS bill.

When managed prudently, many customers find the savings from the RIO program to be as substantial, if not more, than those from an EDP, without the same commitment level.

Discover Your Ideal AWS Partner

Reserved Instances and Savings Plans offer the flexibility to adjust your AWS spending incrementally, whereas an Enterprise Discount Program (EDP) demands a substantial commitment across your entire AWS portfolio.

Identifying the optimal choice requires businesses to understand their operational landscape and expectations thoroughly. This process can be particularly daunting for companies needing more AWS experience, as any missteps could lead to significant repercussions.

Seeking an AWS cost assessment from a well-versed and seasoned AWS Premier Tier Services Partner, like Mission Cloud, can help demystify your current situation and unlock potential AWS cost savings. Our proven professional services and deep-seated expertise give you the confidence to make well-informed decisions, maximizing your cloud infrastructure savings without compromising on quality or service delivery.

With a robust track record of assisting world-leading companies in deriving enhanced value from AWS, Mission Cloud is a testament to successful cost-optimization strategies. Discover how COMPLY saved $460,000 by collaborating with Mission Cloud and adopting our cost-optimization strategies.

Take the guesswork out of AWS cost optimization. Join forces with Mission Cloud, your premier AWS partner. Make smarter decisions, maximize savings, and unlock the full potential of your cloud infrastructure. 

FAQ

1. Given the requirement of a substantial financial commitment, how do companies assess their future AWS usage accurately enough to commit to an EDP?

Companies can assess their future AWS usage for EDP commitments by conducting thorough analyses of historical usage patterns, forecasting future demand based on growth plans, and considering the flexibility of EDP terms. Engaging with AWS or consulting partners for guidance on optimizing usage and costs can also provide valuable insights, helping to make a more informed financial commitment.

1. What specific use cases or scenarios make EC2 Instance Savings Plans more advantageous over Compute Savings Plans, despite the former's narrower scope of application?

EC2 Instance Savings Plans are particularly advantageous in scenarios with a steady usage state for specific EC2 instance families or sizes. They offer a higher discount rate for these instances than Compute Savings Plans, making them ideal for applications with predictable performance requirements.

1. For businesses with highly variable cloud computing needs, what are the best practices for balancing between Reserved Instances and on-demand services to maximize cost efficiency without overcommitting?
2. Businesses with variable cloud computing needs should adopt a strategy that combines Reserved Instances for baseline usage and on-demand services for peak loads. This approach ensures cost efficiency by securing lower rates for consistent workloads while maintaining the flexibility to scale up resources as required without significant financial risk.