TEXAS A&M UNIVERSITY
Choosing Your AWS Pricing Model
Audience: AWS users, FinOps practitioners, and Cloud Operations teams.
Purpose: Guide for selecting the most suitable AWS pricing model to optimize costs.
Overview
Choosing the right AWS pricing model is crucial for optimizing costs and maximizing the value of cloud investments. This guide helps you evaluate workload characteristics and select the appropriate pricing option.
AWS Pricing Models
| Model | Commitment | Best For | Savings |
|---|---|---|---|
| On-Demand | None | Variable, unpredictable workloads | Baseline |
| Reserved Instances | 1 or 3 years | Steady-state, predictable workloads | Up to 72% |
| Spot Instances | None | Fault-tolerant, flexible workloads | Up to 90% |
| Savings Plans | 1 or 3 years | Consistent usage across services | Up to 72% |
Decision Framework
Step 1: Evaluate Workload Characteristics
Assess your workload requirements:
| Factor | Questions to Consider |
|---|---|
| Compute | What are CPU and memory utilization patterns? |
| Storage | What are capacity and I/O requirements? |
| Network | Is the workload latency-sensitive? |
| Availability | Can the workload tolerate interruptions? |
Step 2: Analyze Usage Patterns
Identify Your Pattern
Review historical data to identify:
- Seasonal fluctuations in demand
- Peak usage hours or days
- Baseline usage that remains constant
- Variable spikes that occur unpredictably
Use AWS Cost Explorer or Cloudability to visualize these patterns over time.
Step 3: Match Pattern to Pricing Model
Pricing Model Details
On-Demand Instances
How it works: Pay by the hour or second with no upfront commitment.
Best for:
- Development and testing environments
- Unpredictable workloads
- Short-term projects
- First-time AWS users learning patterns
Considerations:
- Highest per-unit cost
- Maximum flexibility
- No commitment required
Reserved Instances (RIs)
How it works: Commit to 1 or 3 years for significant discounts.
Best for:
- Production workloads with steady usage
- Databases and baseline compute
- Known capacity requirements
Options:
| Payment Type | Discount | Flexibility |
|---|---|---|
| All Upfront | Highest (up to 72%) | Lowest |
| Partial Upfront | Medium | Medium |
| No Upfront | Lowest | Highest |
Considerations:
- Locked to specific instance type/family
- Regional or zonal commitment
- Can sell unused RIs on Marketplace
Spot Instances
How it works: Bid on unused EC2 capacity at steep discounts.
Best for:
- Batch processing jobs
- CI/CD pipelines
- Big data analytics
- Containerized workloads
- Workloads that can checkpoint and resume
Considerations:
- Can be interrupted with 2-minute notice
- Prices fluctuate based on demand
- Use Spot Fleet for automatic capacity management
Savings Plans
How it works: Commit to a consistent $/hour spend for 1 or 3 years.
Best for:
- Organizations wanting RI-like savings with flexibility
- Workloads that may change instance types
- Multi-service commitments (EC2, Lambda, Fargate)
Types:
| Plan Type | Flexibility | Discount |
|---|---|---|
| Compute Savings Plans | Any instance family, size, OS, tenancy, region | Up to 66% |
| EC2 Instance Savings Plans | Specific instance family and region | Up to 72% |
Cost Estimation Tools
Use these tools to model costs under different pricing options:
| Tool | Purpose | Link |
|---|---|---|
| AWS Pricing Calculator | Estimate costs for new workloads | calculator.aws |
| AWS Cost Explorer | Analyze historical usage and get RI/SP recommendations | Console |
| Cloudability | Advanced FinOps analytics and recommendations | Internal tool |
Example Scenarios
Scenario 1: Predictable Production Workload
Situation: A department runs 10 m5.large instances 24/7 for a production application.
Recommendation: Purchase 3-year Compute Savings Plans with partial upfront payment for ~60% savings.
Scenario 2: Variable Development Environment
Situation: Developers need instances during business hours only, with varying sizes.
Recommendation: Use On-Demand during the day, or Spot Instances if interruptions are acceptable.
Scenario 3: Batch Data Processing
Situation: Weekly data processing jobs that can tolerate delays.
Recommendation: Use Spot Instances with checkpointing. Jobs can resume if interrupted.
Additional Resources
- AWS Pricing Documentation
- AWS Cost Optimization Best Practices
- AWS Pricing Calculator
- AWS Cost Explorer
Ownership
| Role | Team |
|---|---|
| Document Owners | A&E, FinOps, Cloud Operations |
| Original Author | Emma Gersten |
| Reviewers | Paul White |