AWS Savings Plans
AWS has a new discount billing model called AWS Savings Plans.
Like Reserved Instances (RIs), Savings Plans provide you with a significant discount in comparison to On-Demand rates. Over time, however, Savings Plans will change the way you manage and use RIs and apply discounts in your cloud environment.
Read on to learn how Savings Plans work and how CloudCheckr supports this new model.
For years, Reserved Instances (RIs) were the best way for customers to earn a significant discount—often greater than 50%—on AWS services.
AWS also benefitted. By looking at the cadence of their customers' RI usage, AWS could better determine what equipment in which regions to invest in and pass those savings on to customers.
In this environment, Managed Service Providers (MSPs) would buy RIs and resell that capacity to their customers at full price. To boost those profits even more, these MSPs would turn on CloudCheckr's RI Unsharing feature—billing individual accounts that had previously benefitted from RI usage inadvertently—at On-Demand rates.
The Changing AWS Landscape
In November 2019, AWS introduced AWS Savings Plans, a more flexible model that offers similar discounts as RIs but without the commitment to a specific instance type.
The default AWS logic, however, prevented CloudCheckr's customers from taking full advantage of the benefits offered by Savings Plans. AWS applies Savings Plans discounts across a consolidated billing family rather than to the purchasing account—making it difficult for Enterprise customers and MSPs to create a profitable chargeback strategy.
To combat this potentially negative billing model, CloudCheckr has released the first part of its Savings Plan Unsharing feature: Savings Plan Deallocation. By selecting Savings Plan Deallocation, our customers can reverse discounts, so that accounts which benefited inadvertently from Savings Plans get billed at the On-Demand rate.
A Deallocation Dinner
To better illustrate the concept of Savings Plan Deallocation, consider the following analogy.
A group of co-workers—Alex, Betty, Carly, David, Ernesto, and Fiona—go out to dinner at Cafe AWS. George brings a “Buy One Entree, Get One Free” Groupon.
They could request separate checks—which is how Cafe AWS would normally charge each customer—but then the Groupon wouldn’t get applied to each check. They could ask Cafe AWS to split the total as it sees fit—like how AWS would split total charges across a consolidated billing family. But, there’s no guarantee as to who would benefit from the Groupon.
As the group's coordinator, Fiona has a lot to consider:
- Should George get a free meal since he bought the Groupon? If each group member paid with a separate check, however, the discount will go unused because George doesn't meet the Groupon requirements of buy one, get one free.
- Should George only pay half price for his entree while the other group members share the value of the remaining discount?
- Should the Groupon discount stay in the family since George and Betty are married?
- Should the value of the Groupon be spread across the entire group?
- Should the value of the Groupon be divided equally by the number of diners? Or should the value of each group member’s meal determine how much discount they receive?
There is no single correct answer. The restaurant will still receive payment for the total bill regardless of how Fiona determines to charge each group member.
Bringing Order to the Chaos
CloudCheckr's Savings Plan Deallocation ensures that any account which buys a Savings Plan receives 100% of their entitled discount. If the account that bought the Savings Plan does not use all the discount, CloudCheckr offers several options, so that the unused discount can get applied equitably to other accounts.
For example, this diagram shows an account family that includes Account A and Account B. Account A has purchased a Savings Plan. Account C is outside of the account family. The MSP has also purchased a Savings Plan, which it plans to distribute to its customers, Accounts A, B, and C.
Using this example, CloudCheckr can apply the unused discount two ways:
|Default AWS Behavior
|Eliminate Free Discounts
AWS shares its unused discount with Accounts B or C.
Account C gets a free discount even though it's not in the same account family as Accounts A and B.
If AWS shares the unused discount with Account B, which is in the same account family, Account C gets charged the On-Demand rate.
If AWS shares the unused discount with Account C, which is not in the same account family, CloudCheckr can deallocate or revert Account C's discount and charge Account C at the On-Demand rate. Account B won't get any benefit since CloudCheckr ignores unused discounts.
CloudCheckr will only apply your deallocation to our invoices. The AWS bill will remain the same. Account A will earn the full discount. To ensure that any unused discount always stays in an account family, would require you to unshare the Savings Plan, which is not yet a CloudCheckr feature. Until Unsharing is complete, we encourage each account to buy a Savings Plan to ensure unused discounts stay in an account family.
|The MSP applies Savings Plan discounts to Accounts A, B, and C and charges them at On-Demand rates to increase profits.
|If Account A purchases Savings Plans:
Keep In Mind...
While setting up deallocation is as simple as clicking a button, you should be aware of the following ramifications:
- These changes have nothing to do with how or how much AWS will charge the Payer account. AWS will still apply Savings Plans discounts to the Payer’s total AWS bill. Deallocation only applies to CloudCheckr invoices associated with Payee accounts managed by the Payer.
- Deallocation will remove Savings Plan discounts that AWS arbitrarily applies to accounts that did not purchase Savings Plans and are not in an account family with extra discounts and invoice those at the On-Demand rate.
- Deallocation is not the same as CloudCheckr's Unsharing feature. Unsharing also performs deallocation and allows customers to reallocate any discount that AWS applied to an account outside the purchaser’s account family.
- Deallocation requires data from the Cost and Usage Report (CUR) and not the Detailed Billing Report (DBR). Existing customers who use the DBR must migrate to the CUR to use Savings Plan Deallocation. CloudCheckr configures all new customers to the use the CUR.
Question: I just read about Savings Plan Deallocation in your blog. How do I enable this feature in CloudCheckr?
From the left navigation pane, choose Cost > AWS Partner Tools > Configure > Configure Custom Cost and select Use Deallocation in the Saving Plan Cost Allocation section on the Configure Custom Cost page.
Question: What is a Savings Plan?
A Savings Plan allows you to commit a dollar amount per hour of compute usage and apply that discount automatically across regions, accounts, and instance types. You must commit to a consistent amount of usage for a 1- or 3-year term just like you would with an RI.
AWS is currently offering two types of Savings Plans:
|Compute Savings Plans
Applies to selected AWS compute engines in any region
|EC2 Instance Savings Plans
Applies to a selected EC2 instance family and region
Question: What is the benefit of using Savings Plans over RIs?
The Savings Plan gives you more flexibility on how you apply savings across your consolidated bill, and it reduces the risk of losing unused dollar commitments when you make changes to your cloud infrastructure. Ultimately, the Savings Plan will offer you an easier, less-complicated method for managing and using RIs.
Question: How will Savings Plans change the way AWS supports RIs?
Now that Savings Plans are available, you can use both RIs and Savings Plans as part of your cost-savings strategy. For the foreseeable future, AWS will continue to support both options, but eventually, AWS will most likely deprecate RIs in favor of Savings Plans.
Question: How does CloudCheckr plan to manage this change?
Out of the gate, CloudCheckr can support customers who purchase Savings Plans through features like:
- Billing Summary Dashboard
- Custom Charges
- Advanced Grouping Report
- List Cost Analysis Report
- AWS Credit Summary Report
- Billing Summary Reports
- Invoice Generator
Question: How Do I access AWS Savings Plans?
Log in to the AWS Management Console, go to the Billing & Cost Management Dashboard, and select Savings Plans.
Question: Do I still need to use CloudCheckr for recommendations?
Absolutely. Before you purchase an RI or a Savings Plan, you should analyze your utilization. Our Right Sizing feature determines if you are under- or over-powered based on your utilization and if you should move up or down in instance size or even to a different instance family.
If you were to sign up for a one- or three-year commitment before you use Right Sizing, you could magnify your inefficiency—and pay for that mistake for up to three years. CloudCheckr’s Right Sizing tools allow the administrator to determine the CPU usage level and time period while AWS is hard-coded at 40%. In theory, a CloudCheckr user could decide that 20% is their threshold, or 60%, or over 2 days, or 30 days.
With built-in Automation, the administrator can also select Fix Now or Request Fix to initiate the change in instance.
Finally, while AWS lets you choose between 7, 30, or 60 days of historical usage to make recommendations, CloudCheckr offers 30, 60, 90, or even 180 days' worth of data. When making a 1-year commitment, let alone three years, it’s important to have as much historical data to best determine your long-term needs.
Question: Will Savings Plans change the way I use CloudCheckr?
If you don't plan on purchasing Savings Plan soon, your CloudCheckr experience will remain the same.
If you do plan to purchase Savings Plan soon:
- review the AWS Savings Plans blog
- reach out to your Technical Account Manager (TAM)
Once you purchase a Savings Plan, CloudCheckr will reflect that purchase in your billing file.
As we work through our analysis, we will help you come up with a plan on how to maintain or improve your existing margins and gather your feedback on what Savings Plan functionality you would like to see in our application.
Question: How do I purchase a Savings Plan?
Payers or payees can purchase Savings Plans directly from the AWS Cost Explorer Console. They are not available in the AWS Marketplace.
Question: Are there any drawbacks to using Savings Plans?
Yes. The major drawback is that the very flexibility offered by Savings Plans means that they cannot be restricted to an instance type, region, or account. So, if you needed to use funds to cover your usage costs on an instance type—for example, only your Windows Production m4.4xlarge instances—there is no mechanism to do so. In this case, you are better off buying RIs to match those instances to ensure that only one cost center would benefit.
Question: What happens if I buy an RI and a Savings Plan?
In this case, AWS will apply all RIs first, then apply Savings Plans to any instances not already covered by an RI.
Question: Does this change mean that RIs are going away?
For now, AWS will still offer RIs in parallel with Savings Plans. Currently, AWS Savings Plan is only available for EC2 instances and Fargate compute engines, but as AWS adds support for more services, we expect customers to move away from RIs toward Savings Plans.
Question: Can a single payer account have a Savings Plan and RIs?
Question: How will Savings Plans work with Enterprise Discount Program customers?
Customers with Enterprise Discount Program (EDP) will have their EDP discounts stacked on top of the Savings Plan discount.
Question: Are Savings Plans available for GovCloud customers?
Yes—but you can only purchase GovCloud region Savings Plans for the standard account—not in the GovCloud account.
Question: Are Savings Plans available in China?
Question: When you apply a Savings Plan to multiple instance types, which type gets the discount first?
AWS first applies the discount to the account that purchased the Savings Plan, then applies it to the highest discount instance to lowest discount instance accordingly. If there is unused commitment, AWS will apply it to other accounts in your organization.
Question: This is a lot of information to digest. Can you give me a quick comparison?
This table shows how Savings Plans measure up to RIs:
Type of Commitment
1- to 3-year terms
Upfront, partial upfront, or no upfront
You will be charged at the On-Demand rate if you go over your commit.
Can apply across instance types, regions, or accounts
Can only apply to a specific operating system, instance family, or region