Amazon EC2 offers various pricing options to fit different needs and budgets. This guide explores EC2 pricing plans, including On-Demand, Savings Plans, and Spot Instances, as well as Tenancy options. Whether for short-term projects, long-term applications, or flexible workloads, this guide helps you navigate EC2 pricing to choose the best option for your needs.
What is Tenancy?
Before moving on to pricing options, let's explore what Tenancy is.
Tenancy refers to the physical allocation of the underlying hardware (servers) where your EC2 instances run. AWS offers different tenancy options that determine whether your instances share hardware with instances from other customers or run on dedicated physical servers.
Here are the main tenancy options:
1. Shared Tenancy (Default)
Default Option: By default, EC2 instances run on shared hardware, where multiple customers' instances may run on the same physical server.
Cost-Effective: This option is generally the most cost-effective because AWS maximizes resource utilization by sharing hardware across multiple customers.
Isolation Level: While instances share physical hardware, each instance is logically isolated, ensuring security and privacy.
2. Dedicated Tenancy
Dedicated Instances: These instances run on hardware that is physically dedicated to a single customer. Although other AWS customers do not share the hardware, AWS manages the server, so you don't have control over which specific server your instance uses.
Compliance and Licensing: This option is often used for workloads that need physical server isolation due to regulatory or licensing requirements.
Higher Cost: Dedicated Instances are more expensive than Shared Tenancy instances because of the dedicated hardware.
3. Dedicated Hosts
Full Server Control: A Dedicated Host is a physical server dedicated to your use. It provides greater visibility and control over the server, including the ability to place your instances on specific physical cores or sockets.
BYOL (Bring Your Own License): Dedicated Hosts are useful if you have existing software licenses that need specific server setups.
Cost: Dedicated Hosts are the most expensive option but offer the most control and are necessary for some compliance and licensing scenarios.
When to Choose Different Tenancy Options
Shared Tenancy: Best for general-purpose applications where cost is a concern and there are no strict compliance or licensing requirements.
Dedicated Instances: Suitable for applications that require physical server isolation but don't need detailed control over server placement.
Dedicated Hosts: Ideal for workloads that need complete control over the physical server, specific licensing needs, or strict compliance requirements.
EC2 > Instances > Launch an instance > Advanced Details >
On-Demand Pricing
On-Demand Pricing is the most straightforward and flexible EC2 pricing model. With On-Demand Instances, you pay for compute capacity by the hour or second (with a minimum of 60 seconds) without any long-term commitments or upfront payments.
Key Features of On-Demand Pricing
Flexibility
No Upfront Commitment: You can launch and terminate instances at any time without incurring additional costs.
Pay-as-You-Go: You only pay for the compute resources you use, making it ideal for unpredictable workloads.
Use Cases
Short-Term Projects: On-Demand Pricing is great for short-term, unpredictable, or sudden workloads where flexibility is important.
Development and Testing: Developers can quickly spin up instances for testing without worrying about long-term costs.
Unpredictable Traffic: Applications with variable traffic can scale up or down as needed without committing to a specific capacity in advance.
Cost Considerations
No Discounts: On-Demand Pricing does not offer the same level of discounts as other pricing models. If your usage is consistent and predictable, other pricing options might be more cost-effective.
Data Transfer Costs: Be aware of extra costs for data transfers, especially between regions or to the internet.
Storage Costs: Using Amazon Elastic Block Store (EBS) for storage will incur additional charges for volumes and snapshots.
Tenancy Options
Shared Tenancy: By default, On-Demand Instances run on shared hardware, where multiple customers' instances may run on the same physical server. This is the most cost-effective option and ensures logical isolation for security.
Dedicated Instances: For workloads requiring physical server isolation, you can choose Dedicated Instances, where your instances run on hardware dedicated to your account. This option is more expensive but necessary for specific compliance or licensing requirements.
Savings Plans
Savings Plans offer a flexible pricing model that allows you to reduce costs in exchange for a commitment to a consistent amount of usage (measured in $/hour) over a 1- or 3-year term. These plans are designed to provide significant savings compared to On-Demand Pricing while offering flexibility across instance types and regions.
Types of Savings Plans
Compute Savings Plans
Overview: Compute Savings Plans offer savings of up to 66% on a broad range of compute services, including EC2, regardless of instance family, size, region, operating system, or tenancy.
Flexibility: This plan provides the most flexibility, allowing you to switch between instance types, families, regions, operating systems, and tenancies without losing the benefits of the plan.
Use Cases: Ideal for organizations with predictable compute needs but who want the flexibility to adapt to changing requirements over time.
EC2 Instance Savings Plans
Overview: EC2 Instance Savings Plans provide lower prices up to 72% on specific instance families within a specific region. This plan is less flexible than Compute Savings Plans but offers slightly higher savings for those who can commit to a particular instance family.
Constraints: You are locked into specific instance families and regions, making it less adaptable if your needs change.
Use Cases: Best for applications with predictable and consistent usage patterns within a specific instance family and region.
Benefits of Savings Plans
Cost Savings
Significant Discounts: Savings Plans offer big discounts compared to On-Demand Pricing, ideal for long-term, steady workloads.
Flexible Commitment: Commit to a usage level but stay flexible across instance types and regions.
Simplified Management
Automatic Application: Savings Plans automatically apply to your usage, ensuring you always get the best rate.
Budgeting and Forecasting: Commit to spend over 1 or 3 years for better budgeting and forecasting.
Use Cases
Long-Term Projects: Perfect for long-term projects with predictable usage.
Steady-State Workloads: Best for applications with consistent, predictable usage patterns.
Additional Considerations
Tenancy Options: Savings Plans apply to different tenancies (Shared, Dedicated Instances, and Dedicated Hosts), affecting costs and hardware control.
Instance Flexibility: Compute Savings Plans are useful if your workloads change, allowing you to switch between instance types, regions, and operating systems without penalty.
Spot Instances
Spot Instances are spare EC2 compute capacity that AWS offers at steeply discounted prices. Because they utilize excess capacity, AWS can reclaim these instances with just a two-minute warning if the capacity is needed for On-Demand or Reserved Instances. As a result, Spot Instances are best suited for applications that are flexible and can handle interruptions.
Key Features of Spot Instances
Cost Savings
Massive Discounts: Spot Instances offer up to 90% savings compared to On-Demand prices.
Variable Pricing: Prices fluctuate based on supply and demand, but you can set a maximum price to control costs.
Interruption Handling
Two-Minute Warning: AWS can terminate your Spot Instance with a two-minute warning, so your application must handle interruptions.
Checkpointing and Resuming: Applications often use checkpointing to save progress and resume work if the instance is terminated.
Flexibility
- Spot Fleets: Create Spot Fleets to maintain desired compute capacity, automatically adjusting the number of instances based on availability and needs.
Use Cases
Batch Processing and Big Data Analysis: Ideal for tasks like big data analysis, video rendering, and media encoding that can be split into smaller, independent jobs.
Stateless Applications: Suitable for web servers and microservices that scale with demand and can be easily replicated or restarted.
Containerized Workloads: Used in Kubernetes clusters and serverless architectures for workloads that can handle node failures.
Testing and Development: Great for CI/CD pipelines, running tests, deploying builds, and creating temporary development and testing environments.
AWS Pricing Calculator
A tool provided by Amazon Web Services to help users estimate their monthly bill based on their usage and the services they plan to use.
How it works
Open AWS Pricing Calculator: Navigate to the AWS Pricing Calculator website: calculator.aws/#.
Select Services: Choose the AWS services you plan to use by clicking on the "Create estimate" button.
Configure Service Details: For each selected service, configure the specific details such as instance type, region, and usage patterns.
Review Estimate: Review the estimated costs for your selected services. The calculator will display a detailed breakdown of the costs.
Save or Share Estimate: Save your estimate for future reference or share it with others by using the provided options.
Adjust as Needed: Make any necessary adjustments to your service configurations to see how changes impact the estimated costs.
Finalize Estimate: Once satisfied with the estimate, you can use it to plan your AWS budget and usage.
Benefits of using AWS Pricing Calculator:
Regularly Update Your Estimate: As your requirements change, revisit the calculator to update your estimate with the latest information.
Explore Different Scenarios: Test different scenarios to understand how changes in usage or service selection impact costs.
Use Saved Estimates: Save multiple estimates for different use cases or projects.
Consider Cost Optimization Strategies: Explore the potential cost savings by using Reserved Instances, Savings Plans, or other cost optimization strategies.
Conclusion
Navigating Amazon EC2 pricing can be complex, but understanding your options helps you make informed decisions. Whether you need On-Demand Instances, Savings Plans, or Spot Instances, there's a model for you. Choosing the right tenancy option—Shared, Dedicated Instances, or Dedicated Hosts—can further optimize costs. Use tools like the AWS Pricing Calculator to manage expenses effectively. By evaluating your use cases and leveraging the right pricing strategies, you can maximize the value of your EC2 investments.