EC2 Purchasing Options

1. On demand – Fixed rate with no commitment.

2. Reserved – Capacity reservation, significant discount on hourly charge for an
instance, 1-year or 3-year terms.
3. Spot – Bid whatever price you want for instance capacity (provides even greater
savings), you terminate-you pay, AWS terminate-free for that hour.
4. Dedicated Hosts –
• Physical EC2 server dedicated for your use.
• Can help you reduce cost by allowing you to use your existing server-
bound software licenses.
• May share with your other non-dedicated hosts (same account no other
accounts).

Reserved Instances (RI)

• Reserved Instances provide you with significant savings on your Amazon EC2
costs compared to On-Demand Instance pricing.
• Reserved Instances are not physical instances, but rather a billing discount
applied to the use of On-Demand Instances in your account.
• These On-Demand Instances must match certain attributes, such as instance
type and Region, in order to benefit from the billing discount.
• You can purchase a Reserved Instance (Standard or Convertible) for a one-year
or three-year commitment, with the three-year commitment offering a bigger
discount.
▪ One-year: A year is defined as 31536000 seconds (365 days).
▪ Three-year: Three years is defined as 94608000 seconds (1095 days).
• Reserved Instances do not renew automatically; when they expire, you can
continue using the EC2 instance without interruption, but you are charged On-
Demand rates.
 1) Standard RIs (72% off)
• Suited for steady-state use.
2) Convertible RIs (54% off)
• Capability to change attributes (can change AZ, Instance type etc.).
• Suited for steady-state use.
3) Scheduled RIs
• Available to launch within the time windows you reserve.
• Allows you to match your capacity reservation to a predictable recurring
schedule, that only requires a fraction of day, a week, or a month.

Standard Reserved Convertible Reserved

Instance
Some attributes can be
Modify Reserved Instances modified.
Exchange Reserved
Instances Can't be exchanged.
Sell in the Reserved Can be sold in the Reserved
Instance Marketplace Instance Marketplace.
Can be bought in the
Buy in the Reserved Reserved Instance
Instance Marketplace Marketplace.
Instance
Some attributes can be
modified.
Can be exchanged
during the term for
another Convertible
Reserved Instance with
new attributes,
including instance
family, instance type,
platform, scope, or
tenancy.
Can't be sold in the
Reserved Instance
Marketplace.
Can't be bought in the
Reserved Instance
Marketplace.

Savings Plan (up to 70% off)

• Offer significant savings over On-Demand instances just EC2 RIs in exchange
for a commitment to use a specific amount of compute power (measured in
$/hour) for a 1- or 3-year period.
• 2 types of savings Plan are:
1) Compute Savings Plan (66% off)
▪ Plans automatically apply to EC2 instance usage regardless of
instance family, size, AZ, Region, OS, tenancy. Also apply to
Fargate and Lambda.
 2) EC2 Instance Savings Plan (72% off)
▪ In exchange for commitment to usage of individual instance
families in a Region (for eg: m5 usage in N. Virginia).
▪ This automatically reduces cost on the selected instance family
regardless of AZ, size, OS, tenancy – you can change instances
within a family (eg: c5.xlarge to c5.2xlarge).

Spot Instances
• Run fault tolerant workloads for up to 90% off.
• Gives you unused EC2 capacity in AWS cloud.
• Can be used for various stateless, fault tolerant or flexible applications such as
big data, containerized workloads.
• Can easily combine Spot instances with On-demand, RIs and Savings plan
instances to further optimize workload cost with performance.
• Have the option to hibernate, stop or terminate your Spot instances when EC2
reclaims the capacity back with 2 minutes of notice.
• Concepts:
▪ Spot capacity pool – A set of unused EC2 instances with the same
instance type (for example, m5.large) and Availability Zone.
▪ Spot price – The current price of a Spot Instance per hour.
▪ Spot Instance request – Requests a Spot Instance. When capacity is
available, Amazon EC2 fulfils your request. A Spot Instance request is
either one-time or persistent. Amazon EC2 automatically resubmits a
persistent Spot Instance request after the Spot Instance associated with
the request is interrupted.
▪ EC2 instance rebalance recommendation – Amazon EC2 emits an
instance rebalance recommendation signal to notify you that a Spot
Instance is at an elevated risk of interruption. This signal provides an
opportunity to proactively rebalance your workloads across existing or
new Spot Instances without having to wait for the two-minute Spot
Instance interruption notice.
▪ Spot Instance interruption – Amazon EC2 terminates, stops, or
hibernates your Spot Instance when Amazon EC2 needs the capacity
back. Amazon EC2 provides a Spot Instance interruption notice, which
gives the instance a two-minute warning before it is interrupted.
Capacity Reservations
On-Demand Capacity Reservations enable you to reserve compute capacity for your
Amazon EC2 instances in a specific Availability Zone for any duration. Capacity
Reservations mitigate against the risk of being unable to get On-Demand capacity in
case there are capacity constraints. If you have strict capacity requirements, and are
running business-critical workloads that require a certain level of long or short-term
capacity assurance, we recommend that you create a Capacity Reservation to ensure
that you always have access to Amazon EC2 capacity when you need it, for as long as
you need it.

You can create Capacity Reservations at any time, without entering into a one-year or
three-year term commitment. The capacity becomes available and billing starts as
soon as the Capacity Reservation is provisioned in your account. When you no longer
need the capacity assurance, cancel the Capacity Reservation to release the capacity
and to stop incurring charges. You can also use the billing discounts offered by Savings
Plans and Regional Reserved Instances to reduce the cost of a Capacity Reservation.

When you create a Capacity Reservation, you specify:

• The Availability Zone in which to reserve the capacity

• The number of instances for which to reserve capacity
• The instance attributes, including the instance type, tenancy, and platform/OS

Capacity Reservations can only be used by instances that match their attributes. By
default, they are automatically used by running instances that match the attributes. If
you don't have any running instances that match the attributes of the Capacity
Reservation, it remains unused until you launch an instance with matching attributes.

Savings Plan and RIs

• Savings Plans does not provide a Capacity Reservation.
• But you can reserve capacity with On-Demand Capacity Reservations and pay
lower prices on them with Savings Plans.
• Can continue purchasing RIs to maintain compatibility with your RIs to maintain
compatibility with your existing cost management processes and your RIs will
work along-side Savings Plans to reduce your overall bill.
• Even though RIs and Savings Plans offer same savings, Savings Plans have
additional flexibility.
Difference Between RIs and Capacity Reservation
• In Reserved instances, you get a lower pricing than on-demand, but have to be
in contract for a minimum of 1 year.
• In Capacity reservation, there is no contract, but you still pay on-demand pricing
for the time you keep the reservation active. (For eg: If you opt for 10 c5.xlarge
instances regardless of you actually running 1 or 10 instances).
• The Capacity reservation scenario is used when you do not want to commit for
a contract but want capacity reserved for use and don’t mind paying on-
demand pricing.
• Primarily both try to achieve the same end result; i.e. to ensure that there is EC2
capacity available to launch when you are charged for them.

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