How choosing the right EC2 pricing option can keep you out of trouble

If you are new to Amazon Web Services, you might be asking why it is so important to pick the right EC2 pricing option? Can I not just use on-demand? Is it really worth my effort exploring other options? Well, the idea of cutting your hourly instance costs for each instance running in AWS means it can keep you out of trouble and stay in good books with your boss and the finance department. With regards to managing your IT infrastructure, there is a constant struggle between optimizing costs and delivering features. In this blog, we are going to make it easier for you to stay out of trouble with your boss and select the best EC2 pricing options for your applications.

Amazon EC2 Pricing Options

We are going to look in a bit more detail at the different pricing options of EC2 instances that AWS offer. There are currently four ways to pay for your Amazon EC2 instances: On-Demand, Reserved Instances, and Spot Instances. The fourth option is where you can pay for Dedicated Hosts which will provide you with EC2 instance capacity on physical servers which are dedicated for your use.

So the big questions is; how do we examine how expensive reserved instances are compared to spot instances etc? Well, this all depends on your design, management, compute requirements etc. Basically, your company’s requirements will determine what service you should choose. In many cases, what might seem expensive for one company may be an essential requirement for another.

AWS Migration Can Be An Overwhelming Task

For most small to medium-size companies that take the decide to plunge into Amazon Web Services (AWS), saving costs is always a major incentive. However, without having the correct AWS infrastructure in place, costs can easily spiral out of control (which means your boss will be giving you headaches you don’t need). It’s easy to forget to switch EC2 servers off but you soon remember when your bills come in, so having the ability to monitor and manage EC2 instance usage is vital to ensure your costs don’t spiral out of control. This is where automated scheduling tools such as CloudRanger, come in really useful. But it also helps to choose the right instance to fit your needs. So let’s have a look at the EC2 Instance type options available.

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Amazon EC2 On-Demand Instances

With On-Demand instances, you pay for compute capacity by the hour with no long-term commitments or upfront payments. With these instances, you can increase or decrease compute capacity depending on the demands of your application and then you only pay the specified hourly rate for the instances you use.

Amazon EC2 On-Demand instances are recommended for:

  • Users that prefer the low cost and flexibility without any up-front payment or long-term commitment.
  • Applications with short-term, or unpredictable workloads that cannot be interrupted
  • Applications that are being developed or tested on Amazon EC2 for the first time

Check out Amazon EC2 on-demand pricing

Amazon EC2 Spot Instances

With Amazon EC2 Spot Instances customers can bid on spare versions of On-Demand-Instances, which in some cases, offers bidders up to 90% discount. These are recommended for companies that are flexible and have large computing needs, where some interruptions are acceptable. In June 2016, AWS introduced the new Amazon EC2 Spot Jenkins plug-ins which will allow you to configure Jenkins to automatically scale a fleet of Spot instances up or down depending on the number jobs to be completed. This plug-in was designed to make it easier to save money with EC2 Spot instances.

Spot instances are recommended for:

  • Applications that have flexible start and end times
  • Applications that are only feasible at very low compute prices
  • Users with urgent computing needs for large amounts of additional capacity

Check out Amazon EC2 Spot Instance Pricing

Amazon EC2 Reserved Instances

The Amazon EC2 Reserved instances are usually best suited for production environments. Since Reserved Instances are specific to regions, availability zones and instances types, the contractual agreement is fulfilled automatically by AWS when launching an instance, as long as these match your contract, you’ll be billed at the lower rate reserved instance. The AWS purchasing agreement states a low, one-time payment for each instance you want to reserve and in turn receive a significant discount on the hourly charge for that instance. By using Reserved Instances, this enables you to balance the amount you pay upfront with your effective hourly price. This means it can be substantially cheaper for customers when compared to On-Demand instances.

It’s also worth noting that you can request to move your Reserved Instance to another Availability Zone within the same region. You can also change its network platform, or, for Linux/UNIX Reserved Instances and modify the instance type of your reservation to another type in the same instance family at no additional cost. If you have a US bank account, you can also sell your Reserved Instances if you need to.

So, if you have applications that have steady state or predictable usage, Reserved Instances can provide you with significant savings compared to using

Reserved Instances are recommended for:

  • Applications with steady state usage
  • Applications that may require reserved capacity
  • Customers that can commit to using EC2 over a 1 or 3-year term to reduce their total computing costs

Check out Amazon EC2 Reserved Instance Pricing

Amazon  EC2 Dedicated Hosts

The final option to consider when choosing your EC2 instance pricing is the Dedicated Host. A Dedicated Host is a physical EC2 server dedicated for your use. Dedicated Hosts is an option that can help you reduce costs by allowing you to use your existing server-bound software licenses, including Windows Server, SQL Server, and SUSE Linux Enterprise Server, and can also help meet your specific compliance requirements.

Dedicated Hosts are recommended for:

  • Can be purchased On-Demand (hourly).
  • Can be purchased as a Reservation for up to 70% off the On-Demand price.

Check out Amazon EC2 Dedicated Hosts

What Happens If Your Business Requirements Change?

With On-Demand instances offered as a pay as you go model, Reserved Instances are seen as a need to know model and Spot Instances seen as an option to bid for low prices, knowing which to choice for best business practices and cost efficiency is essential, but what happens if your business takes a different direction and what you may have budget for becomes more demanding? What do you do with the already purchased Reserved Instances?

The best advice is to revisit what EC2 instance pricing options you are using at least every year.  Amazon are always releasing new instance types that could help reduce your costs. For example, if you are running lots of M1 instances today, why not look at migrating them into T2 or M3 types? This will give you better performance, at a lower cost. By investigating options to lower your EC2 costs, you will ensure there are no surprise AWS bills landing on your boss’s desk, and keep yourself out of trouble.

About CloudRanger

CloudRanger is a cost-effective SaaS solution that reduces your cloud computing costs by optimizing AWS resources through automation. CloudRanger enables AWS customers to manage your EC2 backup processes and schedule automatic start/stop times for idle EC2 instances, so you pay only for the AWS resources you actually use.

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