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Reduce AWS costs with volume discounts, Reserved Instances

AWS volume discounts sound simple -- the more you buy, the less you pay. But cost savings can vary based on the services you use and whether Reserved Instances play a role.

One of the biggest benefits of cloud is its pay-as-you-go model, but cloud providers -- including AWS -- have always...

offered variations on that theme.

With AWS, there are pricing options, such as volume discounts, that boil down to "cheaper by the dozen." And, according to experts, there are several ways to use these volume discounts and mix and match them with certain instance types to reduce AWS costs.

The basics of AWS volume discounts

For volume discounts, AWS says it treats all affiliated accounts within an organization as a single account. This should reduce AWS costs overall, since certain services, such as Elastic Compute Cloud (EC2) and Simple Storage Service (S3), offer greater volume discounts as you use more of the service. However, for services such as EC2 that offer a free tier, AWS will apply the free tier to the total usage across all accounts.

"Amazon likes commitment. The more you are willing to commit -- meaning time -- the more you typically save," said Tim Fox, head of cloud managed services at CorpInfo, an AWS Premier Consulting Partner based in Los Angeles. "The key is, as long as a company is willing to commit to specific things for a year, it is easier to find those deals."

For example, AWS has special pricing on S3 once you reach a certain level of scale. But to take advantage of that discount, you must commit to use a specific amount of S3 resources for at least a year. If you no longer need to use that amount of resources, you are still committed to the full spend.

There are other caveats to watch for. For example, all accounts within an organization can earn the hourly cost benefit of Amazon EC2 Reserved Instances, even if users purchase them through different accounts. However, the discount only accrues if the instances associated with the different accounts are launched in the same availability zone.

Reduce AWS costs with Reserved, Spot Instances

"One of the best ways to save with AWS is to mix and match different purchasing models," said Owen Rogers, research director for digital economics at 451 Research.

For instance, AWS offers a wide range of Reserved Instances that provide significant discounts for those willing to commit. "Buyers should forecast how they expect their demand to change over time and can then lock in discounts by reserving capacity for all this demand, using different combinations of terms and payment-type Reserved Instances," he said.

If demand goes over baseline capacity, buy additional VMs on demand for as little as 60 seconds to supplement the Reserved Instances. In addition, Spot Instances can reduce AWS costs, providing inexpensive compute power for workloads that are flexible in terms of when they can start and stop, he said.

If this all sounds tricky, it is. To simplify things, organizations can assign someone to master the subject of Reserved Instances, suggested Dave Bartoletti, analyst at Forrester.

"You can save a lot of money with Reserved Instances, and many companies are wasting money by not doing that successfully," Bartoletti said.

Monitor the behavior of all your Amazon services. If you use a service in a consistent, steady-state way, that's a case to buy capacity through one-year or three-year Reserved Instances, he said.

Amazon also recommends that customers access discount information through the Bills page, which displays an average tiered rate determined across all accounts for which an organization is responsible. This can provide a stronger sense of current usage and clarify which discounts could further reduce AWS costs.

Next Steps

AWS rolls out per-second cloud billing model

Compare Amazon Lightsail vs. EC2 pricing

AWS aims to increase flexibility of Reserved Instances

This was last published in October 2017

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