AWS Savings Plans: Cost-Saving Strategies for SMBs

AWS Savings Plans offer a simple way for small and medium-sized businesses (SMBs) to lower cloud compute costs by up to 72% compared to on-demand rates. By committing to a specific hourly spend for one or three years, businesses can save money while maintaining flexibility to adjust instance types, regions, and configurations. Here’s what you need to know:

• Types of Plans:
  • Compute Savings Plans: Flexible across EC2, Lambda, and Fargate services.
  • EC2 Instance Savings Plans: Higher discounts but tied to specific instance families and regions.
• Payment Options: Choose between All Upfront, Partial Upfront, or No Upfront to match your cash flow needs.
• Who Benefits Most: SMBs with predictable workloads can maximise savings, while those with evolving needs can still enjoy discounts without compromising scalability.
• How to Get Started: Use AWS Cost Explorer to analyse your usage, identify consistent workloads, and optimise resources before purchasing a Savings Plan.

With Savings Plans, you can control costs, simplify budgeting, and ensure discounts apply automatically to eligible usage. Regular monitoring and adjustments will help you make the most of your investment.

AWS Savings Plans Explained: Cost Optimization for EC2 and Compute Workloads

Types of AWS Savings Plans

AWS offers two main types of Savings Plans, each tailored to meet different business requirements. Knowing how they differ can help you make the right choice for your small or medium-sized business (SMB).

Compute Savings Plans

Compute Savings Plans are all about flexibility. By committing to a specific hourly spend, you unlock discounts across a variety of AWS services, including EC2, Lambda, and Fargate. The best part? You're not tied to any particular instance type, region, or operating system.

For instance, suppose you're using t3.medium web servers in London (eu-west-2) and later decide to switch to c5.large instances or expand into a new region. Your Compute Savings Plan will still apply. It even covers other compute services like Lambda or container workloads on Fargate, ensuring that cost savings continue no matter how your infrastructure evolves.

This flexibility is perfect for businesses that need to experiment, scale, or pivot their infrastructure without losing out on savings.

EC2 Instance Savings Plans

EC2 Instance Savings Plans, on the other hand, provide deeper discounts but with stricter conditions. These plans are tied to a specific instance family, region, and operating system. For example, you might commit to using r5 instances running Linux in a specific region.

Because of this focus, EC2 Instance Savings Plans can offer discounts of up to 72% on compute costs. They’re an excellent choice for stable, predictable workloads - like database servers with steady capacity or web servers handling consistent traffic. However, if you change configurations (e.g., moving from r5 to r6i instances or switching regions), the plan won’t apply, and on-demand rates will kick in for any unmatched usage.

Comparing Savings Plans Types

For many SMBs, starting with Compute Savings Plans makes sense while their infrastructure is still developing. Once your workloads become more predictable, you can switch to EC2 Instance Savings Plans to take advantage of the higher discounts for consistent usage.

Both plan types can also work together within the same AWS account. For example, you could use EC2 Instance Savings Plans for steady production environments and Compute Savings Plans for more dynamic needs. AWS will automatically prioritise the higher discounts of EC2 Instance Savings Plans for eligible configurations, while Compute Savings Plans cover any remaining usage.

Both options are available with one-year or three-year commitments, and you can choose payment options such as All Upfront, Partial Upfront, or No Upfront. This flexibility allows you to align your payment structure with your cash flow, no matter which plan you pick.

The next step? Review your usage patterns and choose the plan that fits your current and future needs.

How to Evaluate and Purchase Savings Plans

Take time to analyse your AWS usage to avoid committing to unnecessary expenses.

Reviewing Your Usage Patterns

Start by enabling AWS Cost Explorer, which may take up to 24 hours to populate with data. Use it to review 30–60 days of compute spending and identify workloads that run consistently. These steady workloads - like web servers with constant traffic or database instances operating continuously - are prime candidates for committed pricing.

Leverage AWS' tailored recommendations and set Budget alerts to track utilisation and coverage. These recommendations calculate the ideal hourly commitment for the greatest potential savings. Refresh them up to three times daily to account for any recent changes in your usage patterns.

Set up alerts to monitor your Savings Plans’ performance. For instance, create a budget that notifies you if your Savings Plan coverage drops below 70% of your EC2 spending. This helps you address issues before they become costly.

Also, be sure to remove idle resources. Cost Explorer can help you identify instances with low CPU utilisation or forgotten services that might lead to over-commitment.

Once you've analysed your usage, the next step is to fine-tune your instance configurations.

Right-Sizing Your Instances

Check for over-provisioned instances and adjust them to better match your actual workload needs. Cost Explorer provides right-sizing recommendations, such as downgrading a t3.large instance to a t3.medium if it consistently uses less than 30% of its CPU capacity.

Think about your application architecture as well. Could you break down monolithic applications into smaller services or migrate workloads to Lambda for serverless execution? These changes can lower your baseline compute costs, making it easier to commit to a Savings Plan.

Make it a habit to review your infrastructure every quarter. As your business evolves, so will your compute needs, and regular adjustments will ensure your instances remain aligned with your workloads.

Optimising your usage now sets the stage for a smoother purchase process.

Purchasing Your Savings Plan

After reviewing and optimising your AWS usage, you're ready to lock in savings. Head to the AWS Billing and Cost Management console, select Savings Plans > Purchase, or access the option through the EC2 console under the Instances section.

Keep your target hourly commitment, preferred term (one or three years), payment option, and start date in mind. These details will be outlined in AWS' recommendations.

• Compute Savings Plans are ideal for diverse workloads.
• EC2 Instance Savings Plans work best for stable EC2 usage.

Aim for a coverage target between 70% and 90% of your compute spending. A 70% target allows flexibility for variable workloads, while 90% maximises savings but demands precise planning. Many small and medium-sized businesses find 80% to be a good middle ground.

Choose your term length based on your confidence in future usage. A three-year term offers the highest discounts, with savings of up to 72%, but requires a longer commitment. A one-year term is better suited for businesses with changing infrastructure needs.

Select a payment option that fits your cash flow:

• All Upfront gives the largest savings but requires a full payment upfront.
• Partial Upfront splits costs between an upfront payment and monthly instalments.
• No Upfront spreads payments across the term, preserving cash flow but with slightly lower discounts.

Ensure you have the necessary AWSSavingsPlansFullAccess permissions before proceeding.

Once your purchase is complete, your Savings Plan typically activates within minutes. AWS will automatically apply the plan to eligible usage, prioritising higher discounts first. If you also have Reserved Instances, these will be applied to EC2 usage before Savings Plans cover the remaining costs.

After activation, regularly monitor your plan's performance using AWS Budgets. This ensures you're effectively using your committed capacity and meeting your target percentage of compute spending.

Getting the Most Value After Purchase

Maximising the benefits of your active Savings Plan requires consistent monitoring and fine-tuning.

Tracking Your Utilisation

AWS provides tools to help you keep an eye on your Savings Plan usage. Cost Explorer is your go-to dashboard for analysing spending trends and understanding how much of your compute usage is covered by your Savings Plan versus on-demand pricing. If your coverage percentage drops noticeably, it could signal increased demand or inefficient resource use.

AWS Budgets works alongside Cost Explorer, allowing you to set spending limits and receive alerts when you're nearing them. For instance, you can set a utilisation budget with a 90% threshold. If your Savings Plan usage falls below this, you'll get notified, prompting you to investigate whether your usage patterns have shifted or if adjustments are needed.

You can also create a coverage budget to ensure at least 70% of your EC2 spending is covered by Savings Plans. If coverage dips below this, you'll receive alerts, helping you decide whether to purchase additional capacity or explore changes in usage.

The Savings Plans reports in the Billing and Cost Management console provide a clear picture of how much you're saving compared to on-demand pricing. Reviewing these reports quarterly helps you maintain consistent coverage targets and spot trends. This regular check-in can reveal seasonal usage patterns, growth trends, or unexpected changes that might need attention.

Armed with these insights, you can make informed decisions about adjusting your commitments.

Adjusting Your Commitments

As your business evolves, so will your Savings Plan requirements. A quarterly review cycle is a good practice to ensure your current commitments align with your actual usage. Use Cost Explorer during these reviews to identify any gaps between your usage and Savings Plan coverage.

If your compute needs have grown beyond your initial commitment, consider purchasing additional Savings Plans to meet your coverage goals. AWS even allows you to queue new Savings Plans to start when existing ones expire, avoiding lapses while preventing over-commitment.

Before committing to more resources, double-check that you're not paying for unused services. Tools like AWS Trusted Advisor can help identify idle instances or under-utilised resources that should be trimmed. By right-sizing your infrastructure first, you ensure you're only committing to what you actually need.

On the other hand, if your usage decreases - perhaps due to workload changes - let your current plans expire naturally and adjust future commitments to reflect your reduced baseline. This approach avoids overpaying for unused capacity.

Focus your purchases on covering predictable baseline usage rather than peak demand. This strategy offers flexibility for fluctuating workloads while ensuring cost savings on consistent operations.

Keep a detailed record of your Savings Plan purchases, including terms, hourly commitments, and expiration dates. This helps you stay on top of renewals and avoid accidental coverage gaps.

Beyond these adjustments, there are more ways to optimise your AWS costs.

Additional Cost-Saving Methods

Pair your Savings Plan with other cost-saving strategies for even greater efficiency:

• Auto-scaling: Automatically adjust compute capacity based on demand. Let auto-scaling handle traffic spikes while your Savings Plan covers steady, baseline needs.
• Storage tiering: Save up to 95% by moving infrequently accessed data to cheaper storage classes like S3 Infrequent Access or Glacier. AWS lifecycle policies make this process seamless.
• Spot Instances: For workloads that can handle interruptions, Spot Instances offer up to 90% discounts compared to on-demand pricing. They're ideal for tasks like batch processing or testing environments while keeping your Savings Plan for mission-critical workloads.
• AWS ElastiCache: Reduce database load by caching frequently accessed data. This can help you downsize database instances or reduce the need for read replicas, lowering baseline compute costs.
• Optimise Lambda functions: Streamline your code by removing unnecessary dependencies, which can cut down on execution time and associated costs.
• Database indexing: Ensure queries run efficiently to reduce computational demands, saving on database costs.
• Minimise cross-region data transfers: Keep resources co-located whenever possible. If transfers are necessary, consider AWS Direct Connect or optimise transfer patterns to reduce costs.

For small and medium-sized businesses, AWS Optimization Tips, Costs & Best Practices for Small and Medium-sized businesses offers tailored advice for navigating AWS cost optimisation.

Enable Cost Allocation Tags to track Savings Plan benefits at an hourly level. This helps you pinpoint which workloads gain the most from your commitments and simplifies cost allocation across teams or departments.

To streamline monitoring, set up EventBridge rules to automate alerts, generate reports, or adjust resources based on specific conditions. This reduces the need for manual oversight while keeping you in control.

Assign Savings Plan management to specific team members by creating a dedicated IAM role, such as "SavingsPlansManager", with appropriate permissions. This ensures secure, efficient management of your commitments without granting unnecessary account access.

Conclusion

Summary

AWS Savings Plans provide small and medium-sized businesses (SMBs) with a straightforward way to cut cloud expenses by as much as 72% on compute workloads. The key to success lies in understanding your usage patterns, choosing the right type of Savings Plan, and keeping a close eye on performance.

Start by using AWS Cost Explorer to analyse your historical usage and identify predictable workloads that would benefit from committed pricing. If flexibility is your priority, go for Compute Savings Plans. If your focus is on specific instance families and you want higher discounts, EC2 Instance Savings Plans are the better choice.

To stay on track, monitor your usage regularly with tools like Cost Explorer and AWS Budgets. Pair your Savings Plans with other cost-saving methods, such as using Spot Instances, to maximise savings without compromising operational flexibility. This approach reflects the balance between cost efficiency and agility that SMBs need to thrive.

Successful businesses don’t set their Savings Plans on autopilot - they adjust them as workload demands evolve.

Next Steps

Here’s how you can put these ideas into action and strengthen your cost-saving strategy:

• Activate AWS Cost Explorer: Review at least three months of usage data to establish a baseline for your compute needs.
• Leverage customised recommendations: Use Cost Explorer’s tailored purchase suggestions to guide your first Savings Plan investment. Begin by covering your most predictable workloads, and expand your commitments as your understanding of usage grows.
• Set up AWS Budgets: Create utilisation and coverage budgets to receive alerts if performance dips below your targets. This proactive step ensures you’re always optimising costs effectively.

For more tailored advice, check out AWS Optimization Tips, Costs & Best Practices for Small and Medium-sized businesses. This resource offers expert guidance on cost management, cloud architecture, and automation strategies that work hand-in-hand with your Savings Plans.

FAQs

How can small and medium-sized businesses choose the right AWS Savings Plan for their needs?

To find the best AWS Savings Plan for your business, start by examining your current and expected AWS usage. Dive into your historical usage data to uncover consistent trends in compute and storage demands. A helpful tool for this is AWS Cost Explorer, which can highlight where Savings Plans could deliver the most cost benefits.

Next, think about the nature of your workloads. Are they steady and predictable, or do they vary? If your workloads are consistent, Compute Savings Plans offer flexibility across regions and instance types, making them a versatile choice. On the other hand, if your needs are tied to a specific instance family or region, EC2 Instance Savings Plans might be the better option, as they often provide greater discounts for those specific requirements. Whichever you choose, make sure the plan fits within your budget and supports your long-term goals.

Keep an eye on your Savings Plan usage over time to ensure you're getting the most savings possible. Use AWS’s built-in tools or consult with experts if adjustments are needed to optimise your plan further.

What should SMBs consider before committing to a one- or three-year AWS Savings Plan?

Committing to a one- or three-year AWS Savings Plan can lead to noticeable cost reductions, but it’s not without its challenges. For starters, you’ll face limited flexibility. Once you commit to a specific usage level, you’re locked into it for the entire duration of the plan. This can become tricky if your business needs shift, like scaling down operations or moving workloads to different services.

There’s also the matter of upfront costs, particularly with "All Upfront" payment options. While these can offer better discounts, they may put pressure on cash flow, especially for smaller businesses. Another thing to watch out for is underutilisation - if you don’t use the capacity you’ve committed to, you won’t get a refund for the unused portion.

To navigate these risks, take the time to assess your business’s growth plans and consider starting with a smaller commitment if you’re uncertain. Keep a close eye on your usage and adjust your approach as needed to ensure you’re making the most of your Savings Plan.

How can small and medium-sized businesses get the most out of their AWS Savings Plans over time?

To get the most out of AWS Savings Plans, it's important for SMBs to keep a close eye on their usage and make adjustments when necessary. Start by reviewing your organisation’s historical usage patterns to select a plan that fits your consistent workloads. Tools like AWS Cost Explorer can be incredibly helpful, offering insights into your spending and usage trends.

After setting up your plan, make it a habit to review it periodically. This ensures your usage continues to align with your plan’s commitments. If your business expands or your requirements shift, you might need to upgrade or modify your Savings Plan to stay on track. AWS also offers tools like budgets and alerts to help you monitor spending and steer clear of unexpected charges.

By staying on top of your usage and taking advantage of AWS’s optimisation tools, you can maintain cost efficiency and support your business growth seamlessly.

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