As businesses scale, so do their cloud expenditures. Amazon Web Services (AWS), one of the most widely used cloud service platforms, offers a way out of this predicament through volume-based discounts. These discounts have become an integral aspect of cloud cost management, helping organizations not only to sustain but thrive in an increasingly competitive landscape.
This guide dives into how AWS volume-based discounts work, the services they apply to, and how they stand in relation to other AWS discount options like EC2 Spot Instances, Reserved Instance payment plans, and AWS Savings Plans.
How Volume Discounts are Applied in AWS Billing
One of the most compelling features of AWS’s pricing model is its progressive discount structure for increased usage, often referred to as “volume-based discounts.” This system encourages organizations to consume more services by offering cost benefits as usage escalates.
But how exactly does it work? Here’s a closer look.
AWS Tiered Pricing
Tiered Pricing Structure
The cornerstone of AWS’s volume-based discounting is its tiered pricing structure. Under this arrangement, different rates are applied to different “tiers” or “levels” of usage.
For example, if your organization uses X GB of storage in S3, you’ll pay one rate for the first Y GB and a discounted rate for each GB beyond that. As you climb up the usage ladder, additional discounts kick in.
Monitoring and Alerts
For organizations keen on maximizing their volume discounts, AWS provides several tools like AWS Cost Explorer and AWS Budgets. These platforms offer insights into your usage patterns and alert you when you’re close to hitting a discount threshold, thereby enabling proactive cost management.
AWS Consolidated Billing Volume Discounts Example
For the purpose of this example, let’s consider two account holders, Alice and Charles, who manage their storage under one consolidated billing account.
S3 Standard Storage Pricing Table
|Storage Used||Regular On-Demand Price per GB||Volume Discount Price per GB|
|First 50 TB / Month||$0.023||$0.023|
|Next 450 TB / Month||$0.023||$0.022|
|Over 500 TB / Month||$0.023||$0.021|
S3 Volume Based Discounts Example
In this hypothetical example, Alice uses 30 TB of S3 Standard storage, and Charles uses an additional 60 TB for the same class of storage. Collectively, they have used 90 TB of S3 Standard storage.
To calculate their costs:
Regular On-Demand Pricing
- Alice: 30 TB * $0.023 * 1024 GB = $714.24
- Charles: 60 TB * $0.023 * 1024 GB = $1,428.48
- Total On-Demand Cost: $714.24 (Alice) + $1,428.48 (Charles) = $2,142.72
With Volume-Based Discount
- First 50 TB: 50 TB * $0.023 * 1024 GB = $1,190.40
- Next 40 TB: 40 TB * $0.022 * 1024 GB = $901.12
- Total with Volume Discount: $1,190.40 (First 50 TB) + $901.12 (Next 40 TB) = $2,091.52
On-Demand vs Volume Discounts Savings
- $2,142.72 (On-Demand) – $2,091.52 (Volume Discount) = $51.20
Thanks to consolidated billing and volume-based discounts, Alice and Charles save $51.20. While this may not seem like a lot, it can add up over time and across multiple services, leading to significant annual savings.
AWS Volume Based Discounts: List of Services
When it comes to optimizing your cloud costs, it’s essential to know which AWS services offer volume-based discounts. Leveraging these can substantially lower your operational expenses. Here, we’ll provide a comprehensive list of AWS services where volume-based discounts apply:
Services Offering Volume Discounts
- EC2 Instances (Elastic Compute Cloud)
- Amazon SageMaker
- Amazon RDS (Relational Database Service)
- Amazon Redshift
- Amazon ElastiCache
- Amazon OpenSearch Service
- Amazon DynamoDB
To give you a better understanding of the potential cost savings, let’s consider the pricing for a specific configuration across these services for both on-demand and over a one-year period.
AWS Volume Based Discounts Services Pricing Table
|Service||On-Demand Rate||1-Year Reserved Rate||Discount %||Total Savings|
To get these discounted rates, it’s crucial to plan your usage and commit to a one-year or longer-term contract. As illustrated, opting for reserved instances can result in significant discounts—often up to 30% or more—compared to on-demand pricing.
Please note that the above table does not take into account other configurations or additional charges. For getting a comprehensive pricing estimate, we recommend using the AWS Pricing Calculator.
Instance Discounts Available on AWS
Cloud cost optimization is a perennial challenge for businesses. However, Amazon Web Services (AWS) offers multiple avenues beyond volume-based discounts to help you lower your operational expenses. In this section, we delve into some of these options, including EC2 Spot Instances, various types of Reserved Instances (RIs), and AWS Savings Plans.
EC2 Spot Instances
If you’re looking for the ultimate cost-saving option for your flexible, interruption-tolerant applications, EC2 Spot Instances should be on your radar. These instances allow you to utilize spare Amazon EC2 computing capacity at discounts of up to 90% off On-Demand pricing.
EC2 Spot Instances are ideal for:
- Big data processing
- High-performance computing
- Scientific simulations
- Batch processing
- Load testing
Price Fluctuations Prices for Spot Instances change based on supply and demand. When your bid exceeds the current Spot price, your instance will run, and you’ll pay the lower Spot price.
Reserved Instances (RIs) and Payment Plans
When it comes to long-term cloud projects, AWS’s Reserved Instances (RIs) can be a godsend. These are ideal for businesses with predictable workloads and steady-state usage patterns, allowing them to reserve compute capacity at significantly reduced rates compared to On-Demand Instances.
Types of Reserved Instances
- Standard Reserved Instances: For those who can commit to a specific instance type and availability zone for a longer period, Standard RIs offer the most significant cost savings but lack flexibility.
- Convertible Reserved Instances: If your workloads are steady but your infrastructure needs might change, Convertible RIs provide the flexibility to switch instance types or availability zones during the term.
- Scheduled Reserved Instances: Designed for workloads that only need to run during specific times, Scheduled RIs offer a pre-determined operating schedule, although they are currently unavailable for purchase.
AWS Savings Plans
If your organization’s cloud usage varies across multiple AWS services, Savings Plans could be the answer to your budget concerns. These plans provide discounts on compute usage, including EC2 instances and AWS Fargate, in exchange for a commitment to a consistent usage level for a term of 1 or 3 years.
Types of Savings Plans
- EC2 Instance Savings Plan: Designed for applications that require a stable number of EC2 instances running 24/7, this plan offers committed-use discounts specific to EC2 usage.
- Compute Savings Plan: This is a more flexible plan that allows you to apply your committed usage discount across a range of compute services, including AWS Fargate and Lambda.
- SageMaker Savings Plan: Exclusively for Amazon SageMaker users, this plan provides discounts for consistent usage over a 1 or 3-year term, perfect for machine learning workloads.
Differences and Features
|Savings Plan||Differences||Features||Pricing Strategy|
|Compute Savings Plan||Lower rates for EC2 and Fargate services||Can be applied to any EC2 or Fargate usage||Pay per hour used|
|EC2 Instance Savings Plan||Lower rates for EC2 instances only||Can be applied to any EC2 instance usage||Pay per hour used|
|SageMaker Savings Plan||Discount on Amazon SageMaker usage||Can be applied to any Amazon SageMaker usage||Pay per hour used|
When utilized smartly, AWS’s tiered pricing structure and other discount options can serve as potent levers for financial efficiency. It’s not just about using more to save more; it’s about strategically planning your usage to align with the available discount schemes. Therefore, the key to optimizing your AWS expenses lies in a proactive approach, facilitated by an in-depth understanding of all the pricing models AWS has to offer.
So whether you’re a startup scaling fast or an enterprise with established cloud operations, there’s always room to improve your cloud cost management strategy. Every dollar saved is a dollar that can be reinvested back into your business.
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