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In this article, we compare Standard vs Convertible Reserved Instances (RIs) and their features, flexibility, and discounts. AWS offers organizations various ways to lower cloud costs, with EC2 leading the pack. Its flexible purchasing options such as Spot Instances, Savings Plans, and Reserved Instances allow for discounts ranging from 55% to 90%.

In this article, we’ll delve into AWS volume discounts, compare Reserved Instances types, and guide you to the best purchasing option to meet your needs and save on your AWS bill.


What are AWS Volume Based Discounts?

Volume based discounts in AWS are available for AWS RDS, EC2, S3, and Data Transfer. These discounts are designed to provide flexibility and cost savings, making it more appealing to invest in cloud infrastructure. We will be focusing on EC2 discounts for comprehension and brevity.

Standard vs Convertible, Reserved Instances, AWS, Cost Optimization, Volume Based Discounts

Spot Instances

Spot Instances are an innovative way to utilize unused EC2 capacity. By bidding on this surplus capacity, you can access computing resources at significantly reduced costs (up to 90%). This option is suitable for flexible applications that don’t require continuous availability, translating into potential massive savings.

Savings Plans

Savings Plans offer another level of cost control. By committing to a specific amount of compute usage over a 1 or 3-year term, businesses can secure discounts up to 72% compared to On-demand pricing.  The difference lies in the flexibility to change instance types and families without altering the discount, making it an appealing option for those with predictable but variable workloads.

Reserved Instances

Reserved Instances (RIs) serve those looking for stability and substantial savings. By committing to EC2, RDS, or S3 capacity on a 1 or 3-year basis, organizations can enjoy lower costs compared to On-Demand pricing (55% to 75%). AWS offers two types of RIs to suit different budgeting and functional requirements.


What are the different types of RIs in AWS?

Reserved Instances in AWS come in two primary types: Standard Reserved Instances and Convertible Reserved Instances. Both offer substantial cost savings, but their terms and flexibility differ. Let’s dive into their features, discounts, and suitable use cases:

Standard Reserved Instances

Standard Reserved Instances offer substantial discounts compared to On-Demand Instances. They are best suited for steady-state usage and provide the most significant cost savings (up to 75% off On-Demand prices). However, they lack the flexibility to modify the instance type once purchased.

Standard Reserved Instance use cases include:

  • Predictable Workloads: For applications with stable and predictable resource demands.
  • Long-term Projects: Suitable for projects that have a defined timeline and consistent usage patterns.
  • Cost-sensitive Environments: Ideal for budget-constrained projects where cost predictability is paramount.

Convertible Reserved Instances

Convertible Reserved Instances, while offering lesser discounts compared to Standard RIs (up to 55% off On-Demand prices), provide greater flexibility. They allow you to change the instance family, operating system, or tenancy of your RI whenever your needs evolve.

Standard Reserved Instance use cases include:

  • Variable Workloads: For environments with fluctuating demands and the need for different instance types.
  • Experimental Projects: Suitable for new initiatives where requirements may change over time.
  • Strategic Flexibility: Ideal for businesses that seek to balance cost savings with the ability to adapt to future technology shifts.

What is the difference between Standard vs Convertible RIs?

Feature Standard Reserved Instance Convertible Reserved Instance
Modify Reserved Instances Some attributes Some attributes
Exchange Reserved Instances Can’t be exchanged Can be exchanged
Sell in Reserved Instance Marketplace Can be sold Can’t be sold
Buy in Reserved Instance Marketplace Can be bought Can’t be bought

To learn more about selling standard RIs and exchanging convertible RIs, we recommend users to refer to the official AWS documentation.


Reserved Instance Payment Options

There are three payment options for purchasing reserved instances. Each come with their own set of discounts and conditions that must be followed:

All Upfront

Full payment is made at the start of the term, with no other costs or additional hourly charges incurred for the remainder of the term, regardless of hours used.

  • Discount Range: Typically offers the highest discount, ranging from 60% to 75%.

Partial Upfront

A portion of the cost must be paid upfront, and the remaining hours in the term are billed at a discounted hourly rate, regardless of whether the Reserved Instance is being used.

  • Discount Range: Generally provides a moderate discount, ranging from 45% to 60%.

No Upfront

You are billed a discounted hourly rate for every hour within the term, regardless of whether the Reserved Instance is being used. No upfront payment is required.

  • Discount Range: Often comes with a lower discount, ranging from 30% to 45%.
  • Note: No Upfront Reserved Instances are based on a contractual obligation to pay monthly for the entire term of the reservation. For this reason, a successful billing history is required before you can purchase No Upfront Reserved Instances.

By understanding these distinctions, organizations can choose the Reserved Instances and payment options that align best with their requirements, balancing cost-efficiency and flexibility.


Standard vs Convertible RIs – Comparing Pricing and Discounts

When it comes to selecting between Standard and Convertible Reserved Instances, understanding the pricing differences is key to making an informed decision. Below is a comprehensive comparison table for an m5.xlarge EC2 instance under different payment options and terms.

Time Period Payment Type Upfront Monthly Effective Hourly Hourly Discount
Standard 1-Year No Upfront $0.00 $89.79 $0.12 36%
Standard 1-Year Partial Upfront $512.00 $42.34 $0.12 39%
Standard 1-Year All Upfront $1,003.00 $0.00 $0.11 40%
Convertible 1-Year No Upfront $0.00 $102.93 $0.14 27%
Convertible 1-Year Partial Upfront $588.00 $48.91 $0.13 30%
Convertible 1-Year All Upfront $1,153.00 $0.00 $0.13 31%
Standard 3-Year No Upfront $0.00 $62.05 $0.09 56%
Standard 3-Year Partial Upfront $1,030.00 $28.47 $0.08 59%
Standard 3-Year All Upfront $1,937.00 $0.00 $0.07 62%
Convertible 3-Year No Upfront $0.00 $70.81 $0.10 49%
Convertible 3-Year Partial Upfront $1,185.00 $32.85 $0.09 53%
Convertible 3-Year All Upfront $2,322.00 $0.00 $0.09 54%

As evident, Standard Reserved Instances often provide higher discounts, especially for the 3-year term. Meanwhile, Convertible RIs offer more flexibility with lower discounts. The choice between them will depend on your specific needs for cost-saving and flexibility.

For exploring services and instance pricing, you can refer to our AWS Pricing Catalog. To get an accurate forecast of your predicted costs, visit our AWS Pricing Calculator.


Common FAQs

Which AWS service offers volume discounts based on usage?

AWS offers volume-based discounts through services like EC2, S3, RDS, and Data Transfer with its Reserved Instances, Savings Plans, and Spot Instances. By committing to a particular usage level or making reservations, customers can benefit from substantial discounts ranging from 55% to 90%.

What is a standard reserved instance?

A Standard Reserved Instance in AWS provides a substantial discount (75%) over on-demand pricing, but it’s less flexible compared to Convertible Reserved Instances. Attributes like instance type and family can be modified, but the instances can’t be exchanged for another type.

What is a convertible reserved instance?

A Convertible Reserved Instance in AWS allows for a significant discount (55%) over on-demand pricing, still less than standard RIs but has far more flexibility in terms of modifying attributes during its term. This includes changes to the instance family, instance type, platform, scope, or tenancy.

What is the difference between a standard RI and a convertible RI?

Standard and Convertible Reserved Instances in AWS differ mainly in their flexibility and how they are traded:

  • Standard: Limited attribute modifications, cannot be exchanged, can be sold/bought in the Reserved Instance Marketplace.
  • Convertible: More flexible attribute modifications, can be exchanged for different attributes, cannot be sold/bought in the Reserved Instance Marketplace.

How to Purchase Reserved Instances in AWS?

Purchasing Reserved Instances in AWS can be done through the AWS Management Console, AWS CLI, or SDKs. You’ll need to choose between Standard or Convertible, select the desired term (1-year or 3-year), pick the payment option (All Upfront, Partial Upfront, No Upfront), and finally confirm the purchase. AWS’s documentation provides detailed step-by-step instructions, tailored to your specific requirements and preferences.


Conclusion

Final Recommendations for Businesses: For organizations prioritizing cost savings and commitment to specific resources, Standard Reserved Instances may be the ideal choice.

Those seeking flexibility and the ability to change instance attributes might find Convertible Reserved Instances more fitting. Thoroughly assessing your needs and understanding the options is crucial to making an informed decision.

For those eager to expand their knowledge of AWS cost management, we implore you to check out our related articles that will arm you with the required knowledge to start your cost optimization journey:

We hope this article has illuminated the various options and considerations in AWS Reserved Instances.

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