EC2 Instance Purchasing Options
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1h 13m

This course covers the core learning objective to meet the requirements of the 'Implementing effective Cost Management solutions in AWS - Level 1' skill

Learning Objectives:

  • Understand aspects of AWS Cloud economics, including OpEX, CapEX and TCO
  • Understand the various AWS account structures in relation to AWS billing and pricing practices
  • Understand which operations will reduce costs by moving to the AWS cloud
  • Analyze and contrast the various pricing models for AWS, such as On-Demand EC2 Instances, Reserved Instances, and Spot Instance pricing

Instance purchasing options. You can purchase EC2 instances through a variety of different payment plans. These have been designed to help you save cost by selecting the most appropriate option for your deployment. The different EC2 payment options are as follows, on-demand instances, reserved instances, scheduled instances, spot instances and on-demand capacity reservations. It's good to be aware of these different options as well having an understanding of these can help you save a considerable amount of money depending on your use case. Let me run through each option to help explain. Starting with on-demand instance

These are EC2 instances that you can launch at any time and have it provisioned and available to you within minutes. You can use this instance for a shorter time or for as long as you need before terminating the instance. These instances have a flat rate and is determined on the instance type selected and is paid by the second. On-demand instances are typically used for short term uses where workloads can be irregular and where workload can be interrupted. Many users of AWS use on-demand instances within their testing and development environments. And when you stop or terminate your on-demand instance you'll stop paying for the compute resource. 

Reserved instances allow you to purchase a discount for an incidents type with set criteria for a set period of time in return for a reduced cost compared to on-demand instances. This reduction can be as much as 75%. These reservations against instances must be purchased in either one or three year time frames. Further reductions can be achieved with reserved instances depending on which payment methods you select. There are three options available to you, firstly all upfront. The complete payment for the one or three year reservation is paid. And this offers the largest discount and no further payment is required regardless of the number of hours the instance is used. Partial upfront, here a smaller upfront payment is made and then a discount is applied to all remaining hourse during the term. And finally no upfront, no upfront or partial payments are made and the smallest discount of the three models is applied to all remaining hours in the term. Reserved instances are used for long-term predictable workloads allowing you to make full use of the cost savings to be had when using compute resources offered by EC2. 

Scheduled instances, these are similar to reserved instances and the fact that you pay for the reservations of an instance on a recurring schedule, either daily, weekly or monthly. For example you might have a weekly task that is scheduled that performs some kind of bulk processing for a number of hours at the same time every week. With scheduled instances you could set up a scheduled instance to run during that set timeframe once a week. And this prevents you for having to use the on-demand instances which would incur a higher price. You should note that when using scheduled instances but even if you didn't use the instance you would still be charged. This allows you to provision instances for scheduled workloads that are not continuously running. Which is where a reserved instance would be the preferred choice. 

Spot instances allows you to bid for unused EC2 compute resources, however your resource is not guaranteed for a fixed period of time. To you to spot instance you must bid higher than the current spot price which is set by AWS. And this spot price fluctuates depending on supply and demand of the unused resource. If your bid price for an instance type is higher than the spot price, then you'll purchase that instance. But as soon as your bid price becomes lower than the fluctuating spot price, you will be issued a two-minute warning before the instance automatically terminates and is removed from your AWS environment. The bonus for spot instances is that you can bid for large EC2 instances at a very low cost point saving a huge amount on cost. Due to the nature of how the instances can be suddenly removed from your environment, spot instances are only useful for processing data and applications that can be suddenly interrupted. Such as batch jobs and background processing of data. 

Capacity reservations allows you to reserve capacity for your EC2 instances based on different attributes. Such as instance type, platform and tenancy et cetera. Within a particular availability zone for any period of time. This ensures that you always have the available number of instances you require within a specific availability zone immediately. This capacity reservation could also be used in conjunction with your reserved instances discount providing you additional savings. 

About the Author
Learning Paths

Stuart has been working within the IT industry for two decades covering a huge range of topic areas and technologies, from data center and network infrastructure design, to cloud architecture and implementation.

To date, Stuart has created 150+ courses relating to Cloud reaching over 180,000 students, mostly within the AWS category and with a heavy focus on security and compliance.

Stuart is a member of the AWS Community Builders Program for his contributions towards AWS.

He is AWS certified and accredited in addition to being a published author covering topics across the AWS landscape.

In January 2016 Stuart was awarded ‘Expert of the Year Award 2015’ from Experts Exchange for his knowledge share within cloud services to the community.

Stuart enjoys writing about cloud technologies and you will find many of his articles within our blog pages.