AWS Pricing Models:

I. Introduction:

Understanding AWS pricing options is essential to make cost-effective decisions for your business's cloud infrastructure.

In this blog post, we will simplify AWS pricing options and provide examples to help you out for choosing the right option.

These pricing models apply to:

EC2 instances
RDS database instances
Redshift cluster nodes
EMR nodes Elastic Map Reduce (big data processing)
Lambda functions

A.On-Demand Instances: [Hourly, Day]

Mostly used for businesses with unpredictable workloads or traffic patterns. Pay for computing capacity by the hour or second for a certain time. (Eg. Running a website that experiences high traffic throughout the day.)

B. Reserved Instances: [Years]

It’s the best for a stable workload for the long term. Reserve capacity for 1 or 3 years and significantly reduce costs compared to On-Demand Instances.

As part of the reservation, the customer pays an upfront fee. This upfront payment can be the:

Total cost of running the instance over the chosen period (full upfront payment).
Partial cost of running the instance over the chosen period (partial upfront payment).
No cost of running the instance over the chosen period (no upfront payment).

( eg: Running a database server that takes years of workloads.)

Types:

Standard: Steady-state production systems that will run for long periods of time.
Scheduled: Production systems that will run for long periods of time with definite and predictable peaks and workloads.
Convertible: Production systems that will run for long periods of time, but may have slightly different needs and allocations than normal.

C. Savings Plans: [cost-effective for dynamic workloads]

The flexible way & cost-effective for dynamic workloads. The amount of usage (measured in dollars per hour) for 1 or 3 years.

If your workload has varying resource needs throughout the day, week, or month, Savings Plans are more flexible. It automatically applies discounts to your usage.

Also, Savings Plans are applicable to computing resources like EC2, Fargate, or Lambda. This allows the flexibility of choosing the best instance type for getting pricing discounts.

Compute: These are best suited for systems that evolve quickly and may need a different set of services other than EC2, and different instance families in the future. It costs more but is also more flexible. Compute Savings Plans can be applied to EC2 instances, Fargate, or Lambda services. This extends over any instance family, size, AWS region, operating system, or tenancy. The savings can be up to 66%.
EC2: As the name suggests, this is applicable to EC2 only, and applicable only for a specific instance family in a particular region. It should be mentioned that this is regardless of availability zone, across any instance size, operating system, or tenancy. This is best suited for large but predictable workloads. EC2 SPs are more restricted, but offer greater savings (up to 72%).

D. Spot Instances: [Big data handling]

When the demand for resources increases, AWS may interrupt your Spot. However, you can configure your applications to handle interruptions and make them fault-tolerant. ( Eg. Handling big data processing)

Accurate predictions of instance outage and timely bidding in the Spot market.
Automated handling of instance terminations to address critical data loss and capturing any stateful information.
Time-critical re-launch of the correct number of instances to maintain same level performance.
Automated load balancing configuration.

CI/CD pipelines. Here, losing an instance means running any unfinished workflow again once another instance becomes available
Non-production workloads that don’t need continuous uptime
Workloads where lost data can be quickly regenerated
Containerized workloads where container orchestration may need extra nodes from time to time.

(Eg.)In Nepal, Weather Forecasting Department relies on extensive weather data analysis to provide accurate forecasts and monitor climatic conditions where weather data can be computationally intensive and expensive. This is where Spot Instances can make a significant impact.

E.Dedicated Hosts: [data protection, licensing, and sensitive data privacy]

Perfect for specific licensing, security, or compliance requirements. Such as Health Provider Organization keeping records of patients, Research Institution that needs high data performance and securing sensitive data.

Simply it provides dedicated physical servers for your account that help run software with strict licensing that requires dedicated hardware.

II. Why pricing models ?

To optimize costs, provide flexibility, support scalability, and reach out to specific requirements. By choosing the right pricing option,

1. Organizations can handle their cloud expenses with their budget,

2. Adapting according to workload needs,

3. Engaging more with the available budget.

4. Plan for future growth, and meet unique compliance or security obligations.

III. Key Awareness before pricing on AWS !

1. Understand the complexity of pricing models.

2. Be aware of the potential (hidden costs) like 'data transfer fees or storage charges.

3. Monitor and optimize resource usage for cost efficiency.

5. Use the AWS (Pricing Calculator) for cost estimation and comparison.

6. Utilize AWS cost (management tools) for budgeting and cost allocation.

7. Select the appropriate AWS support plan for your needs.

IV. Conclusion:

Choosing the right AWS pricing option is essential for cost optimization and scalability.

Whether it's On-Demand Instances for flexibility, Reserved Instances for stable workloads, Savings Plans for dynamic usage, Spot Instances for cost savings, or Dedicated Hosts for specific needs,

consider your workload and budget to make an effective decision. Regularly review and adjust your pricing strategy as your business evolves to maintain cost efficiency while leveraging the power of AWS.