ec2 pricing models
AWS EC2 Pricing Models: Comprehensive Guide with Real-World Use Case
Amazon Elastic Compute Cloud (EC2) offers multiple pricing models designed to meet different business needs and usage patterns. Understanding these models is crucial for optimizing cloud costs and making informed decisions about your infrastructure investments.
Overview of EC2 Pricing Models
AWS EC2 provides seven primary pricing models that cater to different use cases, commitment levels, and flexibility requirements:
Pricing Model
Best For
Key Characteristics
Potential Savings
On-Demand
Short-term, unpredictable workloads
No commitment, pay-per-use
Baseline (0% savings)
Reserved Instances
Steady-state applications
1-3 year commitment
Up to 72% off On-Demand
Spot Instances
Fault-tolerant workloads
Variable pricing, can be interrupted
Up to 90% off On-Demand
Detailed Analysis of Each Pricing Model
On-Demand Instances
How it works: Pay for compute capacity by the hour or second with no long-term commitments. Billing occurs per-second for Linux, Windows, and other select operating systems, with a minimum of 60 seconds.
Key Features:
No upfront costs or long-term commitments
Immediate availability and full lifecycle control
Per-second billing removes cost of unused compute time
Most expensive option but highest flexibility
Use Cases:
Development and testing environments
Applications with unpredictable usage patterns
Short-term projects and proof-of-concepts
Spiky workloads that can't predict demand
Example Pricing: A t2.micro instance costs approximately $0.0116 per hour in US-East-1, resulting in about $8.70 per month for continuous usage.
Reserved Instances (RIs)
How it works: Make a commitment to use AWS for one to three years in exchange for significant discounts. RIs are essentially billing discounts applied to On-Demand usage when instance attributes match.
Types of Reserved Instances:
Standard Reserved Instances:
Up to 72% savings compared to On-Demand
Least flexible - locked to specific instance configuration
Highest discount for predictable workloads
Convertible Reserved Instances:
Up to 54% savings compared to On-Demand
Can exchange for different instance types, OS, or tenancy
More flexibility but lower discount than Standard RIs
Payment Options:
All Upfront: Highest savings, pay entire cost upfront
Partial Upfront: Moderate savings, partial upfront + hourly rate
No Upfront: Lowest savings, monthly payments only
Use Cases:
Applications with steady-state usage
Predictable workloads running 24/7
Long-term projects with known requirements
Spot Instances
How it works: Access spare EC2 capacity at up to 90% discount from On-Demand pricing. AWS can reclaim instances with two-minute warning when capacity is needed elsewhere.
Key Characteristics:
Market-driven pricing that fluctuates based on supply and demand
Interruption possibility with short notice
Significant cost savings for fault-tolerant workloads
No capacity guarantee
Use Cases:
Batch processing jobs
Data analysis and big data workloads
CI/CD pipelines
Fault-tolerant applications that can handle interruptions
Example: A t2.micro Spot instance can cost as low as $0.003 per hour, compared to $0.0116 for On-Demand.
Real-World Use Case: E-commerce Company Migration
Let's examine how an e-commerce company can leverage different EC2 pricing models to optimize costs when migrating from on-premises infrastructure.
Current On-Premises Setup:
Web Servers: 3 physical servers ($2,400/month)
Database Server: 1 high-memory server ($800/month)
Background Job Processors: 2 compute servers ($1,600/month)
Load Balancer: 1 server ($600/month)
Total Monthly Cost: $5,400
AWS Migration Strategy:
Web Servers (3x t3.medium):
On-Demand Cost: $67.14/month
Reserved Instance Cost: $43.83/month
Recommendation: Use Reserved Instances for predictable web traffic
Database (1x r5.large):
On-Demand Cost: $121.60/month
Reserved Instance Cost: $79.46/month
Recommendation: Use Reserved Instances (databases run 24/7)
Background Jobs (2x c5.large):
On-Demand Cost: $153.28/month
Reserved Instance Cost: $100.14/month
Spot Instance Cost: $45.98/month
Recommendation: Mix of Spot (70%) + Reserved (30%) for fault tolerance
Load Balancer (1x m5.large):
On-Demand Cost: $70.08/month
Reserved Instance Cost: $45.77/month
Recommendation: Use Reserved Instance for consistent availability
Cost Analysis Results:
Infrastructure Approach
Monthly Cost
Annual Cost
Savings vs On-Premises
Current On-Premises
$5,400
$64,800
-
AWS On-Demand
$412
$4,945
92%
AWS Reserved Instances
$269
$3,230
95%
AWS Optimized Mix
$265
$3,181
95.1%
Key Insights:
Monthly savings: $5,135 (95.1% reduction)
Annual savings: $61,619
ROI timeframe: Immediate positive return
Additional benefits: Improved scalability, reliability, and global reach
Decision Framework for Choosing Pricing Models
Use On-Demand When:
Testing new applications or services
Unpredictable workload patterns
Short-term projects (< 6 months)
Need maximum flexibility
Use Reserved Instances When:
Steady-state workloads with predictable usage
Applications running 24/7 or close to it
Long-term projects (1+ years)
Want maximum savings with some flexibility trade-off
Use Spot Instances When:
Fault-tolerant applications
Batch processing or data analysis jobs
Development and testing environments
Can handle 2-minute interruption warnings
Use Savings Plans When:
Using multiple AWS compute services (EC2, Fargate, Lambda)
Workload patterns that change over time
Want flexibility with good savings
Uncertain about future instance requirements
Use Dedicated Hosts When:
Software licensing requires physical isolation
Regulatory compliance mandates
Need visibility into underlying hardware
BYOL scenarios for expensive software
Cost Optimization Best Practices
Right-sizing: Regularly analyze instance utilization and adjust sizes accordingly. AWS Compute Optimizer can provide recommendations.
Mix and Match: Use different pricing models for different components based on their characteristics and requirements.
Monitor Usage Patterns: Use AWS CloudWatch and Cost Explorer to understand actual usage vs. provisioned capacity.
Leverage Auto Scaling: Combine Reserved Instances for baseline capacity with On-Demand or Spot for peak demands.
Regular Reviews: Pricing and usage patterns change - review your strategy quarterly to ensure continued optimization.
Consider Newer Generations: Newer instance types often provide better price-performance ratios.
Common Pitfalls to Avoid
Over-provisioning: Choosing instance sizes based on peak requirements rather than typical usage leads to waste.
Ignoring Commitment Options: Staying on On-Demand pricing for steady workloads leaves money on the table.
Not Planning for Growth: Consider future requirements when making long-term commitments.
Mixing Up Models: Using Spot instances for critical databases or Reserved Instances for temporary workloads.
Understanding these EC2 pricing models and their appropriate use cases enables organizations to achieve significant cost savings while maintaining performance and reliability requirements. The key is matching workload characteristics with the most suitable pricing model and continuously optimizing as usage patterns evolve.