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Many cloud administrators are surprised to learn they can easily spend more in the cloud than they do on premises, but it doesn't have to be that way.
Cloud computing rose to prominence due to its on-demand availability, but those variable costs can quickly add up at scale. Major cloud providers AWS, Microsoft and Google have discount schemes that lower the base price of compute instances in exchange for either a commitment to buy a certain amount of future resources, or acceptance of availability restrictions.
Enterprises rely heavily on these programs to keep cloud expenses in check, so it's imperative that any company starting its journey to the cloud or scaling up usage understand what's available. Let's review some of the prominent cloud discounts on AWS, Microsoft Azure and Google Cloud.
Amazon EC2 Reserved Instances
When AWS first rolled out Reserved Instances (RIs), the concept was simple: reserve a non-refundable, fixed amount of Amazon EC2 instance capacity and type for future use, and receive a sizable discount compared to On-Demand pricing. However, the RI program has become more complex in practice as AWS adds usage options and savings schemes. For example, AWS will now waive capacity requirements if users are willing to forgo capacity reservations.
Standard RIs offer the biggest discount -- up to 72% -- but they largely can't be changed in size or instance family after purchase. For a lesser discount, an AWS customer can opt for Convertible RIs, the attributes of which they can change later to match another RI of equal or lesser value. In both cases, these instances are best purchased for steady workloads, where enterprises can confidently project the amount of capacity they'll need. Prices vary based on the duration of the commitment and how much the user pays up front.
The third option in this discount program is Scheduled RIs, cloud instances that launch in specified windows but only run for a set number of hours in a day, week or month. These can be purchased at any time, but prices and availability vary.
Amazon EC2 Spot Instances
Spot Instances provide even deeper discounts than RIs -- up to 90% off On-Demand pricing at AWS -- but come with greater limitations. Enterprises access pools of unused AWS capacity to achieve these discounts, and availability and pricing fluctuate based on overall resource demand within a given Region. These Spot Instances can also be cut off by AWS on short notice since it gives On-Demand instances priority.
For these reasons, Spot Instances should not be the foundation of workloads that depend on consistent resource availability. However, they're a good addition, combined with On-Demand instances, to accommodate spikes in traffic. They're also well suited for fault-tolerant or flexible workloads, such as containerized applications, batch analytics operations, or test and development environments.
AWS Savings Plans
The latest update to AWS' cloud discount options offers the same savings as RIs, with less complexity. All instances come in either On-Demand or Savings Plan prices. An enterprise commits to a specific amount of future compute usage, measured in dollars per hour, over one or three years. The usage within that commitment is charged at the Savings Plan rate. If AWS usage exceeds that commitment within the same timeframe, the user pays On-Demand pricing.
Enterprises can select between Compute Savings Plans and EC2 Instance Plans, which are similar to Standard RIs and Convertible RIs, respectively. Compute Savings Plans offer more flexibility to change instance attributes, but provide less of a discount than EC2 Instance Plans.
Azure Reserved Virtual Machine Instances
Organizations save up to 72% off the base rate for Microsoft Azure cloud resources when they use Azure Reserved Virtual Machine Instances. Those savings can jump to 80% when combined with Azure Hybrid Benefits, which converts on-premises Windows Server and SQL Server licenses for Azure.
Azure customers select their region, VM type and a term of either one or three years. Unlike similar discounts on other public clouds, this one lets organizations change their instance type or cancel their reservation at any time. However, VMs can only be changed within a prescribed instance size flexibility group, and users can only recoup up to $50,000 per year for refunded reservations.
Azure low-priority VMs
Azure low-priority VMs are available through Azure Batch and VM scale sets, and can come in at up to 80% off the standard price for Azure VMs. They're designed for short-lived workloads or those that tolerate disruption.
Microsoft doesn't offer SLAs to cover low-priority VMs and can interrupt them at any time. Users decide between eviction policies that either completely delete the VM when sessions go offline, or stop allocating resources but maintain the disks associated with the VMs.
Google Committed Use Discounts
Similar to AWS' Reserved Instances, Google offers this cloud discount to users who make one- or three-year commitments to deploy a fixed amount of capacity. An enterprise can save up to 57% on most standard machine types, and up to 70% for memory-optimized machine types. The savings can also be applied to custom cloud VMs.
Enterprises pay on a monthly basis, and the commitments are based on an aggregate usage within a region, so they can reconfigure machines within those limits. However, don't expect to apply the Committed Use discount to shared-core machine types or extended memory. It will work on GPUs, but only if the Google Cloud customer reserves those instances ahead of time.
Google Preemptible VMs
Enterprises save up to 80% when they use Google Preemptible VMs, which are similar to Spot Instances from AWS in that they provide access to unused capacity within a particular region. These cloud discounts come with multiple caveats: Preemptible VMs can only operate for up to 24 hours, and Google can shut them down with only 30-seconds notice.
Because of these limitations, Preemptible VMs are designed for fault-tolerant or batch jobs.
Google Sustained Use Discounts
These are some of the most straightforward cloud pricing discounts. Essentially, they reward customers for continued use of the platform, with automatic discounts applied to certain Google Compute Engine resources if they run for a specified percentage of a given month.
Sustained Use Discounts can cut up to 30% off the base price from Google, but the savings vary depending on the machine type. The discount only applies to vCPU and memory, and cannot work on VMs created in Google's PaaS App Engine or its data processing service Cloud Dataflow.