AWS offers over 15 instance classes, and based on your workload requirements, many configuration and pricing options are available. In this blog, we will do a deep dive into the AWS EC2 instance costs and offer some tips on how to keep them under control so that you can avoid unexpected spikes in your AWS cloud bill. We will also uncover some hidden EC2 cost elements so that you can utilize the cloud resources wisely.

What Are the Different AWS EC2 Instance Types?

Amazon offers a variety of AWS EC2 Instance Types and families from which you can select the one that best meets your needs. The names of instance types are determined by their family, generation, additional capabilities, and size. Names now generally include a letter to indicate the processor type as well. For example, C6i is for the Intel Xeon, whereas R6g is for Amazon Graviton, and M7a indicates it’s an AMD processor. You can keep up with the latest EC2 options here.

Following are the five different families of instance types:

  • General Purpose
  • Compute-Optimized
  • Memory-Optimized
  • Storage-Optimized.
  • Accelerated Computing
  1. General Purpose Instances: M and T families

    Computing, memory, and networking resources for a general-purpose instance can be used for various workloads such as web servers and code repositories. General Purpose Instances are the most sought-after Instances, with many businesses preferring them. In this family, there are two types of instances:

    • Fixed performance (M6i, M7a, and M7g family )
    • Burstable performance (T3a and T4g Family)

    M6 instances are the most recent generation of GP instances. These offer a good balance of computing, and memory, network resources and are an excellent choice for applications with high demand for applications and microservices.

    Ideal for:

    • Applications like web servers and code repositories.
    • Test environments
  2. Compute Optimized: C-type family

    These AWS EC2 instance types are used in applications that require a high CPU load but balanced memory usage. Instance types are combinations of CPU, memory, storage, and networking capacity that allow you to choose the best mix of resources for your applications.Ideal for:

    • Applications that depend on computation and benefit from high-performance CPUs.
    • Machine-learning application
    • Performance-oriented web servers
  3. Memory Optimized: R, X, High Memory, and Z families

    Memory-optimized instances are designed to deliver quick performance for applications that demand the in-memory processing of huge data sets. These circumstances are ideal for the following AWS EC2 Instance Types: Relational (MySQL) and NoSQL (MongoDB, Cassandra) databases with high performance.

    Ideal for:

    • Databases (Relational and NoSQL)
    • Electronic Device Automation applications
    • In-memory caches
    • Real-time big data analytics
  4. Storage Optimized: I, and D families

    Storage Optimized Instances are represented by the I3 and, more recently, the D2 instance families. I3/I3en instances include large SSDs for random I/Os required by databases, data warehouses, and distributed systems like Hadoop. They are appropriate for NoSQL databases such as HBase, Cassandra, MongoDB, and OLTP. The D2 instance family is optimized for HDD storage, for high disk throughput.

    Ideal for:

    • Caching, indexing, streaming
    • Online Transaction Processing (OLTP) high-frequency systems
    • Data warehousing applications
  5. Accelerated Computing: P, G, and Inf families

    Accelerated computing instances are among the AWS EC2 Instance Types that use hardware accelerators, or co-processors, to perform some functions more efficiently than software running on CPUs, such as floating point number calculations, graphics processing, or data pattern matching.

    Ideal for:

    • Hardware accelerators like Graphics Processing Units (GPU)
    • Graphics-intensive applications like game streaming and rendering
    • Built to support machine learning

What are the 5 Models for AWS Instance Types pricing?

There are five different ways for AWS Instance Types pricing, and these are as follows:

1. AWS On-Demand Instance

  • Only pay per hour
  • Cannot be interrupted

AWS enables you to use EC2 compute instances with on-demand pricing and pay by the hour or second. This pricing model allows you to spin up instances without paying anything upfront. Then, as needed, you can quickly terminate these instances and pay for the resources consumed. This option offers high flexibility and scalability and is ideal for new AWS users testing the environment or for unpredictable workloads. On-demand instances, however, are more expensive and can quickly accumulate costs.

Ideal for:

  • First-time applications and dry-runs.
  • A website application that experiences spikes in traffic.
  • Also, for short-term and unpredictable workloads.

2. AWS Reserved Instance

  • Steady-state or predictable usage
  • Can resell unused reserved instances

RIs pricing provides significant discounts in exchange for a commitment for one or three years. AWS allows you to pay for RIs in various ways, including no upfront, partial upfront, and all upfront. When compared to spot instances, it is easier to set up and maintain RIs. However, even if you do not use all of the reserved instances, you will be charged for them. 

nOps Dashboard displaying instance usage and reservation coverage by normalized factor units (NFUs).

Types of Reserved Instances:
  • Standard: Commit for instance, Region, instance family, and platform for one year or three years. (Up to 75% off),
  • Convertible: Reserve with the ability to change instance family and instance platform. (Up to 54% off)
Reserved instance pricing model:
  • All Up-front Reserved Instances (AURI) – Pay completely up-front, no monthly billing (more savings )
  • Partial Up-front Reserved Instances (PURI) – Pay some amount up-front and then monthly installments (Lesser saving than full up-front)
  • No Up-front Reserved Instances (NURI) – Pay nothing up-front, Only monthly installments (Lesser savings than Partial Up-front )

Ideal for:

  • Continuous workloads that are active at all times.

nOps tip: Buying Reserved instances is not a point-in-time exercise. As workload requirements change, you must closely monitor the utilization of reserved instances. nOps offer risk-free commitment management; we maximize your coverage based on your workload needs on auto-pilot.

Line chart showing running instance and reserved NFUs

3. AWS Spot instance

  • You can get up to 90% discount compared to on-demand
  • Request spare computing capacity
  • Flexible start and end times
  • You receive a two-minute warning before your instance is terminated.

These instances are available at up to 90% off the on-demand price; AWS Spot Instances can help you significantly reduce computing capacity costs. This model has the highest potential cost savings but, on the other hand, can be challenging to use for some fault-sensitive workloads because a spot instance can be terminated at any time if AWS requires the compute capacity, and you will only receive a two-minute notice before this happens. Additionally, due to demand, there is a chance that what you are requesting will not be available at the time you need it.

Ideal for: 

  • Workloads that aren’t time-sensitive (Because instances can be terminated anytime)
  • Workloads capable of handling interruptions (server randomly stopping and starting)

4. AWS Dedicated host

  • More expensive than on-demand EC2, as you are paying for the whole host
  • Can be on-demand or reserved (up to 70% off)
  • Guarantee of isolation

AWS allows you to rent physical servers, known as Dedicated Hosts. This option is considered highly secure and reliable because you have the entire server to yourself. You do not need to perform administrative tasks when renting a Dedicated Host. The hardware is cleaned and maintained by AWS. On the other hand, Dedicated Hosts are more expensive and primarily within the budget of businesses.

Ideal for: 

  • Large organizations manage a lot of data.
  • Game servers, application servers, and website servers that need secure workloads

5. AWS Saving Plans

AWS Saving Plans, like RIs, provide a significant discount in exchange for committing to use AWS resources for a more extended period. On the other hand, it allows you to make an hourly spending commitment and then apply a discount rate that is subtracted from your on-demand usage. Coming to AWS Instance types comparison: Saving Plans, unlike RIs, are consolidated across resources, allowing you to take advantage of multiple discounts across your AWS account.

When you sign up for a Savings Plan, the prices you pay for usage remain constant throughout the plan term. You can pay for your commitment in three ways, similar to RIs payment options: AURI, PURI, and NURI. For a significant saving, you must have a fusion of the suitable pricing model as well as the right type and family of instance and its size, so let’s have a look at Instance sizes and how they relate to cost; you can choose the correct instance that fits well with your workload requirements.

nOps Dashboard displaying the utilization of and savings achieved from existing Savings Plans

Tips to save your EC2 Instance costs

Here are some tried and tested tips that you can efficiently use to save your EC2 Instance Costs:
  • The right size of the EC2 instance
    Running an EC2 instance can range from nothing to more than US$250,000/mo, depending on the type (e.g., t4g.nano, p4d.24xlarge) and its configuration. The AWS console is the quickest way to check if the EC2 instance is correctly specified. While viewing the instance, click the Monitoring tab.

nOps Dashboard displaying a list of EC2 rightsizing suggestions

  • Use Cost Optimization Software like nOps
    nOps is a SaaS cloud platform for AWS. It is a software-as-a-service platform that helps customers monitor, analyze, and manage costs. nOps Cloud Cost Optimization tools monitor your AWS resources and provide recommendations for re-sizing so that you can cut the cost without impacting performance. nOps also help in securing their AWS credentials and other services and data. It can be used independently and in an AWS Well-Architected, which allows an organization to reduce its AWS service cost to the minimum.

 nOps Dashboard displaying cost optimization suggestions.

  • Use Standard Reserved Instances for Lowering EC2 Costs
    Managing RIs can be a daunting task that gets more time-consuming and complex as your infrastructure grows and changes.  nOps takes some of the pain away and shows exactly which RIs to purchase.  We can even automate the process for you.

nOps Dashboard displaying a list of candidates for RI/Savings Plan purchase from the Risk-Free Commitment Management program

  • Use auto-scaling:

    Auto Scaling is a tool that will monitor your applications and automatically adjust capacity to ensure consistent, predictable performance at the lowest possible cost.

  • Use Spot instance:

    Unlike the on-demand pricing model, you can save up to 90% by using Spot Instances. In addition, various stateless, fault-tolerant, or flexible applications like big data, containerized workloads, CI/CD, web servers, high-performance computing (HPC), and test & development workloads can all be run on Spot Instances.

  • Use the same Region:

    Keep all traffic within the same Region. If traffic needs to leave a region, look for the Region with the lowest transfer rates that meet your business needs.

  • Use the same Availability Zone:

    Remember that using AWS Private IPs, all traffic within the same Availability Zone and VPC is free. As a result, try to keep your resources as close to the same AZ and VPC as possible by using private IPs.

  • Disassociate Elastic IP address:

    When terminating an ec2 instance, you must disassociate the Elastic IP address.

  • Remove and reduce the size of EBS volume:

    Remove the EBS volume before ending the EC2 instance. Also, downsize the volume, which is underutilized. Instead of storing an EBS volume for a long time, take a snapshot.

  • Scheduling instance Stop/start

    AWS won’t charge you for a stopped instance, so keeping the EC2 instances stopped when they are not in use can help you save a lot. For example, the Dev team needs the environment up from 9 am to 9 pm. So, there is no need to keep the instances running after 9 pm. Instead, turn the instance off after 9 pm and bring it back the next day at 9 am.

    nSwitch will help you create schedules for idle and/or non-production workloads and automate the lights on/off for you

nOps Dashboard displaying recommendations for on/off schedules through nSwitch.

How Can nOps Help You Optimize Your EC2 Spend?

Fully optimal cloud spending isn’t always possible. Customers may experience decision paralysis, especially in the case of large-scale, complicated deployments that call for careful planning. This is where we at nOps can help. We process billions of dollars in cloud spend through our platform, and over time we have helped our customers detect anomalies and optimize accordingly. 

With nOps, we help customers in two ways: First, you pay less for what you use without the financial risk using Risk-Free Commitment and nKS. Second, nOps enables you to use less by automatically pausing idle resources using nSwitch

Let engineers focus on engineering; let nOps focus on FinOps. 

Let us help you save! Sign up for nOps or Book a demo call today.