Are you looking to grow and scale your online business to the next level with cloud-powered services? The AWS network can help you achieve your goals. Amazon Web Services (or AWS) is the global leader in delivering Infrastructure as a Service (or IaaS) to web users looking for remote and cost-effective web services. In short, it allows you to run your own website on a cloud-powered web or application server.
Introducing AWS EC2 Instance Pricing
In a key piece of AWS technology, EC2 (or Elastic Compute Cloud) is a network of virtual machines running on the AWS cloud. It enables you to run multiple applications on virtual machines that can scale with your computing needs.
Because of its flexibility, AWS EC2 allows you to choose from different types of EC2 instances, each with its own CPU, memory, and storage configuration. Depending on your workload, you can choose an EC2 instance with an operating system and deploy your application on its servers.
How do you pay for AWS EC2 instances? On a pay-as-you-go basis, you only pay for the computing resources you use. Through this guide, we'll discuss the various types and pricing models of AWS EC2 instances so you can decide which one is best for your business.
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What types of AWS EC2 instances are there?
AWS EC2 instances are broadly divided into the following 5 categories:
The most common and popular EC2 instance type is used for most web applications with consistent workloads.
This instance type is designed for highly computer-intensive applications that require high-performance web servers, such as real-time applications and scientific modeling.
As the name suggests, this is used for memory-intensive applications, such as those running big data analytics or Hadoop applications.
This instance type is designed for applications that require additional GPUs and parallel processing, such as tasks such as machine learning and graphics processing.
Finally, this instance type is used for applications with high storage capacity, such as those with sequential read and write processes.
Depending on the EC2 instance class, you can choose any of the following instance types:
|General purpose||A1||Based on AWS Graviton processor and 64-bit ARM Core|
|T3/T3a||Dynamic workloads are cost-effective for Intel and AMD processes|
|Computing optimization||C5||Suitable for high handling applications|
|memory optimization||R5/ R5a||Designed for applications with real-time analytics and large memory caches; leverages the AWS Nitro system.|
|X1/X1e||Optimized for applications with high memory requirements such as SAP HANA.|
|high memory||Allocate up to 6-12TB of memory in a single instance|
|accelerated computing||P3||Suitable for applications requiring high parallel processing.|
|G3||For graphics-intensive tasks, including rendering and encoding.|
|F1||Provides an instance of FPGA for accelerated processing.|
|storage optimization||H1||Hard disk-based storage for large datasets; up to 16TB|
|D2||Another hard drive-based storage; up to 48TB|
|I3||For SSD-based storage with lower latency than H1 and D2; AWS Nitro system available; Max storage: 16GB|
Next, let's learn about the 4 different pricing models for AWS EC2 instances and the recommended times for each model.
What are the 4 pricing models for AWS?
free tier model
The AWS Free Tier includes more than 60 products, available in the following types:
12 months free:Only available to new AWS customers within 12 months of signup.
Forever free:These free trials do not expire after 12 months and are available indefinitely to new and existing AWS customers.
test:These are short-term free trials from the day of first use.
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1. On-Demand Instances
In simple language, you only pay for what you consume when using On-Demand Instances. With no upfront payment, you pay based on the compute capacity (by day or hour) consumed by your EC2 instance.
2. Reserved Instance
Offers a discounted price—up to 75% of the cost of an On-Demand instance—in return for a one-time upfront payment. In the long run, Reserved Instances can be very cost-effective compared to the on-demand pricing model.
3. Spot instance
This pricing model allows you to bid for spare or unused EC2 computing power at up to 90% of on-demand pricing. Spot Instance pricing is primarily based on the supply and demand of unused AWS EC2 cloud capacity.
4. Dedicated Hosting
In this model, an AWS EC2 server is dedicated to your use. You are not billed based on the number of instances you use. You can purchase Dedicated Hosting with hourly On-Demand pricing or through a subscription price that is 70% cheaper than On-Demand pricing.
In the following sections, we discuss each of these AWS EC2 pricing models in more detail, including the types of web applications for which they are recommended.
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What are On-Demand Instances?
As mentioned earlier, On-Demand Instances allow you to pay for instances created by the hour or by the second (minimum 60 seconds). Depending on your application, you can increase or decrease your computing power, but only pay for the instance as scheduled.
An on-demand pricing model is recommended when:
- As a customer, you want to take advantage of the flexibility of the AWS EC2 cloud platform without any upfront payment or any long-term commitment.
- You want to deploy web applications that do not have a fixed or predictable workload, including those developing for the first time on Amazon EC2.
What are the benefits of an on-demand pricing model? It enables you to move from higher fixed costs to lower variable costs while freeing you from planning and buying hardware.
You can get hourly rates with on-demand pricing from thisAWS EC2 PricingPage. On this page, you can view the rates for each instance type based on supported operating systems and AWS Regions. For example, here is a snapshot of rates, for example, type Generic on Windows OS and the Asia Pacific (Mumbai) region.
What are Reserved Instances?
AWS EC2 Reserved Instances allow you to reduce costs with discounts of up to 72%. With Reserved Instances, you can take advantage of a Capacity Reservation that assigns you a Reserved Availability Zone. This allows you to spin up instances when needed. In short, Reserved Instances offer significant cost savings compared to On-Demand Instances.
The reserved pricing model is recommended when:
- You want to deploy applications that have steady usage patterns and require reserved capacity.
- You're looking for a long-term commitment as a client -- typically one to three years.
How do Reserved Instances (or RIs) work? RIs give you a discounted hourly rate with the option to reserve capacity for running EC2 instances. Additionally, depending on your application needs, you can choose any of the following types of RIs:
Standard RIsBest discounts available - up to 72% off on-demand pricing - designed for working with stable apps.
Convertible RIOffers discounts of up to 54% on On-Demand pricing, and the flexibility to modify RI attributes such as instance family, OS, and tenancy. Like standard RIs, convertible RIs are suitable for applications that are used steadily.
book RIUsed to launch instances within a specific time window. This is useful when you want to use available capacity for predictable and recurring schedules that may only be required for a fraction of a day, week, or month.
Next, what is the payment model for RI? First, you can choose between Standard RIs and Convertible RIs, which have the following three payment methods:
No upfront:With no upfront payment, this option gives you a discounted hourly rate for the entire 1-year or 3-year term (regardless of usage).
Partially prepaid:With this option, you pay a lower upfront payment and then enjoy a discounted hourly rate throughout the term (1 and 3 years).
All prepaid:Where you pay for the entire RI term in one upfront payment. This option offers the highest discount (up to 72%) compared to On-Demand instances.
You can get hourly rates for RI pricing hereAmazon EC2 Reserved Instances PricingPage. Here you can view hourly rates (and on-demand savings) for each instance type by operating system, standard and convertible plans, term (1-year or 3-year), and payment option. For example, below is a snapshot of the standard 1-year rate for an "a1.medium" instance on a Linux operating system and the "Asia Pacific (Mumbai)" region.
What are Spot Instances?
Spot Instances enable you to take advantage of unused EC2 capacity and enjoy up to 90% off On-Demand pricing. This type of instance allows you to bid for available capacity by specifying the highest spot price you are willing to pay for the instance. You can then launch your AWS instance as long as its price is below your maximum spot price. You can then continue to use the instance until you terminate it or the spot price exceeds your maximum spot price.
The Spot Instance model is recommended when:
- Your application has flexible start and end times.
- You want to run your application with very low computational cost.
- You're looking for a lot of extra AWS capacity.
As an added convenience, you can choose to use Spot Instances in combination with On-Demand or Reserved Instances that best lower your overall cost. You can also run Spot Instances for a predefined duration (up to 6 hours) at a 30-50% discount off the On-Demand price.
To compare the latest Spot and On-Demand prices for the same instance configuration, seeSpot Instance Advisor.
You can also get spot instance prices for Windows and Linux/UNIX fromAmazon EC2 Spot Instances PricingPage. On this page, you can price each instance type based on supported operating systems (Windows, Linux) and AWS Region. For example, here is a snapshot of the "Common" spot price for the "Asia Pacific (Mumbai)" region.
What is Dedicated Hosting?
A Dedicated Host is a physical server allocated by Amazon EC2 for your sole use to meet all your compliance-related requirements. Dedicated Hosting integrates with AWS License Manager, allowing you to use existing software licenses such as Microsoft Windows Server and SQL Server.
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In summary, AWS Dedicated Hosting combines the flexibility of AWS with the cost-effectiveness of using existing licenses.
Dedicated hosting is highly recommended when:
- You need full visibility and control over how your instances run on your server.
- You have an application that requires a dedicated AWS instance to be launched on a physical server.
- You need to deploy application instances on the same server for an extended period of time.
- You already have existing software licenses that need to be deployed on physical servers.
What are the benefits of using a dedicated server? It helps you save money by leveraging your investment in existing software licenses, and also meets enterprise compliance requirements for running application instances on dedicated physical servers.
Next, what is the payment model for dedicated hosting? You can use either of the following two payment methods:
on demand:Here you pay for every second (minimum: 60 seconds) that your dedicated server is activated for your purposes. You can also terminate this second-based billing at any time by releasing your Dedicated Host.
Booking:This is similar to how AWS Reserved Instances work. It can provide up to 70% price discount compared to the on-demand pricing model. Likewise, when you purchase Dedicated Hosting through a reservation, you can use three payment methods - Full Upfront, Partial Upfront, and No Upfront.
You can get the hourly price for dedicated hosting from hereAmazon EC2 Dedicated Hosting PricingPage. Here you can view configuration tables for Dedicated Hosts, as well as On-Demand and Reserved pricing for instance types by AWS Region. For example, here is a snapshot of On-Demand pricing for the instance type, General Purpose, and Asia Pacific (Mumbai) regions.
How to Estimate AWS EC2 Instance Costs Using the AWS Calculator
How do you estimate the cost of a given instance? Here's what you need to do:
- Create an estimate fromAWS Pricing CalculatorPage.
- On the next page, click Configure for the Amazon EC2 service.
- Select the region closest to you and select the "Quick Estimate" option.
- Specifies the operating system on which to run the EC2 instance.
- For instance type, enter the minimum hardware requirements (vCPU, memory) or search for the desired instance name (eg t3a.nano).
- Next, enter the number of EC2 instances you need.
- In the Pricing Strategy section, specify the following:
- Pricing Models - On-Demand, Reserve or Savings Plans
- Retention period - only available for reserved instances
- Payment Options - Available for Reserved Instances only
8. Finally click "Add to my estimate" to view your estimated price. For example, as shown below:
Any more tips for saving money on AWS?
As a flexible platform, AWS EC2 allows you to configure your instances according to your requirements and budget. Also, here are some helpful tips to further help you save on EC2 instances:
Choose the cheapest EC2 instance that meets your requirements.
If you don't have to, I suggest you don't spend your money on expensive instance types. Instead, choose an autoscaling group if your application load varies. You can also use autoscaling to create clusters of EC2 instances to meet your growing business.
Seek minimum instance load.
If you are using an instance type with high CPU or memory utilization, try to minimize the instance load to reduce overall costs. Also, you can easily run the whole operation.
Use Reserved Instances or Spot Instances.
You can also keep costs down by choosing Reserved or Spot Instances. The on-demand instance model works best only if you need to run EC2 instances for several hours or days per week. Reserved or Spot Instances are better options if you need to utilize more from your instance.
Remember to shut down the EC2 instance when not needed.
Sometimes, EC2 instances can continue to run, increasing your costs. Learn to shut down non-production systems when not needed. You can also use automation to shut down such instances when they are no longer in use.
Identify and stop EC2 instances with low utilization.
Identify running EC2 instances that are either idle or underutilized. You can then reduce costs by discontinuing or scaling them back. you can use itAWS Billing and Cost ManagementTools to optimize your ECS costs. Additionally, you can use AWS Instance Scheduler to stop instances or AWS OperationsconductorReduce the size of your EC2 instance.
To get started, you can choose from a variety of AWS EC2 services that meet your application needs. This guide provides a basic understanding of the pricing models in the AWS EC2 cloud platform. As an AWS user, you can take advantage of the detailed EC2 pricing models to determine the best pricing model for your application.
What are your main takeaways from this article? Please share your comments on the AWS EC2 instance types you are using and how you minimize the cost?
Looking forward to your comments and suggestions.
What are the 3 main pricing options with EC2? ›
There are multiple ways to pay for EC2 instances: On-Demand, Savings Plans, and Amazon EC2 Spot Instances. For more information on how to optimize your EC2 spend, visit the Amazon EC2 Cost and Capacity page.What is EC2 pricing model? ›
EC2 on-demand pricing model is the most basic type of EC2 pricing. With this types of Amazon EC2 instance pricing, you will have immediate access to as much compute, memory and storage as you need, even if their resource requirements fluctuate frequently. You pay only for the amount of resources that you actually use.What does EC2 pricing depend on? ›
Amazon EC2 Pricing FAQs
It depends on what billing method you select and other factors, such as the instance type, instance size, operating system, tenancy model, region, and availability zone, as well as whether you use load balancing.
Spot Instances are available at up to a 90% discount compared to On-Demand prices. You can use Spot Instances for various stateless, fault-tolerant, or flexible applications such as big data, containerized workloads, CI/CD, web servers, high-performance computing (HPC), and test & development workloads.What are the 3 basic pricing methods explain? ›
|Price skimming||Its early high prices help recoup development costs.|
|Penetration pricing||Its significantly lower price can motivate customers to switch brands|
|Value-based pricing||A boon to artisanal goods, high-tech products and other unique services.|
- Savings Plans.
- Dedicated Hosts.
- Reserved Instances.
AWS pricing is similar to how you pay for utilities like water and electricity. You only pay for the services you consume, and once you stop using them, there are no additional costs or termination fees.What is the main pricing model of AWS? ›
AWS lets you use EC2 compute instances with on-demand pricing, and pay by the hour or by the second. This pricing model enables you to spin up instances without paying for anything in advance. You can quickly terminate these instances as needed, and pay for the resources you used.What are the 3 types of EC2? ›
- General Purpose Instances.
- Compute Optimized Instances.
- Memory-Optimized Instances.
- Accelerated Computing Instances.
- Storage Optimized Instances.
Spot Instances are a cost-effective choice if you can be flexible about when your applications run and if they can be interrupted. Dedicated Hosts or Dedicated Instances can help you address compliance requirements and reduce costs by using your existing server-bound software licenses.
Which EC2 instance is cost effective? ›
Save up to 90% on EC2 costs by using Spot Instances and save up to 72% with AWS Savings Plans. This is on top of the up to 10% cost saving you gain by rightsizing your workloads with AMD-based instances or the up to 20% lower cost by migrating to AWS Graviton2-based instances.How to make EC2 cheaper? ›
- Change to “T” family instances. ...
- Change to “A” family instances. ...
- Use other instance families. ...
- Change Region. ...
- Change the Operating System. ...
- Change to a newer instance. ...
- Change instance type based on CPU Usage. ...
- Change instance type based on Memory Usage.
The instances are available in three sizes (micro, small, and medium) with On-Demand prices that start at $0.013 per hour ($9.50 per month). You can also gain access to a pair of t2. micro instances (one running Linux and another running Windows) at no charge via the AWS Free Usage Tier.How many EC2 instances are free? ›
Your free usage under the AWS Free Tier is calculated each month across all regions and automatically applied to your bill. For example, you will receive 750 Amazon EC2 Linux Micro Instance hours for free across all of the regions you use, not 750 hours per region.Which AWS EC2 pricing option offers the most flexibility? ›
Compute Savings Plans provide the most flexibility and help to reduce your costs by up to 66%. These plans automatically apply to EC2 instance usage regardless of instance family, size, AZ, Region, OS or tenancy, and also apply to Fargate or Lambda usage.What are the 4 types of pricing methods? ›
What are the 4 major pricing strategies? Value-based, competition-based, cost-plus, and dynamic pricing are all models that are used frequently, depending on the industry and business model in question.What is 3 tier pricing? ›
What is Three-Tiered Pricing? A three-tiered pricing model is a business method of laying out three different service solutions to your customers at three different pricing points, no matter if you use fixed pricing, value pricing or a volume pricing model.What is the most popular method of pricing? ›
Hence the most common method used for pricing is cost plus or full cost pricing.What are the three 3 different cloud costing models strategies? ›
There are three cloud pricing strategies: value-based, fact-based, and market-based.What is typical 3 tier architecture AWS? ›
The three-tier architecture is the most popular implementation of a multi-tier architecture and consists of a single presentation tier, logic tier, and data tier. The following illustration shows an example of a simple, generic three-tier application.
What are the 3 pricing models of cloud computing explain? ›
Cost-based model, which merge the profit with the level of Cost. Value-Based, which take into consideration the basis of user perceiving value. Competition-based, which take into consideration the competitor price of services.What are the four best practices of cost optimization in AWS? ›
- Practice Cloud Financial Management.
- Expenditure and usage awareness.
- Cost-effective resources.
- Manage demand and supply resources.
- Optimize over time.
There are four types of support plans available: Developer, Business, Enterprise On-Ramp, and Enterprise. All paid AWS Support plans are billed monthly with no long-term contracts. AWS Support fees are calculated on a per-account basis for Business and Developer Support plans.What is model pricing? ›
What is pricing modeling? Pricing modeling refers to the methods you can use to determine the right price for your products. Price models take into consideration factors such as cost of producing an item, the customer's perception of its value and type of product—for example, retail goods compared to services.Which configuration choices affect the pricing of an EC2 instance? ›
- Purchasing options.
- Usage duration.
- Instance size.
- AWS Instance type and generation.
- Processor, processor optimization and use of bursts.
- Use of elastic graphics and elastic inference.
- Software stack.
Resolution. AWS offers Amazon EC2 and Lightsail for hosting applications. Amazon EC2 is a mix of multiple services and has its own individual features used to create a single architecture. Amazon EC2 instances are meant for small to complex architecture.How many EC2 instances are there in AWS? ›
Q: How many instances can I run on EC2? You are limited to running On-Demand Instances per your vCPU-based On-Demand Instance limit, purchasing 20 Reserved Instances, and requesting Spot Instances per your dynamic Spot limit per AWS Region.Is EC2 just a VM? ›
Amazon Elastic Compute Cloud (EC2) is the Amazon Web Service you use to create and run virtual machines in the cloud (we call these virtual machines 'instances').What is the lowest cost AWS instance type? ›
With On-Demand Instance prices starting at $0.0058 per hour, T2 instances are one of the lowest-cost Amazon EC2 instance options and are ideal for a variety of general-purpose applications like micro-services, low-latency interactive applications, small and medium databases, virtual desktops, development, build and ...What is the best EC2 instance class? ›
Storage Optimized instance type. The storage optimized AWS EC2 instance type provides the best storage capabilities for Amazon instances.
What is the benefit of Amazon EC2 on-demand pricing? ›
On-demand instances are ideal for users that cannot or do not want to make upfront payments or long-term cost commitments. Organizations that require low-cost, flexible and resizable compute capacity like that provided by Amazon EC2 can also benefit from on-demand instances.Does EC2 cost when stopped? ›
Stopped instances don't incur charges, but Elastic IP addresses or EBS volumes attached to those instances do. To disassociate an Elastic IP address from an instance, see Disassociate an Elastic IP address.Do you pay for EC2 instances? ›
When reviewing your Amazon EC2 usage, consider the following: If your instance is billed by the hour, then you're billed for a minimum of one hour each time a new instance is started—that is, when the instance enters the running state.Which is the type of instance purchase is more cost efficient? ›
Spot Instances are a cost-effective choice if you can be flexible about when your applications run and if your applications can be interrupted.Is EC2 more expensive than Lambda? ›
For most periodic or very light workloads, Lambda is dramatically less expensive than even the smallest EC2 instances. Focus on the memory and execution time that a typical transaction in your app will need to relate a given instance size to the break-even Lambda cost.Is AWS EC2 cheaper than Azure? ›
The cost of running Windows instances on AWS can be up to 5X more expensive than using your existing Windows SQL Server and SQL licenses with Azure. The reason is that you have to purchase Windows licenses separately when using AWS.How do I reduce AWS spending? ›
- Improve Utilization of Amazon EC2 Instances.
- Delete Unattached EBS Volumes.
- Analyze Amazon S3 Usage and Leverage Storage Tiering.
- Review and Modify EC2 Autoscaling Groups Configuration.
- Reuse or Sell Underutilized RIs.
- Identify and Delete Orphaned Snapshots.
- Analysis of Amazon DynamoDB Usage and Cost Reduction.
Pricing for AWS Support Plans | Starting at $29 Per Month | AWS Support.How often do EC2 instances fail? ›
Disk failures on EC2 aren't exactly common place, but I've seen experiences from 0.0001% to 2% disk failure rates. Googling around (and checking the EC2 boards) will yield you more evidence of this.Which AWS service is always free? ›
The AWS Free Tier allows you to get hands-on experience with AWS Services such as Amazon EC2, Amazon S3, and Amazon RDS. The AWS Free Tier provides three types of offers.
Is EC2 a PAAS or IaaS? ›
A good example of IaaS is AWS EC2. EC2 delivers scalable infrastructure for companies that want to host cloud-based applications.What are the three types of EC2 Instances? ›
They are On-Demand Instances, Reserved Instances, Spot Instances, and Savings Plans. Amazon also offers the additional option of Amazon EC2 Dedicated Hosts.What are the 3 different methods that you connect to a EC2 instance? ›
- Task 1: Launch an EC2 instance – optional.
- Task 2: Create an RDS database and automatically connect it to your EC2 instance.
- Task 3: Verify the connection configuration.
The 3 C's of Pricing Strategy
Setting prices for your brand depends on three factors: your cost to offer the product to consumers, competitors' products and pricing, and the perceived value that consumers place on your brand and product vis-a-vis the cost.
Amazon EC2 and Amazon S3 are fundamentally different types of services. One allows you to run servers in the cloud with minimal effort on your part, while the other is designed for storing large amounts of static data and ideal for data backups.What are the three components of EC2 scaling? ›
The three components of EC2 Auto Scaling are scaling policies, scaling activities, and scaling processes.What is S3 bucket and EC2? ›
Amazon Simple Storage Service (S3) and Amazon Elastic Compute Cloud (EC2) are two major storage services for AWS. S3 is more lightweight and provides the capability to store data. EC2, on the other hand, is a web service that provides secure, resizable computing capacity in the cloud.What is EC2 Lambda and S3? ›
S3 is AWS's go-to cloud storage option. EC2 is the computing service that enables applications to run on AWS. Lambda provides managed serverless computing on Amazon Web Services. ECS is an AWS service that orchestrates Docker containers.What is the pricing strategy of cloud services? ›
Cloud services vendors use a variety of pricing mechanisms, including usage-based fixed pricing, usage-based dynamic pricing, subscription-based pricing, reserved services contracts with a combination of usage-based fixed pricing and up-front fees, auction-based pricing, etc.What are the cloud pricing methods? ›
There are three cloud pricing strategies that are subjective (value), objective (fact), and market-based. Demand drives value-based cost; supply drives cost-based cloud model; whereas an equilibrium of both supply and demand drives the market-based cloud model.
What are the three 3 factors affect pricing? ›
The main determinants that affect the price are: Product Cost. The Utility and Demand. The extent of Competition in the market.What is 3 C's concept? ›
The 3 Cs are: Company, Customers and Competitors - the three semi-fixed environmental factors in your market.What is 3Cs strategy model? ›
This method has you focusing your analysis on the 3C's or strategic triangle: the customers, the competitors and the corporation. By analyzing these three elements, you will be able to find the key success factor (KSF) and create a viable marketing strategy.