With all of the new RI types, the customer is billed for a full 24 hours a day every day of the year, regardless of whether the RI is used or not. The change in AWS RIs does not affect on-demand prices, so Google continues to offer a lower cost since reducing its prices in October 2014.We compared Google Sustained Use discounts to AWS No Upfront RIs. These options represent the closest to an apples-to-apples comparison, since the Google Sustained Use discount does not require any upfront payment.
If at any moment the instance does not need the credits it receives, it stores them in its CPU Credit balance for up to 24 hours. The specific performance of each instance type may vary.In this comparison, Google has a price advantage ranging from 11 to 30 percent.
However, AWS also offers more memory on the high-memory instances and twice the memory on the high-CPU instances, along with an SSD, that balances Google’s lower price. As load increases beyond certain thresholds, additional m1.smalls are added according to auto-scaling rules set up by a RightScale user. It is also important to note that the Google Sustained Use discounts require no commitment at all, while the AWS No Upfront RI is still a commitment to use for a one-year term.AWS users may also consider using Spot Instances for certain workloads, which can be substantially cheaper, or buying RIs via the RI Marketplace. However, customers will also need to consider the financial tradeoffs of paying part or all of the costs upfront.
Excluding this additional “cost of capital,” AWS costs range from 1 to 9 percent lower for the standard and high-memory instance families. AWS also provides an ECU measure (EC2 Compute Unit) that describes the relative measure of processing power for different instance types.
However, Google’s cost is lower by up to 14 percent in the high-CPU instance family.AWS has offered even larger discounts for a three-year term on RIs. However, in the case of T2 instances, the published ECU ratings are "Variable" due to the bursting capabilities, which makes it difficult to compare with other instance types.Will T2 Be Cheaper?The chart below plots cost vs.

However, during that three-year term, customers should consider that there may be significant price cuts in on-demand usage as well as the launch of new, more powerful instance types.
The T2 family offers a lower cost than the M1 and M3 families with equivalent memory, but does so at the expense of CPU. Although the RI discount levels calculated by AWS are based on running an instance 100 percent of the time over the term of the RI, it is still possible to realize savings for an instance that doesn’t run 100 percent of the time. For AWS instances with low CPU utilization and no need for instance storage, it provides a well-spaced set of options. It’s important to do a breakeven analysis to determine the amount of time an instance must be used before you break even vs on-demand.
For example, if a No Upfront RI for a particular instance type in a particular region offers a 25 percent discount for a 1-year term, then you will realize some savings as long as you use that RI for at least 75 percent of the year (or at least 9 months). For 1-year RIs, the breakeven point ranged from 222 days (61 percent of the term) for All Upfront RIs to 261 days (72 percent of the term) for No Upfront RIs. T2 instance types are also a fit for single-server workloads where the server sits idle much of the time.
All Upfront RIs required only 409 days (37 percent of the term) to breakeven while Partial Upfront RIs required 435 days (40 percent of the term) to breakeven. However, once a workload reaches a scale where the CPU utilization exceeds 40 percent on average or when multiple servers are brought to bear during auto-scaling, it makes more sense to look at fixed performance instances. This helps to mitigate the risk from changes in on-demand prices, from the introduction of new higher-power instance types, or from changes in a customer’s cloud usage — all of which could decrease the realized discount over the longer 3-year commitment.Additional ConsiderationsAssuming that your breakeven analysis shows that an RI purchase makes sense, you then need to determine which type of RI to buy. Your company will likely use several additional factors that might include your cost of capital, liquidity requirements, capitalization options, and interest rates to determine whether you are better off paying for an All Upfront RI to secure the largest discount or paying month-by-month for a No Upfront RI.In some cases, that decision might also depend on other business factors as well. For example, large enterprises might have money budgeted in a particular month, quarter, or year that needs to be used in that time period.

Conversely, a startup might want to conserve cash in anticipation of future fundraising.Considering Future Price ReductionsAs you decide whether an RI purchase makes financial sense, remember that purchasing an RI might exclude you from future price reductions that apply only to on-demand instances. For example, if you purchase a 1-year RI that offers a savings of 10 percent over on-demand, and if after half a year the on-demand price goes down by 20 percent, you are now no further ahead than if you had stayed with on-demand pricing.
While no one can predict how much cloud prices will decrease over the year, given past history, it’s almost certain that they will decrease.Other Tips on AWS RIsIt’s also important to remember a few things about how AWS RIs work.
You purchase an RI for a particular instance type, availability zone (AZ), and operating system.
You can request to modify your RIs to move between AZs (not regions) or to change instance sizes in the same family.
Requests to modify are processed by AWS as soon as possible based on available capacity.You can continue to use the old-style RIs over their term, and you can combine old-style RIs with these newer RIs.
Your AWS bill will be calculated by applying the lowest cost RI first in order to maximize savings.WrapupCloud prices from AWS and other public cloud providers will continue to drop, and cloud pricing models will continue to evolve for the foreseeable future. Although AWS has simplified RI prices with this announcement, there are still many factors that companies will need to take into account when deciding how to purchase cloud compute resources. The RightScale 2014 State of the Cloud Report found that most enterprises are implementing multi-cloud strategies.
IT teams want to broker multiple public and private cloud services for their organizations and acquire the best cloud services at the lowest possible cost.

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