How Amazon Inflation proofs itself with savings plans

It’s that time of year when we close out the year financially and plan for next year. And this is a great time to re-examine your AWS 1-3 year savings plans.

In this post, I want to break down something I think AWS has done brilliantly to inflation-proof themselves, but also how that could negatively impact you.

The main unit of measurement you pay for with these savings plans is compute and RAM per hour. But AWS doesn’t let you buy CPU/RAM hours and stockpile them.

No, they allow you to pre-pay in dollars.

If they allowed you to stock up CPU/RAM hours and the cost of delivering those to you went up, perhaps because energy costs spike or the supply of computer chips were to skyrocket, then they would have to eat those costs.

But because they are only selling you a discount on dollars committed to be spent, even if they have to raise rates significantly, those dollars would be applied at the rate on the date they are being consumed.

Let’s break it down:

Let's say 1 server costs $30 per month right now, and you commit to 3 years at $30/mo, totalling $1080.

Now, let's say the cost of serving you those same compute hours doubles over the next few years (or goes up 50% and the dollar drops by 50%, you can choose your poison). That means towards the end of your contract, you are going to chew through those dollars faster and likely need to chip in additional funds to keep your account in good standing.

It’s a brilliant move on AWS’s behalf, keeping them nimble and able to adjust course.

It’s not the end of the world for you as the customer; just keep that in mind when purchasing your savings plans. A lot can (and likely will) happen in the next 3 years, so know what you are paying for when making these big decisions.

If you need help making these decisions, feel free to reach out to me; it's what I do.