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AWS Pricing Models Explained

The Fundamentals of AWS Pricing

Amazon Web Services (AWS) is a top cloud provider, offering many services, including storage, artificial intelligence (AI) and machine learning (ML), networking, and more. Each service is priced differently, and there are many pricing models available.

The most flexible of the six AWS pricing models is the “pay as you go” model, which lets you pay only for the resources you use and quickly scale as needed. There is no need for long-term contracts. The basic option lets you pay for what you actually use. Other pricing models enable you to pay less when reserving resources in advance or get volume discounts when you use more resources.

6 AWS Pricing Models

Understanding AWS pricing models is critical for optimizing your Amazon costs

AWS Free Tier 

AWS offers a free tier that lets you sample a wide range of products for free. Here are the three types of free offerings:

  • Always free—this option lets you use a wide range of AWS resources for free. There is a limitation on the amount of resources you can use, and as long as you do not exceed it you can continue using the service without a time limitation. For example, you can get one million AWS Lambda requests per month.
  • 12 months free—the count starts after the initial sign-up date to AWS. This model provides you with free resources for each service for a limited time period. For example, you can get 5 GB of standard storage in Amazon Simple Storage Service (Amazon S3).
  • Short-term free trial—AWS provides a free trial, which you can use to try out certain services. For example, you can use Amazon Redshift for free for a duration of two months.

Note that additional features not included in the free tier may incur additional charges. You can learn more in the official free tier page


The on-demand pricing model lets you pay by the second or by the hour without any upfront payment. There is no need to commit in advance. You can start using the service and pay as needed. However, while on-demand pricing is usually the most flexible model it is also often the most expensive option. It is ideal for unpredictable workloads but not for long term use.

Spot Instances

AWS offers major discounts on their available and unused compute capacity. This model is called Spot Instances. You can get discounts of up to 90% for using spot instances—this is the largest possible discount available on AWS. 

To use spot instances, you need to set up a bid, and when an instance is available at that price you can get a discount on using spare capacity. You can also leverage the Hibernate option, which keeps your instance in the same state and launches it again when there is spare capacity.

While Spot Instances offers major discounts, it also has its limitations. The most concerning limitation is that once the instance is no longer available, it is terminated. You get a 2-minutes notice and then your instance is dropped. This is not ideal for demanding workloads. You can set up AWS monitoring to receive “rebalancing warnings” which are sometimes sent by Amazon in advance of the two minute notice period.

Reserved Instances

Reserved Instances (RIs) provide discounts in return for an upfront commitment to use these resources for a long duration of 1-3 years. This model lets you purchase instances in advance, and use them as needed. AWS provides several payment options, including No Upfront, Partial Upfront, and All Upfront. The more you pay in advance, the bigger the discount.

There are two main types of RIs—Standard RI and Convertible RI. Each comes with different options and several instance families. Convertible RIs let you commit only to a specific region for a certain period of time and change the instance family as needed. This level of flexibility makes Convertible RIs more expensive than the Standard RIs.

RIs are initially less difficult to use than Spot Instances and offer great discounts. However, as you accumulate more RIs, management becomes complex. Additionally, it can be difficult to choose the right instance family and you must pay for the capacity you committed to even if you later do not need it. 

Saving Plans

Saving Plans let you get a high discount rate in return for committing to use AWS resources for a duration of one to three years. You pay an hourly rate, and the discount is subtracted from the  on-demand pricing of your resources. 

AWS offers three main payment options for Saving Plans—Upfront, Partial Upfront, and All Upfront. You can choose one option or a combination of the three and leverage the discounts across your workloads. 

Saving Plans are applied in the account they are purchased from, and then can be applied across all connected accounts. This ensures you can get discounts for several different services, rather than just one. If you want more control over how discounts are applied, you can use an empty account to purchase all available Saving Plans.

Dedicated Hosts

A dedicated host is a physical server offered for rent. AWS lets you rent an entire server, which is reserved for your use only. You gain access to the server and AWS is responsible for administrative tasks, including hardware maintenance and cleaning. 

Dedicated Hosts offer a secure and reliable option for running workloads on AWS. However, this service can be highly expensive, which is why it is used primarily by enterprises. 


In this article I explained the fundamentals of pricing in Amazon’s cloud services, including the following pricing models:

  • Free tier – letting you experience some Amazon services free forever, and others free for a limited time and quantity
  • On-demand – paying per hour or second of usage for Amazon resources
  • Spot instances – deeply discounted instances from Amazon’s spare capacity, which can be interrupted on short notice
  • Reserved instances – letting you commit to computing capacity for a period of 1 or 3 years and receive substantial discounts
  • Savings plans – committing to a certain level of spend on Amazon across your organization in exchange for a discount
  • Dedicated hosts – a physical server provided for your use within the Amazon data center

I hope this will be of help as you plan your use of Amazon and other cloud services.

Should You Move to the Caribbean?

Every winter, we dream about going on holiday to a tropical island full of sunny days and sandy beaches. Some people have taken their relaxing escape further and made the decision to go on permanent vacation. If you have ever pondered the prospect of living close to the turquoise waters of the Caribbean coast, here are some popular islands for expatriates.

Ambergris Caye, Belize

Ambergris Caye is the biggest island in Belize and is lovingly known as Isla Bonita thanks to Madonna’s 80s hit song. The beautiful island is a mere 25 miles long and approximately a mile wide. Located only half a mile from the Belize Barrier Reef, the island is a popular destination for tourists who come for the scuba diving and snorkeling and stay for the incredible island vibe.

San Pedro is the only town on Ambergris Caye. Although it is the second-largest town in Belize, it only has a modest population of fewer than 20,000 people, many of whom belong to a close-knit community of expats. While the island has developed significantly and the sandy paths are now paved roads, it still retains its laidback charm with golf carts, bicycles, and walking being the preferred mode of transport.

With the increased development also comes reliable utility services, amenities, and a thriving dining and bar scene. Almost all of the locals speak English, and immigration policies are extremely foreigner-friendly. For those who need to be close to the big smoke, the island is a short skip to the bustling metropolitan Belize City and only a two-hour flight to Florida, USA.

St Maarten, Dutch Caribbean

Sint Maarten (St Maarten) is an island country of the Kingdom of the Netherlands in the Caribbean. The island of Saint Martin is divided into two separate countries. The northern side is French, encompasses 60 percent of the island, and is called Saint Martin; The southern side is Dutch, covers 40 percent of the island, and is called Sint Maarten. 

St Maarten attracts hordes of visitors every year who indulge in all varieties of water sports such as sailing, surfing, snorkeling, diving, and kitesurfing. Its secluded coves and 37 white-sand beaches are another big draw. Maho Beach, in particular, has become the trademark spot to capture exhilarating photographs of low-flying aircraft preparing to land at the nearby international airport.

Because of the interesting history of Saint Martin island, St Maarten has become a diverse and unique blend of cultures. Expats from all over the world call the island home and they revel in the modern supermarkets and reliable utility infrastructure. The dining scene is exceptionally vibrant, and St Maarten is often known as the gastronomic hub of the Caribbean.

For those who are interested in renting or buying their piece of paradise, there is a wide range of homes available from studio St Maarten condos with stunning views to six-room villas with swimming pools that sit right on the water. Best of all, property titles operate under the European system and there is no annual property tax for property owners or capital gains tax for residents.

Roatán, Honduras

Roatán is a long and thin island located about 35 miles off the northern coast of the Honduras mainland. This 50 square mile island boasts stretches of lush hills, untouched jungle, and the world’s second-largest barrier reef. Formerly a secret escape of scuba divers, this Caribbean island has now become a favorite of expats who seek a low-key lifestyle.

As Roatán was once a British colony, most of the residents on the island speak good English along with the national language of Spanish. There are approximately 80,000 residents spread out over little villages and communities that dot the island. Each district has its distinctively different feel and lifestyle with the larger towns and amenities such as hospitals and government offices located in the middle of the island.

Roatán’s expat community is very welcoming, especially to retirees. With tourist traffic and development mostly concentrated on the north-western side of the island, the majority of expats choose to live and socialize in villages there. However, others prefer to stay in the remote bays of the east side and use boats as their primary mode of transport into town.

These islands in the Caribbean sit at the sweet spot between rustic authenticity and developed comfort. There is just enough international influence to ensure that expats can maintain their standard of living and have their desired groceries from home, without taking away from the small island charm and slow-paced lifestyle.

Life is paradise is a possibility. Whether you want to purchase St Maarten real estate or a little shack on the beach, a reliable and knowledgeable real estate agent will help you to find your perfect new home. Lush, green jungles, azure blue waters bursting with life, pristine and secluded beaches, and the best dining options that global cultures can offer. This is the life that awaits you in the Caribbean.