Reserved Instances and Savings Plans
Commitment-based pricing offers 20-72% off on-demand rates in exchange for 1-year or 3-year usage commitments. Understanding the options and break-even points is critical to avoiding overspend on unused reservations.
Commitment Types by Provider
| Type | Provider | Flexibility | Discount (1yr) | Discount (3yr) |
|---|---|---|---|---|
| Standard RI | AWS | Fixed instance type, region, OS | ~40% | ~60% |
| Convertible RI | AWS | Can change instance family, OS, tenancy | ~33% | ~54% |
| Compute Savings Plan | AWS | Any instance family, region, OS, tenancy | ~30% | ~52% |
| EC2 Instance Savings Plan | AWS | Fixed instance family and region, flexible size/OS | ~40% | ~60% |
| Committed Use Discount | GCP | vCPU and memory based, any machine type | ~37% | ~55% |
| Reserved VM Instance | Azure | Fixed VM size and region | ~40% | ~63% |
| Azure Savings Plan | Azure | Any VM family, region (compute commitment) | ~28% | ~48% |
Payment Options (AWS Reserved Instances)
| Payment Option | Upfront Cost | Monthly Cost | Discount (1yr Standard) | Best For |
|---|---|---|---|---|
| All Upfront | Full term payment | $0 | ~42% | Maximum savings, cash available |
| Partial Upfront | ~50% of term | Reduced rate | ~40% | Balance of savings and cash flow |
| No Upfront | $0 | Discounted monthly | ~36% | Cash-constrained, still want commitment discount |
Break-Even Analysis
Months of utilization required before a reservation becomes cheaper than on-demand. Based on m7i.xlarge ($0.2016/hr on-demand).
| Commitment | Payment | Effective $/hr | Break-Even Month | Total Savings (if used fully) |
|---|---|---|---|---|
| 1yr Standard | All Upfront | $0.1170 | Month 7 | $741/yr |
| 1yr Standard | No Upfront | $0.1290 | Month 1 | $636/yr |
| 3yr Standard | All Upfront | $0.0760 | Month 8 | $3,307/3yr |
| Compute Savings Plan (1yr) | No Upfront | $0.1411 | Month 1 | $530/yr |
Break-even assumes 24/7 usage. If instances run less than break-even months, on-demand is cheaper.
Decision Framework
Choose Savings Plans When
- You expect to change instance types or regions during the term
- You use a mix of EC2, Fargate, and Lambda (Compute Savings Plans cover all three)
- Your architecture is evolving (migration from x86 to ARM, for example)
Choose Reserved Instances When
- You have stable, predictable workloads with known instance types
- You want the maximum possible discount (Standard RI All Upfront)
- You can sell unused capacity on the RI Marketplace (AWS Standard RIs only)