Reserved Instances and Savings Plans: Reducing Cloud Costs
Cloud providers offer significant discounts — typically 30-60% — in exchange for committing to a consistent usage level over a 1 or 3 year term. Understanding these pricing options is essential for managing cloud costs at any meaningful scale.
AWS Reserved Instances
- Standard Reserved Instances: Commit to a specific instance type, region, and OS. Discount up to 72% vs on-demand. Least flexible.
- Convertible Reserved Instances: Can be exchanged for different instance types. Discount up to 54%. More flexible.
- Payment options: All upfront (maximum discount), partial upfront, or no upfront (minimum discount but no cash tied up). 1-year or 3-year terms.
AWS Savings Plans
- Compute Savings Plans: Commit to a dollar amount of compute usage per hour — applies across any instance family, region, OS, and even Lambda and Fargate. Most flexible.
- EC2 Instance Savings Plans: Commit to a specific instance family in a region. Higher discount than Compute Savings Plans.
Spot Instances / Preemptible VMs
Spot instances use spare cloud capacity at 60-90% discount — but can be interrupted with 2 minutes' notice when capacity is needed. Suitable for: batch processing, CI/CD runners, fault-tolerant distributed workloads. Not suitable for: user-facing applications or stateful workloads without careful design.
Our Approach
We review infrastructure utilisation and savings plan opportunities on a recurring basis for retainer clients. Purchasing reservations without utilisation data is wasteful — we commit only where utilisation patterns are stable and well-understood.