As the name implies, with this model, customers can choose to essentially reserve a fixed capacity for their workloads, based on either a one-year or a three-year commitment. Reserving capacity is an ideal scenario when you have a steady workload that will essentially run 24×7, 365 days without much interruption. AWS offered (and still offers to existing customers) the Reserved Instances pricing model up until the introduction of a more flexible pricing plan, called Savings Plans.
Although the Reserved Instances pricing model provided up to 75% savings from the standard on-demand instances, there was an inherent flaw in this model – you could not easily allocate or apply the pricing benefits to other EC2 instance family members, apart from the one that was selected for the reservation. Additionally, the reservations were tied to a particular Region and in many cases to individual Availability Zones (AZs) too, which made transferring the benefits of the pricing model to other Regions even more difficult.
In the case of Savings Plans, you can not only apply the savings (up to 72% on on-demand instances) to any EC2 instance in your workload irrespective of its family, OS, or even tenancy; you can also apply the benefits across your Amazon EC2 instances, AWS Lambda, and AWS Fargate workloads, running across multiple Regions. For customers who only wish to apply the accrued savings to EC2 instances, they can alternatively opt for the EC2 instance Savings Plans as well.
Considering the same m5.large instance for reserved, Savings Plans, and EC2 instance Savings Plans for the Stockholm Region, a customer would end up with the options shown in Table 10.1 to choose from:
No upfront | Partial upfront | Full upfront | ||||
Standard Reserved | 1-year | $560.64 | $539.56 | $525 | ||
3-year | $1,156.32 | $1,061 | $1,008 | |||
Compute Savings | 1-year | $718.32 | $683.28 | $674.52 | ||
3-year | $1,524.24 | $1,419.12 | $1,392.84 | |||
EC2 Instance Savings Plans | 1-year | $560.64 | $534.42 | $525.60 | ||
3-year | $1156.32 | $1077.3 | $998.64 |
Table 10.1: Compute pricing plans for an m5.large instance (the Stockholm Region)
For example, imagine you’re running a web application that serves user requests. You have a consistent workload throughout the year. By purchasing a three-year Reserved Instance for the specific instance type and Region used by your web servers, you can significantly reduce costs. The Reserved Instance discount applies to the instances that match its attributes.
Many organizations also have periodic batch jobs such as data processing or report generation. With AWS, you can reserve instances for specific batch-processing tasks. During peak hours, the RI discount applies. This gives the benefit of savings during high-demand periods without over-provisioning, and predictable savings over the long term, especially if your application runs continuously.