According to AWS, Reserved Instances (RI) can offer discounts of up to 75% when compared to On-Demand rates. It’s like a coupon: AWS matches your monthly usage against any RIs (i.e. coupons) you have and discounts the hourly rate if it finds a match! Unlike at the grocery store, RI matching happens automatically and doesn’t irritate the people behind you in line.
Seriously, understanding how to take advantage of RI’s is a crucial step to becoming cost optimized. The reason is twofold: first, RI’s provide savings for EC2 and RDS which are two of the largest components of most customers’ AWS bills. Second, the savings from RI’s can be so dramatic!
If you have workloads in AWS, paying on-demand rates for EC2 and RDS is like incinerating cash to stay warm. On-Demand is appropriate when you are unsure if a certain workload will persist for more than a year. However, when you consider that most workloads are migrating to the cloud and increasing in usage over time, it is safe to say you should be covering most of our workloads with RIs.
Many people worry about not being able to predict the size of instances they will need, but AWS has you covered. If you decide you need a larger or smaller instance type, you can modify your RI’s to retain the savings. For example, if you purchase an RI for a t2.medium and realize it’s overkill for what you need, you can split that RI into two t2.small RI’s!
AWS offers 2 different types of RI’s: convertible and standard. Here is a breakdown of the differences:
|Terms (avg.discount off On-Demand)
||1yr (40%), 3yr (60%)
||1yr (31%), 3yr (54%)
|Change Availability Zone, Instance size (for Linux OS), networking type
||Yes (Using ModifyReservedinstances API and console)
||Yes (Using ExchangeReservedinstances API and console)
|Change instance families, operating system, tenancy, and payment option
|Benefit from Price Reductions
|Sellable on the Reserved instance Marketplace
||Yes (After linking account with a US bank account)
RI’s give you a bigger savings the longer you commit, and the more you pay up front. The smallest savings come from a 1-year no upfront RI, and the largest from a 3-year all upfront RI.