Setting Up Reserved Instances / Savings Plans to Reduce Costs
Reserved Instances and Savings Plans — tools for reducing cloud compute costs through prepayment or commitment. Correctly chosen type saves 30-60% from on-demand cost.
Reserved Instances vs Savings Plans
Reserved Instances (RI): commitment to use specific instance type in specific region/AZ. Maximum discount with minimum flexibility.
Savings Plans: commitment to spend certain amount per hour. Flexibly applies to any EC2, Fargate, Lambda. Less discount, more freedom.
| Reserved Instances | Savings Plans | |
|---|---|---|
| Discount | 30-60% | 20-50% |
| Flexibility | Low (type + region) | High (any EC2) |
| Applicability | EC2, RDS, ElastiCache | EC2, Fargate, Lambda |
| Recommended | Stable DB servers | Flexible compute |
When to buy
Cannot buy RI/SP "by guess". Historical usage analysis required:
- Minimum 2-4 weeks of metrics on running instances
- Determine baseline — how many instances run 24/7
- Cover RI/SP only baseline, rest — on-demand or Spot
Typical mistake: buy RI on 20 instances, then scale down to 5. Unused RI still gets charged.
Analysis via AWS Cost Explorer
Cost Explorer → Reserved Instance Coverage Report:
Coverage: 45% (potential for RI)
Cost Explorer → RI Recommendations:
Estimated savings: $847/month
Break-even: 7 months
Payment types for Reserved Instances
No Upfront: no prepayment, monthly payments. Discount ~20-30%.
Partial Upfront: part prepay, part monthly. Discount ~30-45%.
All Upfront: full prepayment. Maximum discount ~40-60%.
Term: 1 year or 3 years. 3 years gives significantly higher discount.
Compute Savings Plans: practical example
Baseline: 10 instances m6i.xlarge constantly. On-demand: $0.192/hour. Total: $16,819/year.
Commitment via Compute Savings Plans: $1.30/hour (≈$11,388/year). Discount: ~32%.
RDS Reserved Instances
For databases RI is especially profitable — databases run 24/7:
- RDS Multi-AZ with 1-year RI: 30-40% discount
- ElastiCache Reserved Nodes: 30-50% discount
Important: RDS RI don't transfer between instance families (m5 RI doesn't apply to m6i).
Marketplace for unused RI
If bought RI but infrastructure changed — unused RI can be sold on AWS Marketplace for Reserved Instances.
Regular review
Quarterly:
- Check utilization of bought RI/SP (target: > 90%)
- Assess architecture changes for next 12 months
- Decide on renewal or change of commitments
Timeline
- Analyze current usage — 1-2 days
- Prepare recommendations — 1 day
- Purchase RI/SP (after approval) — 1-2 hours
- Verify discount application — 1-3 days