Factors That Determine the Price of Reserved Instances (RI) in AWS
Instance Attributes
Instance Type
AWS instances come in various families based on specialization. Each family includes different sizes (e.g., large, xlarge, 2xlarge, 4xlarge, etc.). The discount percentage varies based on the instance type—more resource-intensive and specialized instances generally receive lower discounts due to higher base costs.
Availability Region
Pricing varies across AWS regions. For example, the US East (N. Virginia) region tends to be cheaper than Asia-Pacific (Mumbai) due to factors such as energy costs, infrastructure availability, demand, and local tax policies.
Tenancy
Refers to whether the instance runs on shared hardware (default) or dedicated single-tenant hardware. Dedicated tenancy generally costs more due to the reserved physical infrastructure.
Operating System
The OS used (e.g., Linux, Windows) affects pricing. Linux instances are generally cheaper, while Windows instances incur additional licensing fees, which increase the overall cost of running the instance.
Selected Payment Plan
Entire RI Sum Paid Upfront:
The full payment for the reserved instances (RI) in AWS is made upfront. This model offers the highest discount, up to 72%, and no additional charges are incurred during the term.
Partial Upfront Payment:
A portion of the total cost is paid at the start, and the remaining amount is billed hourly at a discounted rate. This model typically offers up to 55% in cost savings compared to on-demand pricing.
No Upfront Payment:
In this model, you are billed hourly throughout the term at a discounted rate compared to on-demand pricing. While it offers flexibility, the discount is lower, typically 25-35% for a 3-year commitment
Committed Term
- One-year commitment plan: 31,536,000 seconds
- Three-year commitment plan: 94,608,000 seconds
To maximize savings with Reserved Instances (RI) in AWS, opt for the three-year plan.
Types of Reserved Instances
Standard Reserved Instances
Offer the highest discount but are the least flexible, since the RI plan can only be modified (e.g., instance size, Availability Zone) but not exchanged.
Convertible Reserved Instances
Offer a lower discount (up to 54%) but can be exchanged with other Convertible Reserved Instances, including those with different instance attributes. Moreover, it is possible to modify them.
There was also a Scheduled Reserved Instances category, but it is now deprecated. Instead, AWS recommends opting for Savings Plans. Learn more about how they differ here.
How to Maximize Savings with Reserved Instances (RI) in AWS
- Sell unused RIs on the AWS Marketplace: Other than Convertible Reserved Instances, Standard Reserved Instances can be listed on the official AWS Marketplace. This helps businesses recoup the upfront costs for resources that are not being utilized or are underutilized.
- Insights into RI Utilization: Before selling RIs, you must know your infrastructure’s utilization in detail. Use AWS Cost Explorer or third-party cloud visibility tools to analyze usage and make informed decisions.
- Use Instance Size Flexibility (ISF): When there are varying workloads, ISF allows RI discounts to be applied to different instance sizes, but only within the same instance family. ISF is available only for EC2 Reserved Instances running on Linux with shared tenancy. For services like ElastiCache, MemoryDB, and RDS, ISF is also supported, but only for specific instance categories.
Get On-Demand Flexibility with 3-Year Commitment Pricing: Here’s How
The primary challenge with AWS RIs is the commitment. But CloudKeeper Auto is the zero-touch, AI-based platform that helps you get on-demand EC2 resources at 3-year RI pricing. The tool automates RI buying and selling based on your infrastructure needs, thus maximizing your savings on compute instances.
Frequently Asked Questions( FAQs)
Q1: What is the difference between On-Demand Instances and Reserved Instances (RI) in AWS?
In the On-Demand pricing model, you can provision cloud resources as you go, with a minimum billing duration of 60 seconds, whereas in the Reserved Instance pricing model, you get a discounted rate by committing to either 1-year or 3-year usage, with optional capacity reservation.
Q2: Is it possible to cancel a purchase of Reserved Instances (RI) in AWS?
No, it is not possible to cancel a Reserved Instance purchase. However, it is possible to modify certain attributes of the instance, exchange it within the same instance family (if it's a Convertible RI), or sell it on the AWS Marketplace, subject to specific conditions related to the instance type and region.
Q3: What are the benefits of the AWS Reserved Instance program?
Primarily, the benefit of Reserved Instances is the noticeable savings in cloud spend, with pricing under certain circumstances being as much as 72% lower compared to provisioning resources On-Demand.
Q4: What are the disadvantages of the AWS Reserved Instance program?
Reserved Instances (RIs) in AWS require organizations to commit to a usage period of either 1 year or 3 years. Also, a Reserved Instance purchase cannot be rolled back. Hence, if the workload reduces, the unused Reserved Instance can become a financial liability.
Q5: Can I sell my Amazon EC2 Reserved Instances on the AWS Marketplace?
Although it is possible to sell EC2 Reserved Instances, it is allowed only under certain conditions — the most prominent being that only Standard Reserved Instances in the Regional or Zonal categories are eligible to be sold in the Marketplace.
Q6: Can AWS promotional credits be used to purchase Reserved Instances (RI) in AWS?
While it is not possible to pay upfront for a Reserved Instance in AWS using promotional credits, they can be used to pay for the hourly charges of On-Demand instances.
