Commitment-Based Pricing: The Basics
Both Reserved Instances (RIs) and Savings Plans let you trade commitment for discount. You agree to a 1-year or 3-year term, and AWS gives you 30-72% off on-demand pricing. The question is which mechanism works better for your situation.
Reserved Instances
RIs are tied to a specific instance type in a specific region. You commit to, say, an m5.xlarge in us-east-1, and you get a discount on that exact configuration.
When RIs make sense:
- You have predictable, stable workloads that won't change instance type
- You're running databases (RDS RIs are especially valuable)
- You want maximum discount and are confident in your capacity planning
When they don't:
- You're likely to change instance families as your architecture evolves
- Your workloads fluctuate significantly
- You're early-stage and uncertain about future needs
Savings Plans
Savings Plans are more flexible. You commit to a dollar amount per hour of compute usage, and the discount applies automatically across instance families, sizes, and even regions (with Compute Savings Plans).
When Savings Plans make sense:
- You want flexibility to change instance types without losing your discount
- You run diverse workloads across multiple instance families
- You use both EC2 and Fargate/Lambda
- You want simpler management
When they don't:
- Very few cases. Savings Plans are generally the better default choice for most organizations.
Our Recommendation
For most SMBs, start with Savings Plans. They give you 80-90% of the savings with significantly more flexibility. Layer RIs on top for specific workloads you're confident won't change — like your primary database.
The worst strategy is no strategy at all. Even a conservative commitment covers your baseline usage and saves real money.
How to Calculate Your Baseline
Look at your last 90 days of usage in Cost Explorer. Find your minimum consistent hourly spend. That's your safe commitment level — the floor you'll use regardless of fluctuations. Start there and adjust quarterly.