Are EC2 Reserved Instances the most economical choice?

We don't want to be tied to AWS Reserved Instances for multiple years. Is reserved EC2 capacity a better financial choice?

One benefit of the public cloud is its scalability, allowing customers to spin up resources on demand and only pay for what they use. The problem with this on-demand paradigm is that costs for compute instances typically are at a premium.

When used for months -- or even years -- an Amazon Elastic Compute Cloud (EC2) instance can rack up high costs, especially when developers combine them with other services, such as monitoring and storage.

To control costs, AWS users can purchase EC2 Reserved Instances if they plan to run the instance for terms of one or three years, like a lease. Businesses benefit from reduced prices because per-hour rates for standard Reserved Instances for one year are about 40% lower than the same instance purchased On-Demand. And a three-year Reserved Instance saves about 60% versus On-Demand rates. Making some or all payments for the instances in advance can also save money. EC2 Reserved Instances can be an extremely cost-effective choice for enterprises that plan to operate EC2 instances over the long term.

For example, IT teams can reserve an m4.xlarge instance, which costs $0.404 per hour On-Demand, for a year and pay $2,689 up front, which works out to about $0.307 per hour for the instance -- a savings of about 24%. Reserve the same m4.xlarge instance for three years, paying $3,419 up front and making a $94.90 monthly payment, for about a $0.260 per-hour cost -- a savings of about 36% over the On-Demand cost.

IT teams can purchase all types of EC2 instances at reserved prices, and meet all workloads needs -- processor, memory, storage and networking -- over the long term. Developers can also reserve capacity within a particular availability zone.

Enterprises can reserve an EC2 Dedicated Instance or Dedicated Host, but EC2 Reserved Instances are not dedicated by default. Consequently, EC2 Reserved Instances typically are multi-tenant. So, IT teams must consider performance, security and compliance needs when reserving a default or Dedicated Instance. Developers can schedule a Reserved Instance, which launches within a desired time window or choose a convertible Reserved instance, which can upgrade later to a different -- more valuable -- instance type.

Next Steps

Make the most of EC2 Dedicated Instances

Gain more workload control with EC2 Dedicated Hosts

Use these five AWS Reserved Instances reports to make IT Decisions

Dig Deeper on Amazon EC2 (Elastic Compute Cloud) management