How to Use AWS Reserved Instances and Save Costs
- Commit to 1- or 3-year terms for up to 72% savings.
- Choose Standard RIs for stable workloads or Convertible RIs for flexibility.
- Use AWS Cost Explorer to identify steady-state workloads.
- Purchase through the EC2 Dashboard and monitor utilization.
- Leverage RI Marketplace for adjustments if changes need to be made.
How to Use AWS Reserved Instances and Save Costs
AWS Reserved Instances (RIs) are a cost-saving pricing model that allows businesses to use specific AWS resources over a one—or three-year term at significant discounts compared to On-Demand pricing.
Understanding how to use RIs effectively allows you to align your cloud usage with financial planning, achieve predictable budgeting, and significantly reduce overall AWS costs.
What Are AWS Reserved Instances?
Reserved Instances are pricing discounts AWS offers for committing to long-term usage of specific instance types and regions. RIs are most beneficial for predictable and consistent workloads, making them ideal for businesses with stable, long-term projects.
While RIs do not guarantee capacity, they provide a billing discount for the specified commitment, helping businesses save on regular, predictable usage.
Types of Reserved Instances:
- Standard Reserved Instances: Offer the highest discounts (up to 72%) but have limited modification flexibility. They are suitable for workloads with consistent, unchanging requirements.
- Convertible Reserved Instances: Provide slightly lower discounts but allow you to change the instance family, operating system, or tenancy during the term, offering more flexibility for evolving workloads.
- Scheduled Reserved Instances: Enable you to reserve capacity for specific periods, such as daily, weekly, or monthly intervals, ideal for predictable workloads that don’t require 24/7 availability.
How Reserved Instances Save Costs
1. Significant Discounts
RIs offer up to 72% savings compared to On-Demand pricing for workloads with predictable usage. These discounts depend on factors such as term length (one year or three years) and payment options (All Upfront, Partial Upfront, or No Upfront).
2. Predictable Pricing
With RIs, businesses can lock in consistent pricing over the commitment period, simplifying financial forecasting and reducing uncertainty in cloud expenses.
3. Flexible Usage with Convertible RIs
For organizations with changing requirements, Convertible RIs provide the ability to modify instance attributes during the term, ensuring alignment with evolving business needs while maintaining cost benefits.
Read our article Top10 AWS Cost Optimization Strategies.
How to Purchase and Use Reserved Instances
Step 1: Analyze Your Workload
- Use AWS Cost Explorer and AWS Compute Optimizer to identify steady-state workloads that consistently run over time. Focus on always-active production environments, databases, and web applications.
- Evaluate utilization patterns to ensure RIs align with workloads that will benefit most from discounted pricing.
Step 2: Choose the Right RI Type
- Opt for Standard RIs for stable, predictable workloads where instance configurations are unlikely to change.
- Choose Convertible RIs if your workload requirements may evolve during the commitment period.
- Use Scheduled RIs for workloads with recurring, time-bound usage patterns, such as nightly data processing jobs.
Step 3: Select the Term and Payment Option
- One-Year Term: Provides moderate savings and greater flexibility for short-term projects.
- Three-Year Term: Maximizes cost savings for long-term commitments, suitable for stable workloads.
- Payment Options:
- All Upfront: Offers the largest discount by paying the full amount upfront.
- Partial Upfront: Balances upfront costs with ongoing savings.
- No Upfront: Provides flexibility by spreading payments over the term, albeit with smaller discounts.
Step 4: Purchase Reserved Instances
- Access the AWS Management Console and navigate to the EC2 Dashboard.
- Click on “Reserved Instances” and choose “Purchase Reserved Instances.”
- Specify details such as instance type, region, term length, and payment option.
- Review your selections and confirm the purchase to activate the RIs.
Step 5: Monitor RI Utilization
- Use AWS Cost Explorer to track RI utilization and ensure that your Reserved Instances are fully utilized to maximize savings.
- Adjust workloads or reassign RIs as necessary to maintain alignment with usage patterns. AWS allows businesses to reallocate RIs across accounts in the same organization for better utilization.
Read our article about top5 quick wins for how to fast reduce AWS costs.
Best Practices for Using Reserved Instances
1. Match RIs with Steady-State Workloads
Identify workloads that run continuously, such as databases, backend applications, or other always-on services, and reserve capacity for these instances to save costs.
2. Leverage Convertible RIs for Flexibility
For workloads with evolving requirements, Convertible RIs allow you to adapt to changing instance types, operating systems, or tenancies while still enjoying discounted rates.
3. Use RI Marketplace for Additional Flexibility
AWS provides an RI Marketplace where you can sell unused RIs or purchase others from third parties. This is a valuable option if your usage changes mid-term, enabling you to adjust commitments without financial loss.
4. Combine RIs with Savings Plans
For workloads that don’t fit neatly into the RI model, consider using AWS Savings Plans. These plans provide similar discounts with greater flexibility across instance families and regions.
5. Regular Monitoring and Optimization
- Set up alerts using AWS Budgets to monitor RI usage and costs.
- Regularly review usage patterns with AWS Cost Explorer to ensure your Reserved Instances align with your workload needs.
- Adjust or purchase additional RIs as required to maximize cost savings.
Real-World Example
A mid-sized SaaS company operating a customer analytics platform identified its EC2 compute workloads as a cost driver. By analyzing usage patterns, they determined that most m5.large instances operated continuously, making them suitable candidates for Reserved Instances. The company:
- Purchased Standard RIs for a three-year term with All Upfront payment, reducing compute costs by 65% compared to On-Demand rates.
- Used Convertible RIs for instances expected to scale with changing customer demands, maintaining flexibility while saving 45%.
- Leveraged the RI Marketplace to sell unused reservations when they scaled down specific workloads, minimizing wasted costs.
- Monitored RI utilization using AWS Cost Explorer to ensure consistent alignment with their requirements.
This approach saved the company $150,000 annually while ensuring predictable costs and optimal resource usage.
Conclusion
AWS Reserved Instances (RI) is a highly effective tool for reducing costs associated with predictable workloads. Businesses can unlock substantial savings while maintaining performance and scalability by carefully analyzing usage patterns, selecting the appropriate RI type, and leveraging AWS tools for monitoring and optimization.
Combine RIs with Savings Plans and regularly review your resource commitments to adapt to evolving workloads for maximum impact. Reserved Instances are critical to any comprehensive AWS cost optimization strategy, providing the financial predictability and flexibility needed to support long-term success.
FAQ: How to Use AWS Reserved Instances and Save Costs
What are AWS Reserved Instances?
AWS Reserved Instances are discounted pricing options for committing to long-term usage of specific instance types and regions.
How much can I save with Reserved Instances?
RIs can save up to 72% compared to On-Demand pricing, depending on the term length and payment option selected.
What are the types of Reserved Instances?
AWS offers Standard RIs for maximum savings, Convertible RIs for flexibility, and Scheduled RIs for fixed-period workloads.
How do I determine if Reserved Instances are right for me?
Analyze workloads using AWS Cost Explorer or Compute Optimizer to identify predictable, steady-state usage.
What is the difference between Standard and Convertible RIs?
Standard RIs offer the highest discounts but less flexibility, while Convertible RIs allow changes to instance attributes during the term.
What payment options are available for Reserved Instances?
All Upfront, Partial Upfront, and No Upfront options balance savings and cash flow flexibility.
How do I purchase Reserved Instances?
You can access the EC2 Dashboard, navigate to Reserved Instances, select configurations such as instance type and term, and finalize your purchase.
Can I change my Reserved Instance configuration?
With Convertible RIs, you can adjust family, operating system, or tenancy instances. Standard RIs don’t allow changes.
What happens if I no longer need my Reserved Instances?
Use the RI Marketplace to sell unused reservations or reassign them across linked accounts in AWS Organizations.
How can I monitor RI utilization?
Use AWS Cost Explorer to track usage and ensure your Reserved Instances are fully utilized to maximize savings.
Can I combine Reserved Instances with Savings Plans?
Savings Plans complement RIs for workloads that don’t fit neatly into the RI model and offer additional cost savings.
What is the RI Marketplace?
The RI Marketplace allows users to buy or sell unused Reserved Instances, providing flexibility during changing requirements.
How do Scheduled Reserved Instances work?
They allow you to reserve capacity for recurring workloads at specific times, such as nightly batch jobs or seasonal demand.
Are Reserved Instances limited to specific regions?
RIs are region-specific but can be applied across Availability Zones within the selected region.
What is the first step in using Reserved Instances?
Analyze your workloads to identify consistent usage patterns, then choose the RI type and term that best suits your needs.
