# Reserved instances and Savings Plans

> Cheaper cloud prices in exchange for promising to keep using it for one or three years.

- Level: Intermediate
- Topics: Cloud, AWS
- URL: https://tidbit.legios.com.ar/reserved-instances-and-savings-plans/
- In Spanish: [Instancias reservadas y Savings Plans](https://tidbit.legios.com.ar/es/reserved-instances-and-savings-plans/)

Cloud servers are normally billed on demand: you pay by the hour or second and can stop whenever you want. That freedom costs extra. If you already know you will need a certain amount of computing for a long time, providers give you a lower price in exchange for a commitment. On AWS there are two main ways to make it: **Reserved Instances** and **Savings Plans**.

A Reserved Instance is a discount tied to a specific kind of machine, for example one EC2 instance type in one region, for one or three years. A Savings Plan is more flexible: you promise to spend a fixed amount per hour, say 10 dollars, and everything you use up to that amount gets the cheaper rate. Compute Savings Plans apply whatever the instance type or region, and also cover Fargate and Lambda. AWS advertises savings of up to roughly 72% compared with on-demand, with bigger discounts for three-year terms and for paying up front.

The catch is that you pay the commitment whether you use it or not. If your app shrinks, moves to another service, or you simply overestimated, the money is spent anyway. The usual approach is to commit only to the steady base you are sure about, and leave the peaks to on-demand or spot instances. Azure calls its version reservations and also sells savings plans; Google Cloud calls them committed use discounts.

## An analogy

Like a gym: paying per visit is flexible, and the yearly membership is much cheaper per visit, but only if you actually keep going.

## Keep in mind

- A lower price in exchange for a one- or three-year commitment.
- Reserved Instances lock in a machine type; Savings Plans commit an hourly spend.
- You pay the commitment even if you stop using it.
- Commit to your steady base, not to your peaks.

## Go deeper

- [Savings Plans (AWS)](https://aws.amazon.com/savingsplans/)
- [Reserved Instances for Amazon EC2 (AWS docs)](https://docs.aws.amazon.com/AWSEC2/latest/UserGuide/ec2-reserved-instances.html)
- [What are Azure Reservations? (Microsoft Learn)](https://learn.microsoft.com/en-us/azure/cost-management-billing/reservations/save-compute-costs-reservations)

## Related terms

- [Cloud computing](https://tidbit.legios.com.ar/cloud-computing/): Renting computers over the internet instead of buying your own.
- [Server](https://tidbit.legios.com.ar/server/): A computer whose job is to answer requests from other computers, all day, every day.
- [Amazon EC2](https://tidbit.legios.com.ar/amazon-ec2/): Virtual computers you rent by the hour, in any size, and switch off when done.
- [Regions and Availability Zones](https://tidbit.legios.com.ar/regions-and-availability-zones/): Where AWS physically lives: cities worldwide, each split into separate data centers.
- [Amazon ECS and Fargate](https://tidbit.legios.com.ar/amazon-ecs-and-fargate/): AWS runs your containers; with Fargate you never see the servers at all.
- [AWS Lambda](https://tidbit.legios.com.ar/aws-lambda/): Run a piece of code only when something happens, with no server to manage.
- [Spot instances](https://tidbit.legios.com.ar/spot-instances/): Spare cloud servers rented at a deep discount, but taken back on short notice.
- [Microsoft](https://tidbit.legios.com.ar/microsoft/): The company of Windows and Office, now just as much a cloud company with Azure.