AWS Reserved Instances

In terms of computing options, AWS Reserved Instances has made a name for itself. This article discusses what AWS Reserved Instances are, how they work, the benefits, and what things to consider before buying AWS Reserved Instances.

AWS Reserved Instances Introduction:

If you as an individual or as a company are willing to buy Reserved Instances, then you’re making a huge investment in this direction. This investment should then have the potential to save you a significant amount of money down the lane— but a miscalculation at this point in time can cost you dear, and even cost you desperately. However, Reserved Instances shouldn’t be feared as this seems to be an area where it is proven to work on almost all the possible scenarios. It’s imperative that businesses looking to save money on their cloud would want themselves to be familiarized with Reserved Instances, which truly is the most significant cost-saving tool that Amazon provides in recent of times. They simply must do so carefully. When used correctly, RIs can produce truly invaluable savings; when used incorrectly, they can devastate your budget.

Let us not take a moment out of this, and let us get started with the basics of what AWS Reserved Instances have to offer us and also let us take each individual part and understand it in a better manner. Let us get going then!

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How Does AWS Reserved Instances Work?

Amazon Web Services (AWS) provides Reserved Instances for customers to use for a varied number of tailor-made requirements. In this regard, Amazon’s EC2 Reserved Instances are provided at an hourly rate and also at the same time with an optional reservation of capacity for the available EC2 instances. Billing from the EC2 reserved instances is applied with the reserved instances discounted rates only when the attributes of the AWS EC2 instance usage match that of the attributes of any of the active reserved instances.

Amazon’s EC2 reserved instances reserves capacity that matches the attributes of the reserve instance if there is an availability zone specified. This capacity reservation that has been made on a reserved instance will be automatically utilized while running the instances matching the attributes. Reserved instances that are scoped to a specific region are automatically applied with the reserved instance’s discount to that specific instance usage across all the instances. This makes it easier for an individual or an Organization to leap the advantages of any of these Reserved Instance’s discounted rates.

The way reserved instances work within the AWS EC2 ecosystem can be considered beneficial to the customers over the traditional on-demand instance pricing. This is achieved because of the fact that the reserved instances are not actually physical instances but they are just a billing discount that gets applied on your on-demand instances available in your account. The only way that this can be achieved is that the on-demand instances must match a specific set of attributes in order to reap benefits from the billing discount.

AWS Ec2 Ecosystem

In the above-mentioned scenario, it is that you are running an on-demand instance (type T2, to be very precise) in your account and for which you will have to shell out paying on-demand prices. If you would have purchased a reserved instance that matches the business requirement where you were running your existing instance, the billing benefit will be applied to the pricing immediately. Based on your requirements, if you will and wish to purchase a reserved instance for a C4 instance – meaning that you do not have any instances running in your account matching these attributes of reserved instances. In the next step, you would launch an instance that matches your attributes of the C4 reserved instance then the billing benefit would immediately be applied to it.

Based on the observations made above, you can choose from a combination of parameters (mix and match) as displayed below, so that these match your needs and requirements:

* Payment Option: There are a varied number of options that you make your payments with, listed are the following that should best suit your requirements.

  •  No Upfront payment
  •   Partial Upfront payment
  •   All Upfront payment

* Term: There are a certain number of term options that are available when you finally decide to make the payment to purchase either the on-demand instances or the reserved instances. Following are the options that an individual or an Organization have to choose from:

  •  One year (365 days equated to 31536000 seconds)
  •  Three years (1095 days equated to 94608000 seconds)

* Offering Class: There are a couple of options here in the class offering from the Amazon EC2 instances

  • Convertible
  •  Standard
In conjunction with all the parameters that are mentioned above, a Reserved Instance can be judged by various other sets of attributes to determine the way these will be running in your account:
  1. Instance type: For example, m4.large. This is composed of the instance family (m4) and the instance size (large).
  2.  Scope: Whether the Reserved Instance applies to a region or specific Availability Zone.
  3.  Tenancy: Whether your instance runs on shared (default) or single-tenant (dedicated) hardware. For more information, see Dedicated Instances.
  4.  Platform: The operating system; for example, Windows or Linux/Unix.
Related Article: AWS Projects

Types of AWS Reserved Instances:

With the available plethora of Reserved Instances provided by Amazon, you will be spoilt for choice to choose amongst the available options to meet your business needs and requirements. You may spend some time over the next section of the article, where we have carefully gathered details to provide you with the best experience in choosing amongst the available options for your needs. The baseline classification of the AWS Reserved Instances is provided to you as follows:

1. Standard Reserved Instances: 

The Standard Reserved Instances do provide the most significant discount (up to 75% off On-Demand) and are also considered the best suited for steady-state usage.

2. Convertible Reserved Instances: 

The Convertible Reserved Instances do provide a discount of (up to 54% off On-Demand). These Instance types are said to hold the capacity and the capability to change the attributes of the Reserved Instance as long as the exchange results in the creation of them are equal or of greater value. Like Standard Reserved Instances, the Convertible Reserved Instances are also best suited for steady-state usage. 

3. Scheduled Reserved Instances: 

The Scheduled Reserved Instances are available to launch within the time windows you reserve them to be yours. By this option, it allows you to match your capacity reservation to a predictable recurring schedule that only requires a fraction of a day, a week, or a month.

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What factors should consider before buying AWS Reserved Instances?

There are various reasons or factors that an individual or an organization has to go through before they make the purchase of the AWS Reserved Instances. As we have already discussed that the purchase of Reserved Instances can prove to be beneficial over the purchase of On-Demand Instances – but this will not stand true always. Hence comes the question of what factors to consider while choosing the AWS Reserved Instances over the On-Demand Instances.

* Execution Time: 

We can comfortably design a schedule for an application, which will be the foremost factor in the instance model to be selected.  Based on the time that an application is bound to run for the Business to run as usual, depending on that the resource instances can be chosen as Reserved Instances. If we are able to successfully identify that an application should run only in a specific time frame or time period, then a scheduled reserve instance or spot buying can be leveraged.

* Application Components: 

Consider any application that needs to be run on the internet, they should definitely be requiring an App server, Web server, DB server, Cache layers and etc. The architects of the application can be more choosy about the set of Reserved Instances model for each of the application components.

* Application Traffic and Usage Pattern: 

The required architects should also be focusing on how the applications or the application modules be consumed by their end-users through the periodic usage of log analysis. If it is observed that the application requires scalability only for a particular period in time, or a certain number of hours each and every day – then the resource allocation should be flexible enough to cater to these needs. In such a scenario, you can auto upgrade to the next levels of scalability with the options provided by AWS. 

* Production vs. Non-Production: 

The Production instances are infamously known to be available for 24 hours a day and hence compromising over the availability and scalability on such machines will not prove to be good ideas but rather the environments as like Testing, Staging and UAT can be scheduled only during the periods of their consumption and for the rest of the time, it could be down for reasonable cost-cutting.

* Right Resource Sizing: 

AWS will only trigger the Reserved Instance pricing model only when it is observed that the requested resource’s specification to be deployed meets the specifications of the resources in the Reserved Instances pool. Hence, the team should be in a good situation to evaluate these things in a much better manner than to repent over it at a later point in time.

Considering almost all the points that we have discussed here, we can definitely reserve AWS resources for the necessary cost savings but in reality, it is an ART that needs the time to MASTER it. Choosing AWS Reserved Instances over the On-Demand resources needs calculated moves and risks at times.

Benefits of AWS Reserved Instances:

The section earlier should have provided you with the scenarios where AWS can be flexible enough to take advantage of the situation, places itself in the driving seat to handle it head-on. The flexibility of usage of resources and at the same time to be able to extend that flexibility to the Customers is just the icing on the cake. Each and every point that we have discussed in the section earlier can be observed as an advantage of using the AWS Reserved Instances – wherein each situation it proves its mettle and stands tall in almost all the situations winning hands down. Considering that, we do not want to repeat what we have already discussed in the sections above to provide a gist of the advantages of using Amazon’s EC2 Reserved Instances.

What are AWS Convertible Reserved Instances?

There are two different offerings that AWS provides when you choose to make the payment or to make the purchase of Reserved Instances via the Offering classes. When you make the final call to purchase a Reserved Instance, you will have to also make a decision between what to go with – a Standard or a Convertible Offering Class. The Reserved Instance do apply to a single instance family, platform and also scope over a specific term. Should there be any changes in your computational requirements, there is always a scope to change, modify, or to purchase new Reserved Instances depending upon the Offering class that you choose earlier. Based on the Offering class that you choose, there can be additional restrictions or limitations attached to them. 

Standard and Convertible Reserved Instances can be purchased to apply to instances in a specific Availability Zone, or to instances in a region. When you purchase a Reserved Instance in a specific Availability Zone, it provides a capacity reservation. When you purchase a Reserved Instance for a region, it's referred to as a regional Reserved Instance. Regional Reserved Instances do not provide a capacity reservation.

Some of the salient attributes of the Regional Reserved Instances are as follows:

* Availability Zone flexibility: 

The Reserved Instance discount applies to instance usage in any Availability Zone in a region.

* Instance size flexibility: 

  • The Reserved Instance discount applies to instance usage regardless of size, within that instance family. Only supported on Linux/Unix Reserved Instances with default tenancy.
  • If you want to purchase capacity reservations that recur on a daily, weekly, or monthly basis, a Scheduled Reserved Instance may meet your needs.

What is the difference between convertible and standard AWS Reserved Instances?

We would suggest going through the section above to get a good idea about both Convertible and the Standard AWS Reserved instances. We do not see any specific need in repeating what has already been discussed in the sections above, but to provide you with the most common differences – here are the top 2 differences between both Standard and the Convertible Reserved Instances:

Standard AWS Reserved InstancesConvertible AWS Reserved Instances
This can be sold in the Amazon Reserved Instance MarketplaceThis cannot be sold in the Amazon Reserved Instance Marketplace
Some attributes such as the instance size can be modified during the term of the Reserved Instance, but a point to note is that the instance type may not be modified any further.Can be exchanged with a new Convertible Reserved Instance during the term with the same or even additional attributes which may be of the same instance type or may even vary
A Standard Reserved Instance cannot be exchanged but only modifiedA Convertible Reserved Instance can have its attributes modified as well

AWS Reserved Instances Pricing:

AWS Reserved Instances can be purchased in two different offerings as mentioned in the sections above in this article and those are either Standard Reserved Instances or the Convertible Reserved Instances. The pricing details of these can be found here in a gist, but we would also want to provide some details on each of these reserved instances on what you get if you are willing to make the purchase.

Standard Reserved Instances from the AWS EC2 ecosystem provide an individual with a significant discount ranging to the levels of 75% when compared against the prices on on-demand reserved instances pricing. Any of these can be purchased for a term of either one year or three years. Individuals or Organizations have the flexibility to modify or change the ‘Availability Zone’ or the instance size, networking type of the standard reserved instances. If you need some flexibility in the usage, then it is recommended of you go with Convertible reserved instances. Usage of Convertible reserved instances enables the usage of different instance families, operating systems, and/or tenancies over the traditionally reserved instance term. Convertible reserved instances provide us with a significant discount of up to 45% when compared to the on-demand reserved instances for a three-year term.

To provide you a better understanding of the pricing, we will go through the following classification and segregation of the available reserved instances based on the features available against the prices that we are assumed to be paying for the offerings:

* On-Demand:

With these on-demand instances, you as an individual or as an organization – you will be paying for the computing capability and capacity either per hour or per second depending on the instances that you are running. This makes it very clear with no futuristic commitments on the computing power and can be changed as per the need, increase or decrease the computing power and pay according to the usage.
These types of instances are recommended for you:

  • If the users prefer the lower cost and flexibility of using the Amazon EC2 without bothering about any of the up-front payment or long-term commitments.
  • If your applications are on shorter terms, or with unpredictable workloads which can’t be interrupted
  • If your application is being developed or tested on an Amazon EC2 for the very first time

A detailed pricing list with all the combinations of the region plus computing power can be checked from here: On-Demand Pricing

* Spot Instances:

There is this other variant of Amazon EC2 spot instances, which allows an individual or an Organization to request spare Amazon EC2 computing capacity for almost up to 90% off on the on-demand price. These type of instances are best recommended for you:

  • If your applications have flexible start and end times
  • If your applications are feasible at the lowest possible computing prices
  • If your users with urgent computing needs for larger amounts

A detailed pricing list with all the combinations of the region plus computing power can be checked from here:  Spot Instances Pricing

* Reserved Instances: 

 Reserved Instances Pricing

* Dedicated Hosts

 Dedicated Hosts Pricing

AWS Reserved Instances Marketplace

The marketplace is the store that is a provision provided by Amazon’s AWS EC2 ecosystem for individuals or organizations to list their unused and unnecessary reserved instances for sale. The process of listing reserved instances for sale can either be done through the AWS Management Console or via the Command Line Tools. In order to use the AWS Management Console an individual has to go through a set of steps as provided here:

  • If it is the first time that you are getting yourself registered, then you need to go through the Marketplace registration wizard and provide the bank account details that you choose to, for all the disbursals.
  • The moment when you finish the registration, you should be able to login into the AWS Management Console, and also you will be able to choose the reserved instances from your account in the navigation pane.
  • At this juncture, you should be able to select the reserved instances that you are willing to sell and then click on ‘Sell Reserved Instances’.
  • You should also be setting the number of reserved instances that you are willing to sell along with the upfront prices on each of those reserved instances.
  • Once the above process is done, click on Continue
  • Please do confirm the settings that are associated with the listing of your reserved instances

These steps provide you the best and the simplest means to sell off your existing Amazon instances to others through the Marketplace channel but to get the best possible solutions for each of your peculiar cases, we suggest that you visit the AWS forums to gain the most that suites your specific scenarios.

Related Article: Complete AWS Marketplace User Guide


In this article, we have tried to introduce to the world of AWS in a very systematic manner and have tried our level best to provide all possible details to explain each and every tiny winy detail of the concepts. Hope that you like this article, kindly provide your suggestions through the comments section below.

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Last updated: 27 Jun 2024
About Author

Prasanthi is an expert writer in MongoDB, and has written for various reputable online and print publications. At present, she is working for MindMajix, and writes content not only on MongoDB, but also on Sharepoint, Uipath, and AWS.

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