EC2 Light Reservations ≠ Light Utilization

May 27 2013 | by Zev Schonberg Cloud Cost Management, ec2 pricing, reserved instances

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When I discuss Amazon’s EC2 Reserved Instances with customers, invariably there is some confusion regarding how pricing and utilization all works out. Understanding these points is a crucial step in realizing the full benefits of public cloud cost-efficiency.

So even if you are an AWS expert, please share this post with folks that might benefit from it.

You CAN run your Light reservation 24/7/365

I’ve heard people claim that if you buy a Light reservation and use it more than X% of the time, you start getting charged On-Demand rates. This is just plain wrong.

As the title of this blog post hinted, you can run your instances at 100% utilization even with Light or Medium reservations (and certainly with Heavy).

For example, if you plan on running any given instance for the next 12 months at full or near-full capacity, a Heavy reservation would indeed be most cost-effective. However, if you only plan on running the instance for a few months, or don’t want to make a big upfront payment for a Heavy, you might decide to opt for a Light reservation. Bottom line though, both options allow you to run the instance 100% of the time – the only difference is whether you pay Light rates or Heavy rates.

Read more about EC2 Reserved Instance pricing on the AWS website.

With Heavy reservations you pay all the way

While Heavy reservations offer the maximum savings for instances that will definitely be used close to 100% of the time (for 1 or 3 year reservations), there is a catch. Unlike Light or Medium reservations, for Heavy, you pay the one-time upfront fee plus the hourly usage fees even if you never run any instances. This is reflected in the AWS bill which shows your full monthly cost for Heavy reservations already at the beginning of the month.

You can read about this important billing detail on the AWS EC2 pricing page.

Reserved Instances offer savings AND flexibility

I still encounter companies that exclusively use On-Demand even though they are running these instances 100% of the time for months or years on end. They explain that they don’t want to be locked in or spend so much on the one-time, upfront fee associated with reservations.

However, for many instances types and availability zones, even if you are running an instance just 2 to 3 months, you already achieve ROI break-even versus On-Demand pricing. In those cases, if you are looking for both savings and flexibility, reservation pricing makes the most financial and operational sense.

Read more about EC2 Reserved Instances vs. On-Demand.
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