Are AWS Reserved Instances (RI) Better Than On-Demand?

  • October 19th, 2016
  • By Amal S
  • Blog
  • The extreme security features and the availability of the most reliable data centers in the nearest locations make AWS as the right choice of enterprises across the world. For AWS, Cloud security is the highest priority. The users of AWS are able to scale and manage their servers along with maintaining a secure environment. Reserved and On-demand are the two popular sought after instance types. Most of the subscribers get confused on selecting the type of instance for their enterprise. This blog reveals everything you should know to make the accurate assortment of Reserved and On-demand instances for your organization.

    The comparison between Reserved and On-demand Instances

    RI provides upfront payment facilities with three options. These payment options are structured on the basis of user requirements. It includes no upfront (monthly payment), partially upfront where a fixed fee is paid as upfront and rest is settled monthly and finally all upfront (settled in advance). All the three payment options are available for one-year contracts and the three-year contracts are available, if you at least partially pay the upfront. Amazon provides discounts to those who subscribe for RIs and is based on how much the user pays as an upfront.

    On-Demand Instances are the AWS virtual servers which are purchased at a fixed rate per hour. These servers run in both AWS Elastic Compute Cloud (EC2) and AWS Relational Database Service (RDS). On-Demand servers are suitable for applications with short-term, irregular workloads that cannot be interrupted and become useful during testing and development of applications on EC2.

    The cloud services are based on the philosophy ‘pay as you go’ and are also the advantage which distinguishes cloud users from others. Reserved instances seem to be violating the cloud philosophy as it follows a fixed payment system. The flexibility of cloud system is depends upon its scalability features and is purely based on the payment which is done according to the usage of resources. For enterprises which confront with such unpredictable demand fluctuation, the ‘pay as you go’ facility becomes vital. When RI makes the cloud a CapEx (one-time expense), On-Demand follows OpEx (monthly recurring expense) system. On-Demand embraces the cloud philosophy rather than RI, however, it is quite expensive than the latter.

    Reserved Instances are cost saving compared to On-Demand instances. When you purchase reserved instances, in return, you will be served with a lower hourly rate. Use of RI reduces the cost of the resources you’re already using and allows paying a lower price upfront than the price you would pay on demand. There are 2000 RIs in total and all of them are with their own breakeven point.


    There is nothing like a ‘bad instance’ in AWS cloud services. The user requirement makes each instance beneficial. So the users must be aware of their requirements in order to choose the right one. Buying an instance is indeed a huge investment, so it involves huge risk as well. Like the veteran theoretical physicist, Einstein quoted “You have to learn the rules of the game. And then you have to play better than anyone else”, every subscriber should no their organizational requirements and the functionality of each instance. Always consider, whether this purchase of instance makes the most sense for your organization or not. The following practice may help in utilizing the benefits of instances:

    • Go for the smaller instance sizes in the case of RIs.
    • Whenever appropriate, use Spot Instances and Auto-scaling.
    • In the case of on-demand instances, schedule the on/off times.

    If applied right, the use of instances produce significant savings or else it will devastate your budget. Be acquainted with the essentials of instance application and experience the exceptionality of AWS instances.

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