Optimizing AWS Costs with Reserved Instances and Savings Plans

Optimizing costs is a critical consideration for any organization utilizing Amazon Web Services (AWS). Two powerful tools in the AWS cost optimization toolkit are Reserved Instances and Savings Plans. Both options provide users a way to achieve significant savings compared to standard on-demand pricing models by committing to a certain level of usage over a specified term. Here’s how they work and how you can use them to optimize your AWS costs.

Reserved Instances (RIs)

Reserved Instances allow users to commit to using a specific instance type, in a specific region, for a set term (either one year or three years), in exchange for a lower hourly rate. RIs are particularly suitable for workloads with steady state usage or predictable performance needs.

Types of RIs:

  • Standard RIs: Offer up to 75% savings over on-demand. They can be modified for instance size within the same instance family, but not the type or location.
  • Convertible RIs: Offer up to 54% savings over on-demand and can be exchanged for different types, instance families, operating systems, or tenancies within the same region.


  • Significant cost savings over on-demand instances.
  • Flexibility in modifications for Standard RIs and even more flexibility with Convertible RIs.

Best Practices:

  • Analyze your current and predictable future usage before purchasing.
  • Start with a small commitment and increase as you become more comfortable with your usage patterns.
  • Use AWS Cost Explorer to monitor the utilization and effectiveness of your RIs.

Savings Plans

Savings Plans are a more flexible alternative to RIs, offering cost savings in exchange for committing to a consistent amount of usage (measured in dollars per hour) over one or three years. There are two types of Savings Plans:

  • Compute Savings Plans: Offer up to 66% savings over on-demand and apply to any EC2 instance regardless of region, instance family, OS, or tenancy. They also apply to AWS Fargate and AWS Lambda.
  • EC2 Instance Savings Plans: Provide the greatest savings up to 72% over on-demand, but are specific to a single instance family in a region. They allow flexibility to change instance size, OS, or tenancy within the chosen family and region.


  • Flexibility to change services, instance types, and regions without affecting the discount.
  • Significant savings over on-demand pricing with a simple commitment to spend a certain amount per hour.

Best Practices:

  • Review your current and forecasted usage across all applicable services to choose the most suitable Savings Plan.
  • Regularly monitor your Savings Plan’s utilization and coverage using AWS Cost Explorer to ensure you’re maximizing your savings.

How to Choose Between RIs and Savings Plans

Deciding between Reserved Instances and Savings Plans depends on your specific needs:

  • Use Reserved Instances if: You have a deep understanding of your usage patterns for specific instance types and regions, and your workloads are steady and predictable.
  • Use Savings Plans if: You are looking for flexibility in your applications, potentially across services, and have a variable workload or plan to migrate between instance types or regions.


Both Reserved Instances and Savings Plans offer substantial savings and can be part of a strategic approach to managing AWS costs. The choice between them depends on the predictability of your workloads, your need for flexibility, and your willingness to commit to AWS usage over time. By carefully analyzing your usage patterns and selecting the appropriate commitment, you can optimize your AWS costs and significantly reduce your cloud spend.

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