Amazon EC2 Reserved Instances

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Features

• Reserved Instances can save you up to 49% over On-Demand rates when used steady state.
• Reserved Instances are easy to use and require no change to how you use EC2. When computing your bill, our system will automatically apply Reserved Instance rates first to minimize your costs. An instance hour will only be charged at the On-Demand rate when your total quantity of instances running that hour exceeds the number of applicable Reserved Instances you own.
• Reserved Instances can be purchased for 1 or 3 year terms.
• Reserved Instances are available in the US East (N. Virginia), US West (N. California), and EU (Ireland) regions.
• Reserved Instances are currently available for Linux/UNIX and Windows Server operating systems.

Use Cases

Reserved Instances are a great option for a number of different use cases.

Steady State Usage

Many applications require servers to be available at all times. Reserved Instances could provide your business substantial savings if you currently own your own hardware or exclusively use On-Demand instances for your steady state applications.

You can determine whether Reserved or On-Demand instances best fit your needs by comparing On-Demand rates and the effective hourly rate of Reserved Instances. In order to calculate an effective hourly rate, amortize the one-time fee over the term and add the hourly usage fee. At steady state usage, the effective hourly rate for 1 year term Reserved Instances is 34% lower than On-Demand rates and 3 Year term Reserved Instances are 49% lower.

Low to Medium Annual Utilization

Reserved Instances can also provide cost savings even if your applications run less than 100% of the time. Unlike traditional dedicated capacity, Reserved Instances allow you to avoid usage charges when you don’t need the instance. 3-year term Reserved Instances breakeven with On-Demand rates at 24% utilization or greater. The table below shows the possible savings over On-Demand rates depending on utilization. The higher your utilization, the more savings Reserved Instances provide.

Another way to view the utilization rates above is in terms of aggregate usage. If you purchase a 3-year term Reserved Instance, you need only run that instance for a total of 8.7 months over the course of the 3-year term (24% of the term) for your costs to equal those of On-Demand. Any usage beyond this amount incrementally increases your savings.

Variable Usage

If your total annual needs are difficult to predict due to fluctuating usage, you can optimize your costs by combining Reserved and On-Demand instances. You can purchase Reserved Instances to meet your average compute requirements and augment with On-Demand when your needs rise above that amount. You reserve capacity for your expected usage while maintaining the flexibility to meet additional needs during peaks, without the high incremental costs of additional hardware that do-it-yourself requires. As illustrated above, even at less than 100% utilization of your Reserved Instances, your effective hourly cost can be lower than On-Demand alone or owning your own hardware.

For example, a web application maintains the same average usage level most of the year, but sees traffic spike occasionally. They purchase 5 three-year term Reserved Instances to handle their everyday levels of usage and leverage additional On-Demand instances to meet spikes in demand. If they had wanted to have the same flexibility with self-owned hardware, they would have needed to purchase 8 servers to meet their peak demand. With Reserved Instances, their costs average to an effective hourly rate 40% lower than the On-Demand rate.

Standby Capacity

Reserved Instances can be a source of reliable standby capacity available at a moment’s notice. For example, following a hardware failure that affects a mission critical application, a company who purchased Reserved Instances as part of their disaster recovery plan can have instances running within minutes to ensure minimal disruption to their business.

Comparing Reserved Instances to Doing It Yourself

With do-it-yourself options such as collocation or managed hosting, you know that your servers are always available. Reserved Instances provide the same capacity and cost savings, but with greater flexibility and less effort.

Direct costs of do-it-yourself solutions include hardware, facility fees, and maintenance. Doing it yourself requires dedicated support resources within your organization, which result in additional indirect costs and distraction to your core business. When you do-it-yourself, you only have access to a set number of physical servers; any hardware problems result in costly repairs and lost time. Reserved Instances transfer responsibility for these support activities to Amazon EC2, leaving you free to focus on your business. Reserved Instances allow you to avoid recurring costs by turning off instances when you are not using them. In the event of a hardware issue, you can re-launch your instance immediately without additional costs.

The chart below shows a comparison between the estimated annual costs of doing it yourself, Reserved Instances and On-Demand Instances for a customer running 35 m1.small and 10 m1.large Linux/UNIX instances at steady state for 1 year.

Annual Cost Comparison (100% utilization)
	Do-It-Yourself	EC2 On-Demand	EC2 Reserved (1 Year Term)	EC2 Reserved (3 Year Term)
Usage Costs	-	$ 55,845	$ 36,772.50	$ 28,460
Server Hardware	$ 20,129	-	-	-
Network Hardware	$ 4,026	-	-	-
Hardware Maintenance	$ 9,662	-	-	-
Operating System	$ –	-	-	-
Facility Expense	$ 43,794	-	-	-
Remote Hands Support	$ 338	-	-	-
Data Transfer Costs	$ 3,357	$ 2,106	$ 2,106	$ 2,106
TOTAL COST	$ 81,305	$ 57,951	$ 38,878.50	$ 30,566

For information, tools, and resources to compare the costs of Amazon Web Services with IT infrastructure alternatives please visit the AWS Economics Center.

How Billing Works

Customers using both Reserved and On-Demand Instances will have Reserved Instance rates applied first to minimize costs. Each hour, if the number of running instances is less than or equal to the number of applicable Reserved Instances you have, all running instances will be charged at the Reserved Instance hourly rate. When your total quantity of running instances exceeds the number of applicable Reserved Instances you own, you will be charged the On-Demand rate.

For example, if you own 3 Reserved Instances with the same instance type and Availability Zone, the billing system checks each hour to see how many total instances you have running that match those parameters. If it is 3 or less, you will be charged the Reserved Instance Rate for each instance running that hour. If more than 3 are running, you will be charged the On-Demand rate for the additional instances.

If you purchase a Reserved Instance for an Availability Zone where you have a running instance, the lower hourly charge will automatically be applied to that instance moving forward with no need to restart.

How To Purchase Reserved Instances

Reserved Instances can be purchased using the AWS Management Console, Elasticfox or API tools.

AWS Management Console:

1. Log in to the AWS Management Console, click the “Amazon EC2” tab & click “Instances” in the navigation pane
2. Click the “Reserved Instances” button and select “Purchase Reserved Instances”
3. Select your platform, instance type, availability zone and term length
4. Adjust the quantity of instances to purchase
5. Confirm your purchase

Elasticfox:

To install Elasticfox, click here.

1. Open Elasticfox from the “Tools” menu in Firefox
2. Click on the “Reserved Instances” tab
3. Select a Region from the dropdown in the upper left corner
4. In the “Reserved Instances Offerings” box, use the headings to sort and find the Reserved Instance with the instance type, Availability Zone and term length you want
5. Click on the Reserved Instance you want to purchase
6. To purchase, click on the green button

Important Notes about Purchases:

• Operating System (e.g. Linux/UNIX or Windows Server), Instance Type, and Availability Zone must be chosen at purchase, and cannot be changed later.
• In the AWS Management Console, there is an option to purchase the “Best Available” Availability Zone rather than specifying one. If you select this option, Amazon EC2 will select an Availability Zone for you based on capacity available at the time of purchase.
• If you choose “Best Available” as your Availability Zone, you will be assigned an Availability Zone that cannot be changed. Make note of the Availability Zone you are assigned and be sure to launch an instance in that Availability Zone if you want the Reserved Instance rate to apply.
• You can purchase up to 20 Reserved Instances per Availability Zone each month. If you need additional Reserved Instances, complete the form found here.
• The one-time fee is non-refundable.