Before You Buy Amazon EC2 (New) Reserved Instances

understand the commitment you are making to pay for the entire 1-3 years

Amazon just announced a change in the way that Reserved Instances are sold. Instead of selling the old Reserved Instance types:

  • Light Utilization
  • Medium Utilization
  • Heavy Utilization

EC2 is now selling these new Reserved Instance types:

  • No Upfront
  • Partial Upfront
  • All Upfront

Despite the fact that they are still called “Reserved Instances” and that there are three plans which sound like increasing commitment, the are not equivalent and do not map 1-1 old to new. In fact the new Reserved Instances are not even increasing commitment.

You should forget what you knew about Reserved Instances and read all the fine print before making any further Reserved Instance purchases.

One of the big differences between the old and the new is that you are always committing to spend the entire 1-3 years of cost even if you are not running a matching instance during part of that time. This text is buried in the fine print in a “**” footnote towards the bottom of the pricing page:

When you purchase a Reserved Instance, you are billed for every hour during the entire Reserved Instance term that you select, regardless of whether the instance is running or not.

As I pointed out in the 2012 article titled Save Money by Giving Away Unused Heavy Utilization Reserved Instances, this was also true of Heavy Utilization Reserved Instances, but with the old Light and Medium Utilization Reserved Instances you stopped spending money by stopping or terminating your instance.

Let’s walk through an example with the new EC2 Reserved Instance prices. Say you expect to run a c3.2xlarge for a year. Here are some options at the prices when this article was published:

Pricing Option Cost Structure Yearly Cost Savings over On Demand
On Demand $0.420/hour $3,679.20/year  
No Upfront RI $213.16/month $2,557.92/year 30%
Partial Upfront RI $1,304/once + $75.92/month $2,215.04/year 40%
All Upfront RI $2,170/once $2,170.00/year 41%

There’s a big jump in yearly savings from On Demand to the Reserved Instances, and then there is an increasing (but sometimes small) savings for the more of the total cost you pay up front. The percentage savings varies by instance type, so read up on the pricing page.

The big difference is that you can stop paying the On Demand price if you decide you don’t need that instance running, or you figure out that the application can work better on a larger (or smaller) instance type.

With all new Reserved Instance pricing options, you commit to paying the entire year’s cost. The only difference is how much of it you pay up front and how much you pay over the next 12 months.

If you purchase a Reserved Instance and decide you don’t need it after a while, you may be able to sell it (perhaps at some loss) on the Reserved Instance Marketplace, but your odds of completing a sale and the money you get back from that are not guaranteed.