Cloud Computing
Reserved Instance
Definition
A Reserved Instance (RI) is a pricing model that offers a significant discount (up to 75%) compared to on-demand pricing in exchange for a commitment to use a specific amount of computing capacity for a one- or three-year term.
Why It Matters
RIs are a key cost optimization lever for workloads with predictable, steady-state usage. If you know you are going to be running a server 24/7 for the next year, using an RI can save a lot of money.
Contextual Example
A company runs a database on a specific type of EC2 instance that is always on. They purchase a one-year Reserved Instance for that instance type, which lowers their hourly cost for that server significantly.
Common Misunderstandings
- An RI is a billing discount; it is not a physical instance. The discount is automatically applied to any running instance that matches the RI's attributes.
- It is a financial commitment. You are agreeing to pay for the capacity whether you use it or not.