14-3: Reserved Instances & Savings Plans
The complex calculus of cloud commitment: comparing 1-year vs 3-year RI lock-in, Savings Plans elasticity, and calculating break-even limits.
🎯 What You'll Learn
- ✓ Execute Compute Savings Plan arithmetic
- ✓ Determine the opportunity cost of multi-year lock-in
- ✓ Maximize Spot instance coverage
The Arithmetic of Cloud Commitment
Cloud providers (AWS/GCP/Azure) offer massive 30-72% discounts if an enterprise commits to paying for compute power upfront for 1-3 years. If your workload is historically stable, utilizing On-Demand pricing is a gross misallocation of capital.
However, engineering teams often overestimate their architectural stability. If a team buys a 3-Year Reserved Instance for 100 EC2 servers, and 6 months later the architecture team migrates to serverless Lambda functions, the company is still liable for 2.5 years of EC2 payments.
Compute Savings Plans offer flexibility (applying the discount to any compute type) at a slightly lower total discount, serving as an optimal hedge against architectural pivots.
The percentage of baseline compute running without any discount applied.
The sunk cost of RIs purchased that are no longer being utilized by active resources.
Execute a 14-day Compute Savings footprint analysis.
Action Items
Continue Learning: Track 14 — Cloud FinOps & Infrastructure
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Module Syllabus
Lesson 1: The Arithmetic of Cloud Commitment
Cloud providers (AWS/GCP/Azure) offer massive 30-72% discounts if an enterprise commits to paying for compute power upfront for 1-3 years. If your workload is historically stable, utilizing On-Demand pricing is a gross misallocation of capital.However, engineering teams often overestimate their architectural stability. If a team buys a 3-Year Reserved Instance for 100 EC2 servers, and 6 months later the architecture team migrates to serverless Lambda functions, the company is still liable for 2.5 years of EC2 payments.Compute Savings Plans offer flexibility (applying the discount to any compute type) at a slightly lower total discount, serving as an optimal hedge against architectural pivots.