Skip to content
Back to Architecture Decisions

Reserved Capacity

Commit to capacity you'll use for 1+ years to cut 30-70% off the compute bill.

Why

On-demand cloud pricing has a ~40% premium for flexibility you rarely use. Reserved Instances / Savings Plans commit to a quantity for 1-3 years in exchange for 30-70% discount. For a steady-state workload (which most production compute is), paying on-demand is burning money. The risk of reservation is over-committing — if you reserve 100 instances and use 60, you pay for 40 idle. The discipline is to reserve your steady-state baseline (the floor you'll always need) and leave the burst on-demand.

When

Once you have 3 months of steady-state usage data. Takes 1 hour to analyze + purchase. Re-evaluate quarterly.

How

1. Pull 90 days of compute usage; find the floor (min instances always running)
2. Reserve 70-80% of the floor for 1 year (conservative start)
   - Use Savings Plans (flexible across instance families) over RIs where possible
3. Leave the burst (floor → peak) on on-demand
4. Set a monthly reservation-utilization alert; target > 90% utilization
5. Re-evaluate at month 9: did usage grow? Buy more reservations for year 2
6. Never reserve 100% of peak — you pay for idle capacity in the trough

Example

90-day usage: floor 40 instances, peak 65, avg 48

Reservation plan:
  - Reserve 32 instances (80% of floor) via 1-yr Compute Savings Plan
  - Discount: 52% → 32 × $100 × 0.48 = $1,536/mo (was $3,200)
  - Savings: $1,664/mo = $20k/year
  - Burst (33 instances) stays on-demand: $3,300/mo

Total: $4,836/mo (was $6,500) — 26% reduction, zero operational change.

Common Problems

  • ⚠Reserving 100% of peak usage — you save on the busy months and pay for idle reservations in the quiet ones, netting less than expected.

Best Practices

  • ✓Start with 1-year commitments; 3-year locks in a price but also locks in an instance family you may want to leave.
  • ✓Use Savings Plans over Reserved Instances for flexibility — they apply across instance sizes and families.

Related Resources