How to Utilize Reserved Instances to Cut Cloud Costs

By: Quentin Fleming | November 21, 2023

Cloud computing has revolutionized the way businesses operate by providing a scalable, cost-effective infrastructure for running applications and managing data. However, the costs of cloud computing can quickly add up, especially for businesses that rely heavily on cloud services. One way to reduce these costs is by utilizing reserved instances.

In this blog, we will explain what reserved instances are and how you can use them to cut your cloud costs.

What Are Reserved Instances (RI)?

RIs are a pricing model offered by cloud service providers like Microsoft Azure, Amazon Web Services (AWS), and Google Cloud Platform (GCP). A RI is a discounted, one- or three-year commitment to a specific instance type in a particular cloud region. In exchange for this commitment, you get a significant discount on the hourly rate for that instance type compared to the On-Demand price.

How Can Reserved Instances Cut Cloud Costs?

Using reserved instances can deliver significant cost savings for businesses that have predictable usage patterns. Here are some ways that RIs can help you cut your cloud costs:

  1. Lower hourly rates: As mentioned earlier, RIs offer significant discounts on hourly rates compared to On-Demand instances. This means you can save money by committing to a specific instance type for a longer duration.
  2. Predictable costs: With RIs, you can predict your costs over the next one or three years. This is especially useful for businesses that have steady workloads and want to avoid unexpected spikes in their cloud bills.
  3. Capacity planning: By committing to a specific instance type and region, you can plan your capacity requirements in advance. This helps you avoid instances where you might run out of capacity and need to pay for additional instances at On-Demand rates.
  4. Flexibility: Many cloud service providers allow you to modify your reserved instance commitments if your needs change. This means that you can switch to a different instance type or region if needed without losing the benefit of the discount.

How to Utilize Reserved Instances

To make the most of reserved instances, you should follow these best practices:

  1. Analyze your usage patterns: Before committing to an RI, analyze your usage patterns to determine which instance types and regions you use the most. This helps you choose the right RI that will provide the most significant cost savings.
  2. Choose the right commitment term: Cloud service providers offer one-year and three-year commitment terms for reserved instances. Choose the term that works best for your business based on your long-term usage requirements.
  3. Monitor and modify your commitments: Monitor your usage patterns regularly to ensure that you are using your RIs efficiently. If your usage changes, modify your commitments to maximize your savings.
  4. Consider a hybrid approach: Consider using a hybrid approach that combines RIs with On-Demand instances. This can provide additional cost savings while allowing you to take advantage of the flexibility of On-Demand instances.

Conclusion

Reserved instances are an effective way to reduce your cloud costs while providing predictable capacity planning and flexibility. By analyzing your usage patterns, choosing the right commitment term, monitoring, and modifying your commitments, and considering a hybrid approach, you can make the most of reserved instances and save money on your cloud bills.

If you are looking for ways to reduce cloud costs, then contact us. Our cloud experts can show you how to make sure you’re only paying for what you need.

Cloud Cost Optimization Checklist

Quentin is a cloud cost optimization specialist on Core's Microsoft Licensing Team. He specializes in helping organizations rightsize their Azure environments to make the most of their cloud investment.

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