AWS Savings Plans vs Reserved Instances: Choosing the Best Option for Your Cloud Strategy

Struggling to choose between AWS Savings Plans and Reserved Instances? This guide breaks down key differences, pricing, flexibility, and best use cases to help you reduce cloud costs while maintaining scalability.

In this article, you will learn:

• Understanding AWS Savings Plans
• Types of AWS Savings Plans
• How AWS Savings Plans Work?
• Understanding AWS Reserved Instances (RIs)
• Types of AWS Reserved Instances
• How AWS Reserved Instances Work?
• Comparison Table: AWS Savings Plan vs Reserved Instances
• AWS Savings Plans vs AWS Reserved Instances
• Advanced Strategies for Cost Optimization
• Frequently Asked Questions (FAQs)
• Conclusion

When it comes to AWS cost optimization, businesses often struggle to balance savings and flexibility. Commitment-based pricing models like AWS Savings Plans and Reserved Instances (RIs) offer significant discounts compared to On-Demand pricing, but choosing the right one requires a strategic approach.

Reserved Instances have long been a go-to option for predictable workloads, offering higher discounts but with rigid terms. Savings Plans, on the other hand, provide more flexibility, making them ideal for dynamic environments. The challenge? Understanding which model aligns best with your cloud usage patterns.

This guide breaks down the key differences between AWS Savings Plans and Reserved Instances, covering pricing, flexibility, use cases, and best practices to help you make the right choice for your cloud strategy. Read on!

Understanding AWS Savings Plans

AWS Savings Plans offer a flexible, commitment-based pricing model that provides up to 72% savings on compute usage compared to On-Demand pricing. In exchange for a fixed hourly spend commitment over a one- or three-year term, AWS automatically applies discounted rates to eligible compute services. Unlike Reserved Instances, Savings Plans do not require selecting a size, operating system, or tenancy, offering greater flexibility for evolving workloads.

• Savings of up to 72% compared to On-Demand pricing.
• Flexibility across AWS services (Compute Savings Plans cover EC2, Fargate, and Lambda).
• Automated cost optimization based on actual usage patterns.

Types of AWS Savings Plans

AWS offers three types of Savings Plans, each designed to balance flexibility and cost savings differently based on workload requirements:

1. Compute Savings Plans

Compute Savings Plans provide the most flexibility, allowing businesses to apply discounts across EC2, AWS Fargate, and Lambda usage without restrictions on instance types, operating systems, or regions.

• Covers EC2, AWS Fargate, and Lambda workloads.
• Offers up to 66% discount compared to On-Demand pricing.
• Works across any instance type, OS, and AWS region.
• Do not cover RDS, ElastiCache etc…

2. EC2 Instance Savings Plans

EC2 Instance Savings Plans offer the highest possible savings, but they are restricted to only EC2 service (do not cover RDS) and a specific EC2 instance family within a single AWS region. This makes them ideal for predictable, long-term workloads that do not require flexibility across instance types or locations.

• Applies to a chosen EC2 instance family within a single region (e.g., m5.large in us-east-1).
• Provides up to 72% savings compared to On-Demand pricing.
• Best for stable workloads where instance type and region remain unchanged.

3. SageMaker Savings Plans

SageMaker Savings Plans are specifically designed for Amazon SageMaker workloads, offering discounts on ML model training and inference jobs without being tied to specific instance types.

• Applies exclusively to Amazon SageMaker services.
• Provides up to 64% savings compared to On-Demand pricing.
• Ideal for businesses running frequent ML workloads on SageMaker.

How AWS Savings Plans Work?

AWS Savings Plans automatically apply discounted rates to eligible usage, prioritizing maximum savings for committed spend. If the usage exceeds the committed amount, the excess is billed at standard On-Demand rates.

For example, if a business commits to $10/hour in a Compute Savings Plan, AWS applies that $10 to the lowest-cost eligible compute usage—whether across different instance families, sizes, or even AWS services like Fargate or Lambda. If the company’s actual usage exceeds $10/hour, the additional consumption is charged at On-Demand rates.

Understanding AWS Reserved Instances (RIs)

AWS Reserved Instances (RIs) provide a commitment-based pricing model that offers up to 72% savings compared to On-Demand pricing. Unlike Savings Plans, RIs require businesses to commit to a specific instance type, region, and operating system for one- or three-year terms in exchange for discounted rates.

It’s possible to use Reserved instances also for RDS, ElastiCache, RedShift, OpenSearch, MemoryDB, and DynamoDB. But this article focuses more on the EC2 Reserved Instances.

RIs are ideal for predictable, long-term workloads where instance configurations remain consistent over time.

Types of AWS Reserved Instances

AWS offers two types of Reserved Instances, each catering to different levels of flexibility and savings:

1. Standard Reserved Instances

Standard RIs provide the highest possible discounts, but they come with limited flexibility - once purchased, they cannot be changed easily except through RI modification or selling in the AWS RI Marketplace.

• Offers up to 72% savings compared to On-Demand pricing.
• Requires commitment to a specific instance type, OS, and AWS region.

• Limited modification options but can be sold in the AWS RI Marketplace if unused.

• Convertible Reserved Instances

Convertible RIs allow businesses to exchange their Reserved Instances for different instance types, sizes, or operating systems within the same AWS family, providing more flexibility than Standard RIs but at a slightly lower discount.

• Offers up to 66% savings compared to On-Demand pricing.
• Allows instance type, OS, or tenancy modifications during the commitment period.
• Best for workloads that may evolve but still need long-term commitments.

How AWS Reserved Instances Work?

When a business purchases a Reserved Instance, AWS applies the discounted pricing to the specific instance type and region selected for the commitment term. The organization continues paying for the reserved capacity, regardless of whether the instance is fully utilized.

For example, if a business purchases an m5.large Standard RI in us-east-1 for $5/hour, AWS applies the discounted pricing to all matching m5.large instances running in that region. If the company launches more m5.large instances beyond the reserved amount, the extra usage is charged at On-Demand rates.

Some Reserved Instances include a feature called Instance Size Flexibility. This doesn’t mean you can change the reserved instance itself, but rather that the reservation applies to different sizes within the same instance family. For example, if you purchase a large reserved instance, it can also be used for an xlarge instance, since an xlarge instance is essentially double the size.

Comparison Table: AWS Savings Plan vs Reserved Instances

The tables below provide a detailed comparison of AWS Savings Plan vs Reserved Instances across key factors like pricing, flexibility, commitment levels, and best use cases.

Here is an additional comparison table showing that AWS Savings Plans offer more flexibility across services with automatic adjustments, lower overcommitment risk, and no resale options.

AWS Savings Plans vs AWS Reserved Instances

Even AWS promotes Savings Plans within the AWS Management Console as a preferred cost-saving option over Reserved Instances. But you should first decide if you want to compare EC2 Savings Plan vs Reserved Instances, or also count Compute Savings Plan.

Savings Plans offer a simpler, more flexible approach by allowing businesses to commit to an hourly spend rather than locking into specific configurations. This makes it easier to manage costs while maintaining scalability.

However, there are specific scenarios where Reserved Instances still make sense - especially when leveraging the AWS RI Marketplace to resell unused reservations. Let's explore a detailed comparison of both options.

When to Choose AWS Savings Plans?

Choose AWS Savings Plans if:

• Your workloads vary across instance types, regions, or AWS services like Lambda and Fargate.
• You need cost savings without being locked into specific configurations.
• Your cloud usage fluctuates, and you want flexibility in scaling resources.
• You prefer automated cost optimization without constant manual adjustments.

Savings Plans are ideal for businesses with dynamic workloads that require long-term cost savings but need flexibility in how resources are used.

When to Choose AWS Reserved Instances?

Choose AWS Reserved Instances if:

• You have predictable, long-term workloads that do not require frequent changes.
• You need maximum savings (up to 72%) and can commit to a specific instance type, operating system, and region for the long term.
• You require a capacity reservation to ensure instance availability in a given AWS region.
• Your infrastructure remains stable, with minimal changes over time.
• If you're looking to reserve capacity for services other than EC2, such as RDS, currently only AWS Instance Reservations offer this option.

Reserved Instances are best for businesses with fixed, high-utilization workloads where cost savings matter more than flexibility.

Still struggling to choose between AWS Savings Plans and Reserved Instances? Contact us for a quick Well-Architected Review of your infrastructure, and we'll help you determine the best option for your needs.

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Advanced Strategies for Cost Optimization

• Right-Size Instances – Optimize instance sizes before committing to avoid over-provisioning and unnecessary costs.
• Mix Commitment Models – Use Compute Savings Plans for flexibility and Reserved Instances for predictable workloads.
• Leverage Consolidated Billing – Apply Savings Plans across multiple accounts in an AWS Organization to maximize discounts.
• Monitor Usage Regularly – Use AWS Cost Explorer to track commitments and adjust as cloud usage changes.
• Combine with Spot Instances – Run non-critical workloads on Spot Instances while reserving core workloads under Savings Plans or RIs.
• Review Commitments Periodically – Reevaluate your AWS Reserved Instances vs Savings Plan commitments to ensure they align with evolving cloud needs.
• Review AWS data transfer costs – It’s always best to monitor the Data Transfer portion of your AWS billing or check how much you’re paying for data transfer across services like S3 and CloudFront.

Frequently Asked Questions (FAQs)

1. Can I switch from Reserved Instances to Savings Plans?

No, RIs and Savings Plans are separate commitment models. However, you can combine them and for example purchase Savings Plans while still using existing RIs.

2. Do Savings Plans provide capacity reservations like RIs?

No, Savings Plans only offer pricing discounts, whereas RIs guarantee reserved capacity for Zonal Reserved Instances.

3. Which option provides the highest savings?

Standard Reserved Instances offer the highest discounts (up to 72%), but Compute Savings Plans provide more flexibility (up to 66% savings).

4. Can I modify or cancel a Savings Plan or Reserved Instance after purchase?

No, both are non-refundable. However, Convertible RIs allow modifications, and Standard RIs can be resold in the AWS RI Marketplace.

5. What is a difference between EC2 Reserved Instance vs Savings Plan

There is a significant difference in how these two billing functions work in AWS. I believe this article highlights the main differences, but you should first determine what type of Savings Plan you need.

Conclusion

Both plans offer significant cost savings, but the right choice between Saving plans vs Reserved instances depends on your workload’s predictability and flexibility needs. Savings Plans are ideal for dynamic, evolving workloads, while RIs work best for fixed, long-term infrastructure with capacity reservation needs.

Before committing, analyze your usage patterns, scaling needs, and budget to determine which model aligns best with your cloud strategy.

As you continue to develop and optimize your cloud strategy, follow Stormit’s blog for more valuable content on cloud technologies and best practices.