Terry Jones

If you purchase an Amazon EC2 reserved instance, you’ll pay a certain amount up front (pricing). If you don’t use the instance much, it will be more expensive per hour than a regular on-demand instance. E.g., if you paid $227.50 to reserve a small instance for a year but then only used it for a single day, you’d be paying almost $10/hr and it would obviously be much cheaper to just get an on-demand instance and pay just 8.5 cents per hour.

OTOH, if you ran a small instance for a year at the on-demand price, you’d pay $745 and it would obviously be cheaper to pay the up-front reservation price ($227.50) plus a year of the low per-hour pricing (365 * 24 * $0.03), or $490.

So for how long do you have to run an instance in order for it to be cheaper to pay for a reserved instance? (Note that I’m ignoring the time value of money, what you might do with the up-front money in the meantime if you didn’t give it to Amazon in advance, etc.)

The answer is pretty simple: for a one-year reservation you need to run the instance for about 6 months to make it worthwhile. For a three-year reservation you need to run the instance for at least 3 months per year, on average.

Here’s a fragment from a simple spreadsheet I made, based on the US N. Virginia prices:

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