A friend of mine once quipped that Amazon must’ve retained a Chief Jargon Officer in the early days of AWS—Bezos’s infrastructure titan isn’t exactly known for descriptive product names. Between EC2, Redshift, Route 53, and dozens of other polygon-logo’d services, AWS is teeming with coded names behind stellar products. Today, we are going to discuss one of the most complex but crucial AWS offerings—Reserved Instances.

Before reading further, you should know three things about Reserved Instances (RIs).

Reserved Instances are a major piece of AWS Billing, accounting for 100B in revenue alongside Saving Plans (SPs). We will explore how RIs are categorized, are purchased, and some additional services your company can trust to make RIs less befuddling.

Do I need an RI?

If AWS spend isn’t a major priority or don’t foresee major upcoming changes to your infrastructure, navigating RIs may not be worth your time. However, if your AWS spend is starting to look like an employee or team’s yearly cost, or, you are looking to cut spend across departments in general, exploring RIs could net massive 20-70% savings. You read that right—seventy percent.

Types of Reserved Instances

First, we need to understand what is available on the market. Amazon’s Reserved Instances vary across three dimensions: (i) contract length, (ii) type, and (iii) payment terms. Like any other good or service—except perhaps McDonalds chicken nuggets—the value of RIs is a function of how much you’re willing to pay (upfront) and how much constraint are you comfortable with.

Lets expand all three dimensions.

Contract Length

You have two options if you buy an RI directly from AWS—1 year and 3 year commitments. I say directly because you can purchase partially used, often-discounted RIs on AWS’s RI marketplace (yes, that actually exists).

Payment Terms

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