Why I Use AWS EC2 Reserved Instances

Amazon Web Services (AWS) EC2 reserved instances provide a simple-to-use method for reducing AWS costs for small business like mine. When my free tier expired last year, I’d heard of reserved instances but didn’t recognize how the how simple it is to save money using them rather than on-demand instances.

We’re been told that EC2 instances are not servers. I agree completely. People who use EC2 instances as simple VPS-like servers are using a fraction of AWS’ capabilities. You can find very inexpensive VPSs from Joe’s Datacenter (btw, kudos to Joe’s for native IPv6). If you are not technically inclined, you’ll find VM with cpanel already pre-installed much easier to use than AWS EC2. I choose AWS because I wanted experience with the API and other AWS services.

If you run your company’s web page on EC2, the instance will be running 24×365. You can commit to a certain number of hours using reserved instances. AWS charges an upfront fee in addition to reduced hourly fees.

Let’s look at an example. You decide on a micro instance for a lightly utilized web server (I recommend you test your load on a micro instance before buying reserved instances. Some people are unhappy with the performance.). We’ll use a Linux instance in the Northern Virginia region.

All prices listed from 3/30/2013 in USD.

The cost for an on-demand Linux instance is $0.02/hour, or about $175/year.

The cost for a reserved Linux instance (light utilization) has an upfront cost of $23. The hourly pricing is $0.012/hour, or about $105/year. Add in the $23 upfront fee for a total of $128/year.

27% savings isn’t bad at all.  Increasing the commitment or selecting a bigger instance increases the discount. AWS claims on its web site that the savings can be up to 65%. In absolute terms, this is chump change for a person serious about running a business. Even so, I think awareness of the savings with reserved instances is good to know if you are setting up instances for friends, family members, and charities.

Check out AWS’s reserved instance page for additional information.