AWS Knowledge
AWS Spot Instances vs Reserved Instances Explained
Piyush Kalra
Nov 27, 2024
AWS EC2, also a part of AWS infrastructure, is widely used across various environments in the cloud. It offers great computing resources to enterprises, thus promoting innovation, efficiency, and growth in the cloud. While EC2 has different types of pricing models available, making an incorrect decision can ruin your budget and infringe on the overall operation of systems.
Two popular options – AWS Spot Instances and Reserved Instances – provide unique benefits according to your requirements. Spot Instances, while not guaranteed and best used for workloads such as batch processing or testing, can provide savings of up to 90% compared to the On-Demand price. On the contrary, Reserved Instances are ideal for consistent long-term use and savings of 75% can be achievable, for instance, for web hosting or critical application use cases.
If I were to put this in simpler terms, Spot Instances would be like renting Airbnbs – cheap, but moving out can be a hassle. In comparison, Reserved Instances ensures a spot for long-term rental while guaranteeing discounts.
This blog will break down the differences, benefits, and best use cases for each. Whether you're managing a bootstrapped startup, an enterprise's cloud operations, or just checking out, we will provide you with great insight into the model best suited for your needs.
What Are AWS Spot Instances?
AWS Spot Instances offer a new way to purchase unused EC2 computer capacity for up to 90% lower than the standard starting rate. They are best suited for a few types of usage, making managing costs easy while purchasing extra capacity in the cloud.
How Spot Instances Work
Spot Instances are spare EC2 computing capacities assigned to aid workloads in AWS data centres with cloud hosting. Convertibility is essential since the Spot Price principle governs these types of AWS instances. This principle states that the price of a Spot Instance is based on its availability, meaning that there's a market-forced set price for it. However, with Spot Instances, as the name implies, customers set a limit on the price they are willing to pay for an instance.
But, there is a downside to Spot Instances. Since these instances are part of the excess capacity of EC2, AWS has the right to take them back after issuing a warning of only 2 minutes when an on-demand user is required when an order is placed.
Benefits of Spot Instances
Significant Cost Savings: Cut expenditure by as much as 90% compared to the on-demand model.
Flexibility: Ideal for businesses with variable workloads requiring fault tolerance.
Scalability: You can spin up thousands of instances if needed for large but non-critical processes.
What Are AWS Reserved Instances?
A Reserved Instance is when a client or company pays in advance to ‘reserve’ a static amount of computing resources for an extreme scenario. Opting for a one-year or three-year contract allows you to secure a reduction of as high as 75% instead of On-Demand pricing.
Types of Reserved Instances
Standard Reserved Instances: In contrast with the other kinds, this one enables the customer to pay a larger fee but to maintain the preferred location, such as area and region.
Convertible Reserved Instances: With these kinds of contracts, there is a scope for converting into different kinds of instances (m5.large turning into c5.large) while still at a somewhat devalued disqualification.
Scheduled Reserved Instances: This works better to assist with routine tasks that follow a cycle (specific periods during the day/evening, for instance).
Benefits of Reserved Instances
Predictable Costs: Almost always allows for maintaining cost within clear boundaries over a wide time frame, such as years, while maintaining consistent pricing levels.
Capacity Reservation: This guarantees availability even during busy times in a region.
Long-term Savings: There is a considerable discount for usage on steady-state applications.
Key Differences Between Spot Instances and Reserved Instances
1. Pricing Models
Spot Instances: This allows the pricing to be relative to market conditions and increases or decreases according to demand. Whenever the Spot Price drops below a set ceiling you have configured, purchasing interacting with these instances must be placed through a bidding model.
Reserved Instances: These are price-controlled and fixed and apply for the pact signed by the user with AWS.
2. Availability
Spot Instances: There is no guaranteed availability for these types, but they can be utilized whenever there is a surplus of EC2 resources; they can also be terminated at short durations.
Reserved Instances: There is a guaranteed reserved capacity in conjunction with the time of usage, which is not the case for Spot instances.
3. Reliability
Spot Instances: Because of their vulnerability to interruptions, they lack dependability for large application systems that want to guarantee uptime.
Reserved Instances: This one offers stability, freeing one from interruptions.
4. Use Cases
Spot Instances: They are suited for GPU rendering workloads, extensive data processing, batch computations, CI/CD pipelines, etc.
Reserved Instances: This is suitable for applications requiring constant state performance, like web servers and databases.
Key Comparison Table:
Pricing Comparison Example Between Spot and Reserved Instances
The Spot Rate denotes the elastic pricing of Spot Instances, which can be up to 90% cheaper than On-Demand rates. These prices vary according to the parameters of the Spot Market, which is perfect for time-sensitive, economical tasks. On the other hand, the Reserved Rate gives you a price in exchange for a contract that lasts a specific amount of time, allowing for savings of up to 75%, which is good for business plans where the long-term needs are known.
Use Case Scenarios
Spot Instances: For all the tasks that are non-essential or can be flexible, this would be the best instance type to go for. A spot instance that costs $10 for a rendering job that normally takes $100 on demand would be ideal.
Reserved Instances: Great for workflows that can easily be predicted and are consistent. This is because a one-three year long-term commitment in a Reserved Instance can amount to a 40 to 70% savings in costs, where there are services such as an active database or any application that works 24/7.
When to Use AWS Spot Instances
Ideal Use Cases:
Batch Processing: Performing data analytics over large datasets through Hadoop, spark or AWS EMR jobs.
Big Data Analysis: Always try to cut down on costs when analyzing big data sets.
Machine learning model training: Build models in which a disruption would not change the results greatly.
Continuous Integration/Delivery: Minimize expenses in building pipelines during the development cycle of applications.
Render Farms: GPU-hungry media or visualization rendering work.
Tips for Using Spot Instances Effectively
Use Spot Fleets to cater to demand across different instance types/regions.
Set up automated Auto Scaling Groups to actively replace terminated instances.
Use the AWS cost management dashboard to look at history and observe Spot Price trends.
When to Use AWS Reserved Instances
All workloads that use AWS reserved instances should be long-lived and need consistent up-time.
Ideal Use Cases:
Web Applications: Applications that require a higher amount of sustained traffic to be handled.
Databases: Long-lasting database solutions that need frequent interaction to stay high on availability.
Enterprise Apps: Fixed processes for internal systems, such as ERP and CRM applications, that facilitate the back office.
Long-term Benefits:
Reserve pricing for workloads that are predictable at a lower rate.
Combine AWS Reserved Instances with AWS Saving Plans so that enhanced economic devices through more convenient billing can be made possible.
Choosing Between Spot and Reserved Instances
When deciding between Spot and Reserved Instances, most users face an allusion question: Which one's spot vs Reserved for me? Here’s how to make the choice:
Workload Predictability: Use Spot instances for dynamic workloads that do not need to be scheduled and utilize Reserved instances for workloads with a set schedule.
Risk Tolerance: If you are fine with disruptions, Spot is unparalleled for savings; however, for assured capacity, the safer option is Reserved instances.
Budget Constraints: If you aim to cut down costs and yet maintain some level of reliability, then the reserve instances are the best option available.
Best Practices for Cost Optimization
Combine Both Types: Use Reserved instances when the workload is comparatively consistent and utilize spot instances for batch runs.
Implement Auto Scaling: Change the resources needed to cater to spot pricing dynamically depending on the time of day or year.
Monitor Usage Regularly: Make the best use of AWS Cost Explorer and Pump to check and change your usage.
Save Money with Pump: AWS RIs have a pay-as-you-go model, and the charge appears on the first of every month, which can cause a sudden spike in price; many companies and other users of AWS do not use RIs in 1st month and instead wait for a month and then resell it through Pump to save costs.
As soon as you join Pump, the RI charge will be adjusted according to Pump's billing cycle. RI charges will be reset according to the date when the user joined, and Pump will cover the rest of the RI charges for that month; for the charging month, that is.
And it’s not just RIs! Pump also helps you save on other AWS or GCP services by optimizing costs across your entire cloud setup.
Getting Started with AWS
To begin using Spot or Reserved Instances at AWS Management Console, follow the steps mentioned below:
Spot Instances: Navigate to EC2 > Spot Requests > Create a Request.
Reserved Instances: Navigate to EC2 > Reserved Instances > Purchase Reserved Instances.
Final Words on AWS Spot vs. Reserved Instances
AWS Spot & Reserved Instances for Cloud Computing provide great opportunities to cloud users depending on their workload requirements. If the job may need varying levels of demand and is sensitive to costs, use Spot Instances. For predictable workloads over a long period, Reserved Instances guarantee availability.
So carefully assess your business’s requirements and merge these approaches for the best. If you are prepared to gain control over how much you pay for cloud services, try Pump and enjoy great savings.
Start optimizing your cloud spend with Pump!!
Join Pump for Free
If you found this post interesting, consider checking out Pump, which can save you up to 60% off AWS for early-stage startups, and it’s completely free (yes, that's right!). Pump has tailor-made solutions to take you in control of your AWS and GCP spend in an effective way. So, are you ready to take charge of cloud expenses and maximize the most from your investment in AWS? Learn more here.
