Spot Instances vs. On-Demand Instances: Pros and Cons

This is part of a series of articles about Spot Instances

What Are Spot Instances? 

Spot instances are an innovative pricing model introduced by cloud computing providers. They allow you to bid on unused compute capacity, which cloud providers offer at steep discounts compared to their regular pricing (known as on-demand pricing).

Typically, when requesting spot instances, you specify the maximum price you’re willing to pay per hour per instance. If your bid exceeds the current spot price, your request is fulfilled, and your instances start running. As the spot price changes based on supply and demand, your instances continue to run as long as your bid exceeds the spot price. When it does, instances are terminated with short notice (typically between 30 seconds and two minutes).

Spot instances are a cost-effective solution for applications that have flexible start and end times, or that are only feasible at very low compute prices. They are ideal for data analysis, batch jobs, and background processing. With advances in cloud automation and cost optimization, specialized tools make it possible to run even mission critical workloads on spot instances without interruption.

What Are On-Demand Instances? 

On-demand instances allow you to pay for compute capacity by the hour with no long-term commitments. This frees you from the complexity of planning, purchasing, and maintaining hardware, and transforms large upfront investments into much smaller, variable costs.

On-demand instances are recommended for users who prefer flexible access to compute resources without any up-front payment or long-term commitment. They can be used for applications with short-term, spiky, or unpredictable workloads that cannot be interrupted.

The key difference between spot instances and on-demand instances is the pricing model and their availability. On-demand instances have a fixed price and are always available, while spot instances operate on a bidding system and are not guaranteed to be available.

In this article, you will learn:

Spot Instances: Pros and Cons 

Advantages of Spot Instances

Cost savings

The first and most notable benefit of spot instances is the potential cost savings. Spot instances can save you up to 90% of the cost compared to on demand pricing. This is particularly beneficial for businesses with large-scale computing needs but tight budgets.

Scalability

Spot instances offer high scalability. You can quickly scale up and down based on the workload and pay only for the compute time you consume. This makes spot instances suitable for handling peak loads or unexpected surges in traffic.

Flexible pricing

The bidding system used with spot instances offers flexible pricing. You have the control to set your maximum price, and when the spot price goes below your bid, you get the instance. This allows you to optimize costs based on your budget and needs.

Disadvantages of Spot Instances

Interruption

One of the main disadvantages of spot instances is the possibility of interruption. The cloud provider can terminate your spot instances when the spot price exceeds your bid, which means the cloud provider needs the capacity back. This can disrupt ongoing operations.

Unpredictable availability

The availability of spot instances is unpredictable as it is based on supply and demand. During high demand periods, the spot price can increase, and the instances might not be available at your bid price. This uncertainty can be a challenge for applications that require constant availability.

On-Demand Instances: Pros and Cons 

Advantages of On-Demand Instances

Predictability

The most significant advantage of on-demand instances is predictability. You know how much you are going to pay at the end of the month (assuming you run the instance for a known duration) because the pricing model is straightforward. There are no surprises or hidden charges, and this makes budgeting easier.

Flexibility

On-demand instances are the cloud pricing model with the highest degree of flexibility, allowing you to scale your compute capacity freely up or down in response to changes in workload. This means you can quickly adapt to peak times and reduce capacity during off-peak hours, optimizing your resources and costs.

Low management overhead

With on-demand instances, there is a low management overhead. You can start and stop instances as your needs change, without any penalties, and there is no need to constantly track spot prices and adjust your capacity.

Disadvantages of On-Demand Instances

Cost

While on-demand instances offer numerous advantages, they are also the most expensive pricing model. This can be problematic, especially for long-term, steady-state workloads. The hourly or per-second billing can add up quickly if not managed properly.

Limited discounts

Unlike reserved instances, on-demand instances typically do not offer built-in discounts. There are some exceptions, such as B-series instances in the Azure cloud, which grant discounts for VMs with burstable CPU performance.

Spot Instances vs. On-Demand Instances: How to Choose? 

Choosing between spot and on-demand instances depends on several factors, including workload characteristics, cost considerations, and project objectives.

1. Assessing Workload Characteristics

The nature of your workload plays a significant role in determining the type of instances that would be most suitable. For example, if your workloads are interruptible and time-flexible, spot instances can be a more cost-effective choice. On the other hand, if your workloads are critical and need to run continuously, on-demand instances may be more appropriate.

2. Budget Constraints

Cost is a significant factor when choosing between spot and on-demand instances. Spot instances can provide substantial cost savings, often up to 90% compared to on-demand pricing. On the other hand, while on-demand instances are more expensive, they provide more stability and predictability.

3. Project and Business Objectives

Your project and business objectives can also influence your decision. If your project is short-term, or if you are testing an application, spot instances can be an excellent choice because of their lower costs. However, for long-term projects or mission-critical applications, the stability and predictability of on-demand instances may be more suitable.

Related content: Read more in our guide to Spot Instances vs. Reserved Instances

Run Spot Instances for Mission Critical Applications with Elastigroup

Elastigroup from Spot by NetApp enables users to scale stateful and stateless workloads on spot instances, with guaranteed availability, to see a dramatic cost reduction with maximum efficiency.

Learn more about how Elastigroup can help you take advantage of the cost savings from spot instances.