Spot Instances vs. Reserved Instances: How to Choose

This is part of a series of articles about Spot Instances

What Are Spot Instances?

Spot instances are an option that allows cloud customers to bid for unused compute capacity. They serve as an alternative to standard on-demand instances, which usually have fixed pricing. Spot instance pricing runs on a flexible pricing model that can save up to 90% of compute costs.

The principle behind spot instances is quite straightforward. Given that there are moments when some capacity remains unused, cloud providers like Amazon Web Services (AWS), Microsoft Azure, and Google Cloud offer this spare capacity at a discount via the spot pricing model.

The caveat is that spot instances can be terminated by the service provider with very short notice, usually when the demand for capacity rises or when the current spot price surpasses the maximum price set. Despite this, spot instances offer a cost-effective solution for tasks with flexible start and end times, or those that can tolerate interruptions.

What Are Reserved Instances?

With reserved instances (RIs), consumers reserve a specific compute capacity for a set period of time, typically one or three years. In return for this commitment, users receive a substantial discount compared with on-demand instance pricing. Like spot instances, reserved instances are available from major cloud providers like AWS, Azure, and Google Cloud. 

Related content: Read our guide to spot instances vs on demand

Reserved instances are best suited for predictable workloads and applications. They provide the assurance of capacity reservation, granting a sense of security that resources will be available when needed.

The main difference between spot and reserved instances is in their pricing model and availability. While spot instances may offer significant cost savings, they come with the risk of interruption. Reserved instances, by contrast, secures resource availability for long-term commitments.

In this article:

Spot Instances: Advantages and Disadvantages

Advantages of Spot Instances

Cost Efficiency

The primary advantage of using spot instances is their cost-effectiveness. They can be significantly cheaper than on-demand instances, with discounts of up to 90%. This pricing model can drive great savings, especially for larger organizations running heavy computational tasks.

Flexibility

Another advantage of spot pricing is flexibility. Unlike reserved instances, which require a long-term commitment, spot instances can be obtained for immediate use, allowing businesses to swiftly respond to workload and demand changes.

Scalability

Lastly, spot instances are highly scalable, allowing companies to scale their resources quickly and efficiently without substantial upfront investment. This makes them especially practical for startups and small businesses which may not have the funds to invest in long-term reserved instances.

Disadvantages of Spot Instances

Interruption Risk

While spot instances offer many benefits, they also present some downsides. The main drawback is the risk of interruption. Providers can terminate spot instances at any time if demand for capacity elevates or the spot price exceeds the user’s specified maximum. This poses an issue for applications that require constant runtime.

Complexity

Using spot instances requires a good understanding of pricing models and the ability to set a maximum price for instances. Moreover, managing spot instances can be complex, especially for larger organizations operating a large number of instances.

Reserved Instances: Advantages and Disadvantages

Advantages of Reserved Pricing

Cost Savings

A key advantage of using reserved pricing is the considerable cost savings compared to on-demand instances. Since a certain number of resources are reserved for a set duration, cloud providers offer significant discounts, going up to 72% for some providers.

Capacity Reservation

Another benefit of reserved instances is guaranteed capacity reservation. Once an instance is reserved, access to that capacity is assured whenever needed. This is especially useful for businesses with predictable workloads and that want to eliminate the risk of not being able to access resources during times of peak demand.

Predictable Budgeting

Lastly, reserved instances allow for predictable budgeting. With a set price and duration, businesses can easily predict their cloud computing expenses and allocate budget accordingly. This predictability is a significant benefit for businesses that value financial planning and cost control.

Disadvantages of Reserved Instances

Upfront Costs

Reserved instances do have their downsides. One of them is the necessity for upfront costs. While this can lead to long-term savings, it does demand a substantial initial investment, which may not be possible for all businesses.

Commitment Requirement

Another potential shortcoming of reserved instances is the commitment requirement. Businesses must agree to use a certain capacity for a predefined duration, typically one or three years. This lack of flexibility may not be ideal for businesses with variable workloads or those in a volatile market.

Spot Instances vs. Reserved Instances: How to Choose?

Assess Workload Attributes: Duration, Flexibility, and Fault Tolerance

It’s important to consider your workload attributes when choosing between spot and reserved pricing models. If your workloads are short-term, unpredictable, or can withstand interruptions, spot instances offer a cost-effective choice. They allow bidding for spare compute capacity often at significantly lower prices than reserved instances.

Conversely, for long-term, predictable workloads that require guaranteed availability, reserved instances are probably the better option. Their capacity reservation and predictable pricing make them better suited for such tasks.

Budget Considerations

Budget is another important factor in the choice between spot and reserved instances. If you have a large upfront budget and prefer predictable pricing, reserved instances might be a worthy investment. On the other hand, if budget constraints exist and fluctuations in price can be managed, spot instances can offer substantial savings.

Strategic Objectives: Project Speed, Longevity, and Criticality of Tasks

Lastly, consider your strategic objectives. If speed is crucial and you need immediate access to resources, spot instances allow you to scale up and down quickly.

However, if the project is long-term and involves critical tasks that can’t bear interruptions, the guaranteed capacity provided by reserved pricing can offer peace of mind.

Managing Spot Instances and Reserved Instances with Spot by NetApp

Managing spot instance and reserved instance purchasing is difficult using cloud native tools alone. To provision the resources you need and optimize costs and infrastructure, a third-party solution is the answer.

With Spot by NetApp, you can get the most out of your cloud investment and take advantage of the low pricing of spot instances and reserved instances.

  • Spot Eco gives you a fully managed, centralized process for managing and optimizing RIs.
  • Spot Elastigroup allows you to scale stateful and stateless workloads on spot instances.

See an overview of Spot’s suite of CloudOps solutions and get started with a free trial today.