A 1- or 3-year commitment to a specific amount of cloud compute capacity in exchange for a significant discount (typically 30-70%) vs on-demand pricing — trades flexibility for predictable savings.
Reserved Instances commit you to paying for a specified compute footprint regardless of usage, in exchange for the discount. AWS RIs, Azure Reserved Instances, GCP Committed Use Discounts all follow the pattern. Modern equivalents (Savings Plans on AWS) trade the strict instance-type matching for more flexibility, applying the commitment to whatever compute you actually run. RIs/Savings Plans should cover the predictable baseline of usage; on-demand and spot fill the variable layer.
Buying 3-year Compute Savings Plans for 60% of an organization's baseline EC2 spend — saving 30% annually on that committed portion.
Reserved Instances are where most cloud cost-optimization programs find their first big win — most environments run 60-80% of their compute predictably enough to commit.
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