Reserved vs On-Demand Instances

On Amazon EC2 these terms have the following meaning:

• Reserved instances:

  They give you the option to make a low, one-time payment for each instance you want to reserve and in turn receive a significant discount on the hourly usage charge for that instance.

• On-Demand instances:

  They let you pay for compute capacity by the hour with no long-term commitments. This frees you from the costs and complexities of planning, purchasing, and maintaining hardware and transforms what are commonly large fixed costs into much smaller variable costs.

I had a look today at the problem of finding the optimal division between Reserved and On-Demand instances. With the optimal solution being the one with the smallest total cost. My findings (in an Excel file) can be found here. Or I put them in two pdf files as well:

• General Pricing Information: download here
• Practical Example: download here