A reserved instance is a billing arrangement offered by cloud providers. You commit to a defined amount of compute, typically for one or three years, and in exchange receive a lower hourly rate than the standard on-demand price. Providers also offer similar flexible commitments, such as savings plans or committed use discounts, with different details.
Why it matters
Steady workloads such as a production database or an always-on application run around the clock, so on-demand pricing can be wasteful. Commitments reduce cost for that baseline, while spot or on-demand capacity covers peaks. The risk is paying for capacity you no longer need if requirements change. Terms, payment options and exchange rules vary by provider, so confirm them in the current documentation. This is a definition, not financial advice.
Example
Baseline need: 4 servers, 24/7, expected for 12+ months -> commit
Variable need: +6 servers during sales -> on-demand or spotCommit only to the steady portion you are confident about.
Common mistakes
- Reserving a specific instance type, then moving to a different family and leaving the commitment unused.
- Committing before right-sizing, so you lock in oversized servers.
- Not tracking utilization of what you already reserved.
Related
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This page is general information written by our editorial team and updated when documentation changes. Servers and providers differ, so test changes safely first. See our editorial policy and disclaimer.