Cloud cost optimization depends on using the right pricing models for the right workloads. A one-size-fits-all approach rarely works. Most environments need a mix of options that reflect how different workloads behave: some run consistently, others come and go, and some need flexibility more than predictability.
That is where the challenge begins. AWS offers several pricing models, each with its own benefits and tradeoffs. Choosing between them is not always obvious. Teams often hesitate to commit, or they overcommit without fully understanding the implications.
Spot Instances and Reserved Instances are two of the most widely used discount options for reducing cloud costs. This blog walks you through the differences between the two options, when to use each, and how to make smarter decisions based on your workload patterns and business goals.
What Are Spot Instances?
Spot Instances or Spot VMs are a discounted compute option that allow users to access surplus cloud compute capacity at a fraction of On Demand rates, typically between 60% and 90% off depending on the provider. This model is available across AWS, Google Cloud, and Azure.
In exchange for the significant discounts they provide, users accept the risk of having their instances reclaimed by their provider with very little notice. Interruption notices are short. AWS typically provides a two-minute warning, while Google Cloud and Azure offer as little as 30 seconds. As a result, Spot Instances are primarily designed for workloads that are short-term, fault-tolerant, or stateless.
Each provider runs its own Spot markets, where prices fluctuate based on supply and demand across instance types, regions, and availability zones. When you launch a Spot Instance, you are essentially bidding to use spare capacity. If the market price rises above your bid or capacity is no longer available, your instance is interrupted.
Spot Instances can significantly reduce costs when used strategically, but they require careful workload selection and attention to availability patterns.
Discount percentages may vary slightly by provider. If you want a detailed breakdown of how Spot pricing and behavior differ across the three cloud providers, our dedicated blog on Spot Instances can help.
Pros and Cons of Spot Instances
Spot Instances offer deep savings, but they come with clear tradeoffs. Understanding both is essential before integrating them into your environment.
Pros
- Cloud computing savings of up to 90% (when compared to On-Demand pricing)
- Highly cost-efficient when used for the correct workloads
- No upfront commitments, allowing greater flexibility in short-term use
Cons
- Evictable by cloud providers with very minimal notice
- Unpredictable availability and high fluctuations in pricing
- Only suitable for batch processing tasks or workloads designed for fault tolerance
What Are Reserved Instances?
Reserved Instances are a pricing model that allows businesses to commit to a specific instance type, region, and term, usually one or three years, in exchange for discounted rates of up to 72% compared to standard pay-as-you-go pricing.
While AWS and Azure refer to them as Reserved Instances, Google Cloud offers a similar construct called committed use discounts. Though the terminology and mechanics vary slightly, the principle remains consistent: commit upfront to resource usage, and receive lower pricing in return. These commitments typically apply to compute resources, but some providers also extend them to services such as managed databases, analytics engines, and caching layers.
If your usage exceeds the RI commitment amount, the excess is charged at On-Demand rates. If your usage falls below the commitment, the unused portion goes to waste, making right-sizing and ongoing monitoring key to maximizing RI value.
AWS and Azure offer s additional flexibility through multiple payment options, including upfront and monthly billing models for their Reserved Instances.All Upfront, Partial Upfront, and No Upfront models. This gives businesses the ability to align long-term cost commitments with cash flow preferences and budget cycles.
Used strategically, Reserved Instances help organizations optimize costs for stable, predictable workloads while maintaining financial control over longer-term infrastructure planning.
Catch our detailed guide on AWS Reserved Instances.
Pros and Cons of Reserved Instances
Like Spot Instances, Reserved Instances also have their own set of pros and cons to consider before deciding on the most cost-effective cloud compute strategy:
Pros
- Substantial cloud cost savings (up to 72%)
- Predictable costs and budgeting with fixed discounted rates locked in for several years
- Offers flexibility when planned correctly, especially with Convertible RIs and regional scope
Cons
- Requires long-term commitments of cloud consumption
- Less adaptable to changes in instance configurations
- Applies a “use-it-or-lose-it” pricing format where businesses can’t roll over unused capacity to the following billing period
Key Differences Between Spot and Reserved Instances
Below are some of the key differences of each provision:
| Feature | Spot Instances | Reserved Instances |
| Discount | Highest potential savings (60-90% off On-Demand pricing) | Slightly lower savings (up to 72% off On-Demand pricing) |
| Commitment | On-Demand, no long-term commitment required | Fixed term of 1 or 3 years based on instance type and region usage |
| Flexibility | High flexibility to cancel or modify instances as needed, often without penalties | Less adaptable, with potential limitations on configuration changes |
| Availability | Changes dynamically based on supply and demand: May not always be available in preferred zones/regions | More predictable availability: Providers prioritize capacity, reservations in specific Availability Zones |
| Ideal use cases | Flexible, fault-tolerant workloads like batch processing, big data analytics, and development/testing | Stable performance for core business applications and high-demand databases |
| Risk of Interruption | High risk, with short eviction notices (30 seconds to 2 minutes). No guarantee of continuous availability | Lower risk for stable workloads, with pricing locked in and the option to scope commitments to Availability Zones for added capacity assurance when needed |
Choosing the Right Fit: Spot Instances vs. Reserved Instances
Deciding between Spot and Reserved Instances really comes down to the individual needs of the business, their budgets, and the complexity of their cloud workloads:
When to choose Spot Instances
Spot Instances are an ideal choice for businesses that want to maximize cost savings across multiple cloud environments that can design their workloads to handle potential interruptions. These instance types are most suitable for:
- Non-mission-critical workloads that can tolerate temporary disruptions
- Applications with built-in fault tolerances
- Workloads that have flexible start and end times, such as batch data processing or CI/CD testing environments
When to choose Reserved Instances
Reserved Instances are a better option for businesses that want to save on cloud spending, but are primarily focused on ensuring consistent performance and availability for their essential applications. These instance types are most suitable for:
- Steady-state workloads that require continuous, uninterrupted service
- Mission-critical applications and databases that need consistent performance and uptime
- Cloud environments with predictable needs over an extended period of time
Can Spot Instances and Reserved Instances Be Used Together?
Yes, both Spot Instances and Reserved Instances can be combined to create a holistic cloud cost optimization strategy.
While Spot workloads are in-eligible for Reserved Instances discounts simultaneously, organizations can use one or the either depending on their workload’s requirements.
A common approach is to leverage Reserved Instances when provisioning more predictable workloads and use Spot Instances for smaller, fault-tolerant tasks. Over time, combining these two models can lead to significant cost savings and more sustainable cloud deployments.
Automatically Optimize Your Cloud Costs With ProsperOps
Spot Instances are a powerful way to reduce compute costs, but their unreliability creates risk. When they are interrupted with little notice, workloads often fall back to On Demand pricing, leading to unexpected cost spikes. Managing this volatility manually, while trying to optimize other discount instruments like Reserved Instances and Savings Plans, quickly becomes complex and inefficient.
ProsperOps handles this complexity for you. Our platform is Spot-aware, meaning it intelligently accounts for Spot instance usage when managing your commitment portfolio. We automatically blend discount instruments to maximize your savings while lowering Commitment Lock-In Risk.
Using our Autonomous Discount Management platform, we optimize the hyperscaler’s native discount instruments to reduce your cloud spend and place you in the 98th percentile of FinOps teams.
ProsperOps delivers savings-as-a-service by autonomously managing and optimizing native discount instruments across AWS, Azure, and Google Cloud. With weekly purchases, continuous laddering, and multi-cloud support, we help you maintain optimal coverage without manual effort.
In addition to rate optimization, ProsperOps also supports usage optimization through ProsperOps Scheduler. This feature allows you to automate resource state changes on weekly schedules, reducing waste from idle infrastructure.
With ProsperOps, your teams stay focused on strategic FinOps goals while we handle the operational complexity of cloud savings.
Make the most of your cloud spend with ProsperOps. Schedule your free demo today!
