Before 2019, Reserved Instances (RIs) were the primary way to get a discount on AWS. Think of an RI not as a physical server, but as a discount coupon that automatically applies to matching usage on your bill.
You commit to paying for a specific instance configuration for a 1 or 3-year term, and in exchange, the cloud provider gives you a significant discount — up to ~72% — off the on-demand rate for that usage. You don't reserve a specific machine; you reserve the right to a discount on matching usage.
Payment Options
RIs offer three payment structures, each with a different discount level:
| Payment Option | How It Works | Discount Level |
|---|---|---|
| All Upfront | Pay the full 1 or 3-year cost immediately | Highest |
| Partial Upfront | Pay a portion now, the rest monthly | Middle |
| No Upfront | Pay monthly, no initial cost | Lowest |
All Upfront maximizes savings but requires capital. No Upfront is closest to On-Demand in cost but still cheaper. Most finance teams prefer Partial Upfront as a balance.
1. Standard RIs
- The Deal: You commit to a very specific configuration: a specific instance family (e.g.,
m5), in a specific region (e.g.,us-east-1), for a specific operating system. - Pros: Offers the deepest possible discounts (up to ~72% for 3-year All Upfront).
- Cons: Very inflexible. If you decide to move from an
m5instance to a newerm6iinstance, your Standard RI does not follow. You're stuck with the coupon for the old type — or you sell it on the RI Marketplace.
2. Convertible RIs
- The Deal: Similar commitment, but with a built-in "exchange mechanism." You can swap Convertible RIs for other Convertible RIs of equal or greater value, allowing you to change instance families, sizes, or operating systems over the term.
- Pros: More flexible than Standard RIs. Lets you adapt to newer instance types over a 1–3 year term without being locked into obsolete hardware generations.
- Cons: The discount is lower than Standard RIs (up to ~54% for 3-year All Upfront).
The RI Marketplace
If you purchased Standard RIs and your needs change, AWS operates a Reserved Instance Marketplace where you can sell your unused RIs to other AWS customers. This provides an exit valve, though you may not recover the full original cost.
Interviewers often ask: "What's the difference between a Standard RI and a Convertible RI, and when would you choose each?" The answer is a trade-off question, not a definition question. Standard RIs are for stable, well-understood workloads where you are confident the instance type won't change. Convertible RIs are for workloads where you expect to upgrade instance generations over the commitment term. A strong answer also mentions that Savings Plans have largely replaced RIs for most use cases because they offer similar discounts with far less management overhead.