When I first started working with AWS, one of the biggest challenges I faced was figuring out how to manage costs without sacrificing flexibility. AWS provides excellent tools like Savings Plans and Reserved Instances (RIs) to help with cost optimization, but understanding the differences and deciding which one fits your needs can be tricky.
That said, in 2025, my strong recommendation is to go with Savings Plans in almost every scenario. RIs are a legacy option that provide marginally better savings—at most around 3%—but come with significantly more risk and operational overhead. However, understanding both options in depth can help you make the right choice, especially if you’re managing a large cloud environment. In this guide, I’ll break down AWS Savings Plans and Reserved Instances, explain why Savings Plans are the superior option in most cases, and help you make informed decisions for your cloud strategy.
Why AWS Savings Plans Are the Better Choice
AWS Savings Plans are flexible pricing models that offer significant savings on your AWS compute usage. By committing to a consistent usage level (measured in dollars per hour) over a 1- or 3-year term, you can save up to 72% compared to On-Demand pricing. Unlike Reserved Instances, Savings Plans provide:
- Greater Flexibility: Discounts apply to EC2, Fargate, and Lambda, without tying you to a specific instance type or region.
- Simplified Commitment: Instead of locking into a specific instance, you commit to a spending level, reducing the risk of underutilization.
- Comparable Discounts with Less Risk: The 3% extra savings offered by RIs is often outweighed by their complexity and risk of over-purchasing.
- Automatic Application of Discounts: AWS automatically applies Savings Plan discounts to the most expensive eligible workloads, reducing the need for manual adjustments.
In short, Savings Plans deliver nearly all the cost benefits of RIs while removing the constraints that make RIs a challenge to manage effectively.
What About Reserved Instances?
Reserved Instances still exist for those who prefer instance-specific commitments, but they introduce several limitations:
- Instance Specificity: RIs are tied to specific instance types, sizes, and regions, which limits flexibility.
- Operational Overhead: Managing RIs requires ongoing tracking and adjustments, especially as workloads shift.
- Limited Resale Value: While AWS offers an RI Marketplace, selling unused RIs can be cumbersome and often results in a loss.
- Convertible RIs vs. Standard RIs: Convertible RIs offer some flexibility but at the cost of lower discounts, making them less attractive compared to Savings Plans.
For these reasons, Reserved Instances are rarely the best choice unless your workload is extremely predictable and unchanging.
Making the Right Decision: When Would You Consider RIs?
Despite their drawbacks, there are still some niche scenarios where Reserved Instances might be useful:
- You have highly predictable, steady-state workloads that won’t change over the RI term.
- You are using older AWS services that don’t qualify for Savings Plans.
- You prefer the ability to resell commitments if your needs change (Savings Plans don’t have this option).
However, in nearly all other cases, Savings Plans provide a more efficient and low-risk approach to long-term cost savings.
Advanced Strategies for Optimizing AWS Costs
While Savings Plans are the recommended approach, maximizing savings requires a thoughtful strategy. Here’s how you can further optimize your AWS cost commitments:
1. Combining Savings Plans and Reserved Instances
For organizations with large, complex cloud environments, a mix of Savings Plans and RIs can sometimes yield the best results:
- Use Compute Savings Plans for broad coverage and flexibility.
- Use RIs for workloads that are static and well-understood.
- Regularly assess whether your RIs are providing additional value beyond what Savings Plans could achieve.
2. Monitoring and Adjusting Commitments
Cost management should be an ongoing process. Leverage AWS Cost Explorer and third-party tools like Yotascale to:
- Track your actual vs. committed usage to avoid underutilization.
- Identify opportunities to increase or decrease commitments based on real-time data.
- Ensure discounts are being applied effectively across your infrastructure.
3. Avoiding Common Pitfalls
Even with Savings Plans, companies can make mistakes that reduce their effectiveness. Avoid these missteps:
- Overcommitting: Ensure you’re not locking in more spend than necessary.
- Ignoring Workload Changes: Review your commitments regularly to align with evolving business needs.
- Assuming Static Usage Patterns: Leverage auto-scaling and optimization tools to fine-tune your cloud spend.
4. Using Spot Instances in Combination
If your workloads allow for interruptions, Spot Instances can provide additional savings beyond Savings Plans. A hybrid strategy using:
- Savings Plans for baseline workloads
- Spot Instances for flexible, fault-tolerant tasks can yield the best balance between cost and reliability.
Final Thoughts
At this point, the verdict is clear: AWS Savings Plans are the best choice for the vast majority of AWS users. They offer nearly identical savings to Reserved Instances while providing superior flexibility, easier management, and automatic discount application. The small additional discount of Reserved Instances simply isn’t worth the extra risk and complexity for most businesses.
If you’re serious about optimizing your AWS costs, start with Savings Plans, monitor your commitments regularly, and adjust as needed. And if you need additional insights into your cloud spend, tools like Yotascale can provide real-time recommendations to ensure you’re always getting the best deal.
These strategies have worked for me, and I’m confident they’ll work for you too. Let’s tackle your cloud cost management challenges head-on and make your spend as efficient as possible.
