Are you still manually balancing spreadsheets to decide between Savings Plans and Reserved Instances? Most teams leave a “30–40% waste tax” on their AWS bill by failing to capture the full value of these programs. Here is how to pick the right mix for your infrastructure.
The fundamental difference: spend vs. resource commitments
While both instruments offer deep discounts over On-Demand rates, they operate on different logic. Understanding this distinction is the first step toward implementing AWS cost management best practices that actually scale with your business.
Reserved Instances (RIs) are a commitment to a specific resource. When you buy an RI, you are telling AWS you will use a specific instance type in a specific region for a set duration. In return, you receive a discount that can reach up to 72% or even 75% for Standard RIs. Some RIs also provide a capacity reservation, which ensures you can launch instances in specific Availability Zones during peak demand or high-concurrency events.
Savings Plans (SPs) are a commitment to a specific dollar-per-hour spend. If you commit to $10/hour of compute, AWS applies that credit to any eligible usage across your account. They are generally easier to manage manually because they “float” across your infrastructure as workloads shift. However, they typically offer lower maximum discounts and do not provide capacity guarantees, making them a purely financial instrument.
Comparing the four main commitment types
When evaluating commitment types, you must weigh maximum discount rates against operational flexibility to ensure you are maximizing AWS discount programs. Standard Reserved Instances and EC2 Instance Savings Plans offer the deepest savings, with discounts reaching up to 72% for specific families when you commit to a three-year term. These are ideal for steady-state workloads that you do not expect to change significantly.
Convertible RIs provide a middle ground, yielding up to 66% savings while allowing you to exchange instance families or regions if your architecture evolves. If your priority is cross-service applicability, Compute Savings Plans cover EC2, Fargate, and Lambda anywhere in the world. While they offer the highest level of flexibility, they cap out at a lower 66% discount threshold compared to their family-specific counterparts.
Why standard reserved instances remain relevant in 2025
It is a common misconception in modern FinOps that Savings Plans have made Reserved Instances obsolete. In reality, Standard Reserved Instance management offers a unique advantage that Savings Plans cannot match: liquidity.
Standard RIs are the only commitment type that can be sold on the AWS RI Marketplace. If your architecture changes or you migrate away from a specific region, you can list your unused RIs for sale to recoup the remaining value of the contract. Savings Plans are a sunk cost; once you commit to that hourly spend, you are locked in for the full term with no exit strategy or secondary market options.
For engineering leaders, the marketplace provides a safety valve against technical debt. By focusing on common instance types in high-demand regions, you can achieve maximum savings while maintaining the ability to exit the commitment if your product roadmap shifts.
The flexibility trap of compute savings plans
Many teams default to Compute Savings Plans because they require the least amount of manual oversight. They cover EC2, AWS Lambda, and AWS Fargate automatically without you needing to specify regions or instance types. However, this convenience often results in significantly higher cloud bills over the long term.
When comparing Compute and EC2 Savings Plans, the maximum discount for a Compute SP is notably lower than the 72% available through more specific instruments. Furthermore, many organizations fall into the habit of using one-year Savings Plans, which typically cap discounts at a measly 20–25%.
By opting for “easy” flexibility, teams often leave millions of dollars on the table. A more effective approach is to build a blended rate optimization strategy that uses deep-discount RIs for your steady-state workloads and SPs only for the variable or serverless layers of your stack.
Why manual commitment management leaves 20% on the table
Most digital-native companies struggle with an execution gap where the fear of over-committing leads to conservative, sub-optimal coverage. This often manifests in several ways:
- The 95% utilization trap, where teams wait for absolute certainty before purchasing more commitments, effectively paying on-demand rates for massive portions of their fleet while waiting for data.
- High engineering opportunity cost, where managing RIs and Savings Plans manually requires 10–15% of an engineering team’s monthly bandwidth to manage what is essentially a financial trading job.
- The risk of static commitments in a dynamic environment, where a Graviton migration or a shift in instance families can suddenly leave 30% of your manual purchases underutilized.
Strategic blending: how to build a high-coverage portfolio
The most efficient AWS spenders do not choose between Savings Plans and Reserved Instances; they use both, layered like a financial portfolio. A mature strategy ensures that different layers of your infrastructure are covered by the instrument that provides the best ROI for that specific workload pattern.
- Use three-year Standard RIs or EC2 Instance Savings Plans for your “evergreen” instances, such as databases and core microservices that stay in the same family and region year-round.
- Layer Compute Savings Plans to cover smaller, erratic workloads, Lambda functions, and Fargate containers that change frequently.
- Deploy Spot Instances for non-critical batch processing and CI/CD pipelines to save up to 90% without any long-term commitment.
This approach requires continuous monitoring to maintain the balance. If you notice your coverage dropping, it is time to buy; if you see underutilization, you must audit your RI utilization and potentially trade those commitments on the marketplace.
Automating the rate optimization tightrope
The complexity of balancing term lengths, marketplace liquidity, and architectural shifts is why manual management is increasingly a liability. Hykell provides an automated reserved instance management solution that operates on autopilot, moving far beyond what basic recommendations can achieve.
Instead of settling for the low savings typical of one-year plans, Hykell customers often see their savings double, reaching an Effective Savings Rate of 55% or more. The platform uses AI-driven algorithms to continuously buy, sell, and convert commitments as your workloads evolve in real-time. This ensures you always have the deepest possible three-year discounts with the practical flexibility of a one-day commitment.
By removing the engineering lift, Hykell allows your team to focus on building features while the platform ensures you never pay a dollar more than necessary. Hykell can reduce your cloud costs by up to 40% automatically with zero code changes and zero upfront risk. We only get paid when you save – if you don’t see results, you don’t pay. Start your free commitment audit today and see exactly how much you are leaving on the table.