Amazon, in its AWS cloud computing services vertical, has several different products, packages and billing formats, which can sometimes confuse us at the time of contracting, when we are not very familiar with these services.

There are 4 billing models, for example, which are worth understanding to choose the best cost-benefit for your project. Savings can reach 75%. The main models, which we detail below, are: On Demand, Reserved Instances – RI, Spot and Savings Plans – SP.

1. On Demand

When to use: For unpredictable workloads or in testing and development.

How does it work

• You pay by the hour or by the second (depending on the instance) with no long-term commitment.
• There is no need for advance payments.
• Ideal for short-term applications, experiments or new projects where demand is not predictable.

2. Reserved Instances (RI)

When to use: For predictable, long-term workloads.

How does it work

• You commit to using an instance for a period of 1 or 3 years.
• Payments can be in advance, in part or without advance payment.
• Offers huge discounts (up to 75%) compared to On Demand.
• Best for stable production applications with constant usage.

3. Savings Plans (SP)

When to use: For greater flexibility in exchange for discounts.

How does it work

• You commit to a usage amount (in dollars) per hour for 1 or 3 years.
• Offers up to 72% discount compared to On Demand.
• Allows flexibility across regions and instance types.
• Ideal for those who need flexibility and want to save money.

4. Spot Instances

When to use: For fault-tolerant and interruptible workloads.

How does it work

• You can use unused AWS capacity at up to 90% discount compared to On Demand.
• Instances can be stopped with two minutes’ notice when AWS needs the capacity back.
• Great for batch processing tasks, data analysis, background workloads, or software testing.

TL-DR / Summary

• On Demand: Pay as you go, no strings attached.
• Reserved Instances (RI): Long-term commitment for significant discounts.
• Savings Plans (SP): Spending commitment for flexible discounts.
• Spot Instances: Use idle capacity at deep discounts, but with the risk of outage.