Reserved vs Savings Plans: When to Optimize Your Cloud Costs in 2025

Cost optimization remains a critical priority for businesses seeking to maximize efficiency while minimizing expenses. As we navigate through 2025, Amazon Web Services (AWS) continues to refine its cost-saving mechanisms, offering Reserved Instances (RIs) and Savings Plans as two of the most powerful tools for reducing cloud expenditures. However, choosing between these options—or determining how to use them in tandem—requires a deep understanding of their nuances, benefits, and the latest updates introduced by AWS this year.

This comprehensive guide will delve into the intricacies of Reserved Instances vs. Savings Plans, explore the latest trends and updates for 2025, and provide actionable insights to help you optimize your cloud costs effectively. We'll cover everything from the fundamentals of RIs and Savings Plans to advanced strategies for combining them, ensuring you have the knowledge to make informed decisions about your cloud investments.

Understanding Reserved Instances (RIs) and Savings Plans

What Are Reserved Instances (RIs)?

Reserved Instances (RIs) are a long-standing AWS offering that allows users to reserve compute capacity for a fixed term—typically one or three years—in exchange for significant discounts compared to on-demand pricing. RIs are ideal for workloads with predictable usage patterns, such as steady-state applications or databases that require consistent performance. By committing to a specific instance type, region, and term, users can achieve substantial cost savings while ensuring capacity availability.

There are three types of RIs, each catering to different workload requirements:

Standard Reserved Instances: Offer the highest discounts (up to 75% off on-demand pricing) but are the least flexible. They are tied to a specific instance type, region, and Availability Zone (AZ), making them ideal for stable workloads with consistent demand. For example, a company running a mission-critical database on a specific instance type in a particular region would benefit from Standard RIs, as they guarantee capacity and provide the deepest discounts.
- Example: A financial services company running a high-transaction database on an m5.2xlarge instance in the us-east-1 region could achieve up to 75% savings by committing to a three-year Standard RI. This ensures that the company has guaranteed capacity and the lowest possible cost for its critical workload.
Convertible Reserved Instances: Provide lower discounts (up to 54%) but allow users to change the instance family, type, or operating system during the term, offering more flexibility. Convertible RIs are suitable for workloads that may evolve over time but still require a long-term commitment. For instance, a business planning to migrate from one instance type to another in the future could opt for Convertible RIs to maintain flexibility while still benefiting from significant savings.
- Example: A retail company planning to migrate from m5.large instances to m6i.large instances in the next year could benefit from Convertible RIs. This allows the company to change the instance type during the term while still achieving up to 54% savings compared to on-demand pricing.
Scheduled Reserved Instances: Enable users to reserve capacity for specific time windows, such as during business hours, making them suitable for workloads with predictable but intermittent demand. Scheduled RIs are ideal for applications that require compute resources only during specific periods, such as batch processing jobs that run overnight or applications that experience peak usage during business hours.
- Example: A media company running batch processing jobs overnight could benefit from Scheduled RIs. By reserving capacity for specific time windows, the company can achieve significant savings while ensuring that resources are available when needed.

What Are Savings Plans?

Introduced as a more flexible alternative to RIs, Savings Plans provide discounted rates in exchange for a commitment to a consistent amount of compute usage (measured in USD per hour) over a one- or three-year term. Unlike RIs, Savings Plans are not tied to specific instance types or regions, making them more adaptable to changing workloads. Savings Plans are particularly beneficial for businesses with dynamic or unpredictable workloads, as they allow for greater flexibility in resource allocation.

There are two primary types of Savings Plans:

Compute Savings Plans: Offer up to 66% savings and apply to any compute usage across AWS services, including EC2, Fargate, and Lambda. This makes them ideal for dynamic workloads that may change over time. For example, a company running a mix of EC2 instances, containers, and serverless functions could benefit from Compute Savings Plans, as they provide discounts across a wide range of services without the need to commit to specific instance types.
- Example: A startup running a mix of EC2 instances, AWS Fargate containers, and AWS Lambda serverless functions could achieve up to 66% savings with Compute Savings Plans. This allows the company to optimize costs across its diverse workloads without being locked into specific instance types or regions.
EC2 Instance Savings Plans: Provide up to 72% savings but are limited to EC2 instance usage within a specific region. They offer a middle ground between the flexibility of Compute Savings Plans and the specificity of RIs. EC2 Instance Savings Plans are suitable for businesses that primarily use EC2 instances but still require some flexibility in instance type selection. For instance, a company running a mix of web servers and application servers in a single region could opt for EC2 Instance Savings Plans to balance cost savings and flexibility.
- Example: An e-commerce company running a mix of web servers and application servers in the us-west-2 region could benefit from EC2 Instance Savings Plans. By committing to a consistent amount of EC2 usage, the company can achieve up to 72% savings while maintaining the flexibility to choose different instance types as needed.

Key Differences Between Reserved Instances and Savings Plans in 2025

As AWS continues to refine its offerings, the differences between RIs and Savings Plans have become more pronounced. Here’s a detailed breakdown of the five key distinctions in 2025:

1. Savings Potential

When it comes to maximizing discounts, Standard Reserved Instances still reign supreme, offering up to 75% savings for users willing to commit to specific instance types and regions. In contrast, Compute Savings Plans provide up to 66% savings, while EC2 Instance Savings Plans offer up to 72%. Convertible RIs, while more flexible, provide lower discounts, ranging from 31% to 54% depending on the term and payment option.

For example, a company running a database on a specific instance type in a single region could achieve the highest savings with Standard RIs. However, a business with a mix of workloads across multiple services might find Compute Savings Plans more beneficial, as they offer significant discounts across a broader range of services.

Example: A financial services company running a high-transaction database on an m5.2xlarge instance in the us-east-1 region could achieve up to 75% savings with Standard RIs. In contrast, a media company running a mix of EC2 instances, containers, and serverless functions across multiple regions could achieve up to 66% savings with Compute Savings Plans.

2. Capacity Reservation

One of the most critical differences between RIs and Savings Plans is capacity reservation. Standard RIs guarantee capacity within a specific Availability Zone, ensuring that your workloads can scale predictably during peak demand. Savings Plans, on the other hand, do not include capacity reservations. This makes RIs the preferred choice for mission-critical applications where uptime and performance are non-negotiable.

For instance, a financial services company running a high-transaction database would prioritize capacity guarantees and opt for Standard RIs to ensure uninterrupted service during peak trading hours. In contrast, a startup with variable workloads might prefer Savings Plans for their flexibility, even if it means forgoing capacity reservations.

Example: A financial services company running a high-transaction database on an m5.2xlarge instance in the us-east-1a Availability Zone could benefit from Standard RIs, as they guarantee capacity and ensure uninterrupted service during peak trading hours. In contrast, a startup running variable workloads across multiple regions might prefer Compute Savings Plans for their flexibility, even if it means forgoing capacity reservations.

3. Flexibility and Coverage

Savings Plans shine in terms of flexibility. They automatically apply discounts to any eligible usage across services like EC2, Fargate, and Lambda, regardless of instance type or region. This makes them ideal for businesses with dynamic or unpredictable workloads. In contrast, RIs are more rigid, locking users into specific instance families, types, and regions. However, Convertible RIs offer some flexibility by allowing modifications to the instance family or type during the term.

For example, a company running a mix of web servers, application servers, and serverless functions across multiple regions would benefit from Compute Savings Plans, as they provide discounts across all these services without the need to commit to specific instance types. In contrast, a business with a stable workload running on a specific instance type in a single region might prefer Standard RIs for their higher discounts and capacity guarantees.

Example: A global e-commerce company running a mix of web servers, application servers, and serverless functions across multiple regions could benefit from Compute Savings Plans. This allows the company to achieve significant savings across its diverse workloads while maintaining flexibility. In contrast, a financial services company running a stable database workload on a specific instance type in a single region might prefer Standard RIs for their higher discounts and capacity guarantees.

4. Scope of Application

RIs are limited to EC2 instances and, in some cases, RDS databases. Savings Plans, however, have a broader scope. Compute Savings Plans can be applied to a wide range of AWS compute services, including serverless options like Lambda and containerized workloads via Fargate. This makes Savings Plans a more versatile option for businesses leveraging multiple AWS services.

For instance, a company running a mix of EC2 instances, containers, and serverless functions would benefit from Compute Savings Plans, as they provide discounts across all these services. In contrast, a business primarily using EC2 instances might prefer EC2 Instance Savings Plans for their higher discounts within a specific region.

Example: A media company running a mix of EC2 instances, AWS Fargate containers, and AWS Lambda serverless functions could benefit from Compute Savings Plans. This allows the company to achieve significant savings across its diverse workloads. In contrast, an e-commerce company primarily using EC2 instances in the us-west-2 region might prefer EC2 Instance Savings Plans for their higher discounts within a specific region.

5. Automation and Management

AWS has introduced several enhancements in 2025 to simplify the management of both RIs and Savings Plans. For instance, AWS Cost Explorer now provides automated recommendations for optimizing commitments based on historical usage patterns. Additionally, AWS has introduced policy changes to prevent the misuse of RIs and Savings Plans by resellers, ensuring that discounts are applied fairly and transparently.

For example, a company using AWS Cost Explorer could receive automated recommendations to adjust their RI or Savings Plan commitments based on their historical usage patterns. This would help them optimize their cloud costs by ensuring they are not overcommitting or underutilizing their reserved capacity.

Example: A financial services company using AWS Cost Explorer could receive automated recommendations to adjust their Standard RI commitments based on their historical usage patterns. This would help the company optimize its cloud costs by ensuring it is not overcommitting or underutilizing its reserved capacity. In contrast, a startup using Compute Savings Plans could receive automated recommendations to adjust its commitments based on changing workload patterns, ensuring maximum cost efficiency.

Latest Updates and Trends for 2025

AWS has rolled out several updates in 2025 to enhance the flexibility, automation, and cost-effectiveness of both RIs and Savings Plans. Here are the most notable changes:

1. Flexible Reserved Instances

AWS now offers Flexible Reserved Instances, which allow users to apply reserved capacity across selected regions rather than being restricted to a single region. This is particularly beneficial for businesses with multi-region deployments that require cost optimization without sacrificing flexibility.

For example, a global company running applications across multiple regions could benefit from Flexible RIs, as they allow for reserved capacity to be applied across selected regions, providing both cost savings and flexibility.

Example: A global e-commerce company running applications across the us-east-1, eu-west-1, and ap-southeast-1 regions could benefit from Flexible RIs. This allows the company to optimize costs while maintaining flexibility in resource allocation across multiple regions.

2. Compute-Optimized Savings Plans

To cater to the growing adoption of containers and serverless architectures, AWS has introduced Compute-Optimized Savings Plans. These plans offer deeper discounts for workloads running on services like AWS Fargate and Lambda, making them an attractive option for businesses embracing modern, scalable architectures.

For instance, a company running a mix of containers and serverless functions could benefit from Compute-Optimized Savings Plans, as they provide deeper discounts for these services compared to traditional Compute Savings Plans.

Example: A media company running a mix of AWS Fargate containers and AWS Lambda serverless functions could benefit from Compute-Optimized Savings Plans. This allows the company to achieve deeper discounts for its containerized and serverless workloads, optimizing its cloud costs.

3. Automated Utilization Insights

AWS Cost Explorer has been enhanced with automated utilization insights, which analyze your usage patterns and recommend optimal commitments for RIs and Savings Plans. This feature helps businesses identify underutilized resources and adjust their commitments accordingly, ensuring maximum cost efficiency.

For example, a company using AWS Cost Explorer could receive automated insights about underutilized RIs or Savings Plans, allowing them to adjust their commitments and optimize their cloud costs.

Example: A financial services company using AWS Cost Explorer could receive automated insights about underutilized Standard RIs, allowing the company to adjust its commitments and optimize its cloud costs. In contrast, a startup using Compute Savings Plans could receive automated insights about underutilized commitments, allowing the company to adjust its commitments based on changing workload patterns.

4. Policy Changes for Fair Usage

AWS has implemented stricter policies to prevent the resale of RIs and Savings Plans by third-party vendors. This ensures that discounts are applied only to the end-user, eliminating potential abuses and ensuring fair pricing for all AWS customers.

For instance, a company purchasing RIs or Savings Plans directly from AWS would benefit from these policy changes, as they ensure that discounts are applied fairly and transparently.

Example: A financial services company purchasing Standard RIs directly from AWS would benefit from these policy changes, as they ensure that discounts are applied fairly and transparently. In contrast, a startup purchasing Compute Savings Plans directly from AWS would also benefit from these policy changes, ensuring fair pricing for its cloud investments.

5. Integration with FinOps Practices

With the rise of FinOps (Financial Operations), AWS has introduced new tools and integrations to help businesses align their cloud spending with financial goals. For example, AWS now provides FinOps dashboards that offer real-time visibility into RI and Savings Plan utilization, enabling businesses to make data-driven decisions about their cloud investments.

For example, a company adopting FinOps practices could use AWS FinOps dashboards to monitor their RI and Savings Plan utilization in real-time, allowing them to make informed decisions about their cloud investments.

Example: A financial services company adopting FinOps practices could use AWS FinOps dashboards to monitor its Standard RI utilization in real-time. This allows the company to make informed decisions about its cloud investments, ensuring maximum cost efficiency. In contrast, a startup adopting FinOps practices could use AWS FinOps dashboards to monitor its Compute Savings Plan utilization in real-time, allowing the company to make informed decisions about its cloud investments.

When to Use Reserved Instances vs. Savings Plans

Choosing between RIs and Savings Plans depends on several factors, including your workload’s predictability, flexibility requirements, and cost-saving goals. Here’s a detailed breakdown of when to use each option:

Opt for Reserved Instances If:

Your Workloads Are Stable and Predictable: If your applications require consistent compute capacity, such as databases or enterprise applications, Standard RIs offer the highest discounts and capacity guarantees.
- Example: A company running a mission-critical database on a specific instance type in a single region would benefit from Standard RIs, as they provide the highest discounts and capacity guarantees for stable workloads.
You Need Capacity Reservation: For mission-critical workloads where uptime is essential, Standard RIs ensure that capacity is always available in your chosen Availability Zone.
- Example: A financial services company running a high-transaction database would prioritize capacity guarantees and opt for Standard RIs to ensure uninterrupted service during peak trading hours.
You Prefer Long-Term Commitments: If your business has a clear long-term cloud strategy, committing to a three-year RI term can yield the highest savings.
- Example: A company planning to run a stable workload for the next three years could benefit from a three-year RI term, as it provides the highest discounts for long-term commitments.

Opt for Savings Plans If:

Your Workloads Are Dynamic or Unpredictable: If your compute needs fluctuate—such as with development environments or seasonal workloads—Savings Plans offer the flexibility to adapt without sacrificing discounts.
- Example: A startup with variable workloads might prefer Savings Plans for their flexibility, as they allow for adjustments in resource allocation based on changing demand.
You Use Multiple AWS Services: Savings Plans, particularly Compute Savings Plans, apply discounts across a wide range of services, including EC2, Fargate, and Lambda, making them ideal for diverse workloads.
- Example: A company running a mix of EC2 instances, containers, and serverless functions would benefit from Compute Savings Plans, as they provide discounts across all these services.
You Prioritize Flexibility Over Capacity Guarantees: If your primary goal is cost savings without the need for reserved capacity, Savings Plans provide a more adaptable solution.
- Example: A business with variable workloads that do not require capacity guarantees might prefer Savings Plans for their flexibility and cost savings.

Consider a Hybrid Approach

In many cases, the optimal strategy involves combining RIs and Savings Plans to balance cost savings, flexibility, and capacity guarantees. For example:

Use Standard RIs for your most critical and stable workloads to secure the highest discounts and capacity reservations.
- Example: A company running a mission-critical database on a specific instance type in a single region would benefit from Standard RIs for their highest discounts and capacity guarantees.
Implement Compute Savings Plans for dynamic or serverless workloads to maximize flexibility and cost efficiency.
- Example: A company running a mix of containers and serverless functions could benefit from Compute Savings Plans for their flexibility and cost savings across multiple services.
Leverage EC2 Instance Savings Plans for workloads that fall somewhere in between, offering a balance of savings and regional flexibility.
- Example: A business running a mix of web servers and application servers in a single region could benefit from EC2 Instance Savings Plans for their balance of savings and regional flexibility.

Best Practices for Optimizing Cloud Costs in 2025

To make the most of RIs and Savings Plans in 2025, consider the following best practices:

1. Analyze Your Usage Patterns

Before committing to RIs or Savings Plans, use AWS Cost Explorer to analyze your historical usage patterns. Identify workloads with consistent usage (ideal for RIs) and those with variable demand (better suited for Savings Plans).

Example: A company using AWS Cost Explorer could identify workloads with consistent usage, such as databases, and opt for Standard RIs. They could also identify workloads with variable demand, such as development environments, and opt for Savings Plans.

2. Start with Short-Term Commitments

If you’re unsure about long-term needs, begin with one-year commitments for both RIs and Savings Plans. This allows you to test the waters and adjust your strategy based on actual usage.

Example: A startup with variable workloads might start with one-year commitments for RIs and Savings Plans to test their cost-saving potential before committing to longer terms.

3. Monitor and Adjust Regularly

Cloud workloads evolve over time, so it’s essential to monitor your utilization and adjust your commitments accordingly. Use AWS’s automated recommendations to identify underutilized RIs or Savings Plans and make changes as needed.

Example: A company using AWS Cost Explorer could receive automated recommendations to adjust their RI or Savings Plan commitments based on their historical usage patterns, ensuring maximum cost efficiency.

4. Leverage Automation Tools

AWS offers several tools, such as AWS Cost and Usage Reports (CUR) and AWS Trusted Advisor, to automate cost optimization. These tools can help you identify cost-saving opportunities and ensure that your RIs and Savings Plans are being used efficiently.

Example: A company using AWS Cost and Usage Reports (CUR) could identify underutilized RIs or Savings Plans and make adjustments to optimize their cloud costs.

5. Align with FinOps Principles

Adopt FinOps best practices to align your cloud spending with business objectives. This includes setting budgets, tracking usage, and fostering collaboration between finance, operations, and engineering teams.

Example: A company adopting FinOps practices could use AWS FinOps dashboards to monitor their RI and Savings Plan utilization in real-time, allowing them to make informed decisions about their cloud investments.

In 2025, optimizing cloud costs requires a strategic approach to Reserved Instances and Savings Plans. While RIs continue to offer the highest discounts and capacity guarantees for stable workloads, Savings Plans provide unparalleled flexibility for dynamic and diverse environments. By understanding the latest updates, analyzing your workloads, and adopting a hybrid strategy, you can achieve the perfect balance between cost savings, flexibility, and performance.

As AWS continues to innovate, staying informed about the latest features and best practices will ensure that your cloud investments remain efficient and aligned with your business goals. Whether you’re a startup or an enterprise, leveraging RIs and Savings Plans effectively can lead to significant cost reductions and a more agile cloud infrastructure.

Ready to Optimize Your Cloud Costs?

Start by analyzing your current AWS usage with AWS Cost Explorer and explore how a combination of Reserved Instances and Savings Plans can drive maximum efficiency for your business in 2025!