Pricing Models

Cloud providers offer a variety of pricing models designed to suit different workloads and usage patterns. Understanding these models is key to optimizing costs. The most fundamental model is 'Pay-as-you-go' (or on-demand). You pay for the compute, storage, and networking resources you consume, typically by the second or hour, with no long-term commitments or upfront payments. This provides maximum flexibility and is ideal for applications with spiky or unpredictable workloads. For workloads with steady, predictable usage, 'Reserved Instances' (RIs) or 'Savings Plans' offer significant discounts (up to 75%) compared to on-demand pricing in exchange for a commitment to a one- or three-year term. This is a great option for baseline production applications. 'Spot Instances' is a model that allows you to bid on spare, unused computing capacity at steep discounts—often up to 90% off the on-demand price. The catch is that the cloud provider can reclaim this capacity with a short (e.g., two-minute) warning. This makes spot instances perfect for fault-tolerant, stateless, or batch processing workloads that can be interrupted, such as big data analysis, scientific computing, and rendering farms. Most organizations use a hybrid approach, running their stable workloads on Reserved Instances and handling traffic spikes or non-critical batch jobs with a combination of on-demand and spot instances to achieve the best balance of performance and cost.