Phase Verbs / Action Phrases
| Phrase | Meaning |
|---|---|
| commit (to usage) | agree to use a set amount for a defined period |
| optimize (discounts) | reduce costs by choosing the right purchase model |
| reserve (capacity) | guarantee availability in a specific AZ |
| bid on / lose (a spot instance) | compete for cheap capacity that can be reclaimed |
| pay upfront / partially / no upfront | payment timing options for reserved instances |
Technical Vocabulary
| Term | Definition |
|---|---|
| On-Demand | Pay per second/hour with no commitment; highest unit cost |
| Reserved Instance (RI) | 1-3 year commitment to specific instance type/region/OS; up to 72% off |
| Convertible Reserved Instance | RI with flexibility to change type/OS/scope; ~66% off |
| Savings Plan | Commit to $/hour spend for 1-3 years; flexible on size/OS/tenancy |
| Spot Instance | Bid-based spare capacity; cheapest (~90% off) but can be reclaimed anytime |
| Dedicated Host | Reserve an entire physical server; most expensive; needed for licensing |
| Dedicated Instance | Instance on hardware dedicated to you; no control over placement; can share with same-account instances |
| Capacity Reservation | Reserve capacity in a specific AZ; no time commitment; billed at on-demand even if unused |
| Bring Your Own License (BYOL) | Use existing software licenses on AWS hardware |
| Tenancy | Whether instance runs on shared or dedicated hardware |
Key Concepts
7 Purchasing Options
| Option | Discount | Commitment | Best For |
|---|---|---|---|
| On-Demand | 0% | None | Short-term, unpredictable |
| Reserved (Standard) | ~72% | 1 or 3 yr | Steady-state DB/app |
| Reserved (Convertible) | ~66% | 1 or 3 yr | Long-term with flexibility |
| Savings Plan | ~70% | 1 or 3 yr | Commit $ amount, flex instance |
| Spot | ~90% | None | Fault-tolerant batch/analytics |
| Dedicated Host | 0% or reserve discount | On-demand or 1-3 yr | Compliance/licensing (BYOL) |
| Dedicated Instance | Small | On-demand | Isolated hardware, no server access |
| Capacity Reservation | 0% | None (cancel anytime) | Guaranteed availability in AZ |
On-Demand
- Billing: per second (Linux/Windows after 1st minute) or per hour
- No upfront, no long-term commitment
- Best for: unpredictable workloads, dev/test, short tasks
Reserved Instances
- Up to 72% discount vs. on-demand
- Choose: instance type, region, tenancy, OS
- Term: 1 year (less discount) or 3 years (more discount)
- Payment: all upfront (max discount) > partial > no upfront
- Scope: regional or zonal (reserves capacity in a specific AZ)
- Can buy/sell unused RIs on the Reserved Instance Marketplace
Convertible Reserved Instances
- Like RIs but can change: instance type, family, OS, scope, tenancy
- Discount ~66% (less than standard RI for the flexibility)
EC2 Savings Plans
- Commit to a spend amount per hour for 1-3 years (e.g., $10/hr)
- Flexibility: instance size, OS, tenancy — locked to instance family + region
- Same ~72% discount as reserved
- Usage beyond commitment → billed at on-demand rate
Spot Instances
- Up to 90% off — cheapest option
- You set a max price; if spot price > max → instance terminated
- Best for: batch processing, data analysis, image processing, distributed workloads with flexible timing
- NOT suitable for: databases, critical applications
Dedicated Hosts
- You book an entire physical server
- Needed for: compliance requirements, BYOL (socket/core/VM-based licensing)
- Most expensive option
- Available on-demand (per second) or as a 1-3 year reservation
Dedicated Instances vs Dedicated Hosts
| Dedicated Instances | Dedicated Hosts | |
|---|---|---|
| Hardware | Dedicated to your account | Dedicated physical server |
| Visibility | None into hardware | Full visibility (sockets, cores) |
| Sharing | May share with same-account instances | No sharing |
| Control | No placement control | Control over placement |
Capacity Reservations
- Reserve on-demand capacity in a specific AZ for any duration
- No time commitment, cancel anytime
- No billing discount — billed at on-demand rate even if unused
- Combine with Regional Reserved Instances or Savings Plans for discounts
The Resort Analogy
| Model | Analogy |
|---|---|
| On-Demand | Walk-in, pay full price |
| Reserved | Book 1-3 years in advance, big discount |
| Savings Plan | Commit to monthly spend, flexible room type |
| Spot | Last-minute deals — get kicked out if someone pays more |
| Dedicated Host | Book the entire building |
| Capacity Reservation | Book a room but pay even if you don’t show up |
Exam Tips
- Know which option fits which scenario (the exam tests this heavily)
- Spot = cheapest but interruptible — never for DB or critical systems
- Reserved Instances: standard = locked; convertible = flexible type
- Dedicated Host = physical server access (for BYOL/compliance)
- Capacity Reservation = guaranteed slot, but always billed at on-demand
- Savings Plan: commit to $/hr; flexible size/OS within the family