AWS Commitments: Reserved Instances, Savings Plans, EDP and PPA
AWS offers four primary ways to lock in long-term discounts instead of paying on-demand rates: Reserved Instances (RIs), Savings Plans, Enterprise Discount Programs (EDPs), and Private Pricing Agreements (PPAs). Each commitment trades flexibility for savings, but the right choice depends on your workload stability, growth trajectory, and organizational scale.
The most common pain point in AWS cost optimization isn't whether to buy commitments—it's which commitment to buy and how to layer them without creating waste. Teams struggle to forecast accurately, leading to either over-purchasing (sunk cost) or under-utilizing (missed savings). This hub clarifies the decision rules, trade-offs, and layering strategies that FinOps practitioners use to optimize AWS spend.
Which Commitment Should You Buy?
Most AWS users layer multiple commitment types to balance savings depth with operational flexibility. To understand when each instrument makes sense, see our detailed guide on Savings Plans and Reserved Instances compared, which breaks down the key trade-offs and decision criteria.
Here's the quick decision hierarchy:
Instrument | Covers | Discount | Lock-in | Best when |
|---|---|---|---|---|
Compute Savings Plans | EC2, Fargate, and Lambda across instance families and Regions | ~40–60% off On-Demand | 1 or 3 years; $/hour commitment | Workloads shift between instance types or services, or you run serverless alongside EC2 |
EC2 Instance Savings Plans | A specific instance family in one Region, with flexibility across size, OS, and tenancy | ~50–70% off On-Demand | 1 or 3 years; $/hour commitment | You have a stable workload on one instance family, such as M6i, but resize instances or change operating systems |
Database Savings Plans | Aurora, RDS, DynamoDB, ElastiCache, DocumentDB, Timestream, Neptune, Keyspaces, DMS, and OpenSearch Service | Up to ~35% off On-Demand | 1 year; $/hour commitment | Database spend is predictable and distributed across engines or Regions |
Standard Reserved Instances | A specific instance configuration and Region, with optional capacity reservation | ~50–75% off On-Demand | 1 or 3 years; limited configuration flexibility | You have a stable, long-running instance that is unlikely to change, or guaranteed capacity matters |
Convertible Reserved Instances | Similar scope to Standard RIs, but exchangeable for different configurations | ~30–50% off On-Demand | 1 or 3 years; exchangeable | You want a capacity reservation with some flexibility to change configurations |
EDP/PPA | Broad AWS service spend through a negotiated cross-service discount | 5–15% off list price, negotiated | Typically a 1–3-year spend commitment | You spend $1M+ annually and want a discount that can stack with RIs and Savings Plans |
The basic strategy is often to use Compute Savings Plans as the primary commitment vehicle for dynamic compute workloads, then supplement with Reserved Instances for the data tier where capacity reservation and deeper discounts matter.
Savings Plans
Savings Plans are AWS's flexible commitment model: you commit to a specific dollar-per-hour spend rate for 1 or 3 years, and AWS applies discounts automatically to matching usage across multiple services, instance families, regions, and operating systems. To understand the fundamentals, start with our guide on how Savings Plans work, which explains the three types (Compute, EC2 Instance, Database and SageMaker), payment options, and how the discount application cascades.
Types and Trade-offs
Compute Savings Plans cover EC2, Fargate, and Lambda usage anywhere in any configuration, offering ~40-60% discounts. They're the most flexible option but deliver slightly lower savings than instance-specific plans. EC2 Instance Savings Plans lock you to one instance family (M6i, C6g, etc.) in one region but allow any size, OS, or tenancy within that family, delivering ~50-70% discounts. However, be aware of the hidden cost of EC2 Instance Savings Plans—they can trap you in underperforming instance families and reduce your ability to adopt newer, more cost-effective instance types.
For database workloads, Database Savings Plans cover most database types such as RDS, Aurora, and DocumentDB usage across all engines and regions with ~35% discounts. These work best when database spend is predictable but spread across multiple engines or you're running multi-region DR setups. To understand when to migrate to Database Savings Plans from RDS Reserved Instances, consider your growth rate and instance diversity—if you're adding new database engines or regions quarterly, Database Savings Plans offer better flexibility than managing individual RDS RIs.
Savings Plans are "use it or lose it" commitments. If you commit to $100/hour and only use $80/hour of eligible compute in a given hour, you've paid for $100 but only received $80 of value. There's no marketplace for Savings Plans—once purchased, they generally cannot be resold or cancelled.*
*AWS now permits eligible active Savings Plans to be returned when they were purchased within the previous seven days, remain within the same calendar month, and have an hourly commitment of $100 or less.
Reserved Instances
Reserved Instances were AWS's original commitment model: you reserve a specific instance type, size, region, OS, and tenancy for 1 or 3 years in exchange for up to 75% off on-demand pricing. For a comprehensive overview of RI mechanics, see Reserved Instances explained, which covers payment options, scope (zonal vs regional), and when RIs still make sense in the Savings Plans era.
Standard vs Convertible RIs
Standard RIs lock to a specific configuration (e.g., m6i.2xlarge, us-east-1, Linux) and deliver the deepest discount (~50-75% off), but cannot be modified to the same extent as CRIs once purchased. You can sell unused Standard RIs on the EC2 Reserved Instance Marketplace, though often at a loss. Convertible RIs offer a slightly lower discount (~30-50% off) but allow you to exchange one Convertible RI for another of equal or greater value. To understand when this flexibility justifies the lower discount, see our guide on convertible RIs, which includes exchange mechanics and migration strategies.
RDS and Database RIs
For database workloads, RDS Reserved Instances apply to RDS database instances (MySQL, PostgreSQL, Oracle, etc.) with similar 1- or 3-year terms and discount structures. RDS RIs typically deliver deeper discounts than Database Savings Plans for predictable production database. AWS continues to expand RI options for newer instance types; most recently, Amazon RDS for Oracle now offers 1-year and 3-year Reserved Instances for R8i and M8i instances (powered by custom Intel Xeon 6 processors), with up to 53% cost savings compared to on-demand prices.
Automation and Optimization
Managing RIs manually becomes unsustainable at scale. Automated RI purchasing covers programmatic RI procurement, utilization monitoring, and renewal workflows. Even with automation, teams face common RI optimization challenges like rightsizing mismatches, regional sprawl, and underutilized convertible RIs. For the latest policy updates that affect RI strategy, see recent changes to RIs and Savings Plans, which covers AWS's 2025 marketplace and exchange policy adjustments.
Enterprise Agreements — EDP & PPA
Enterprise Discount Programs (EDPs) and Private Pricing Agreements (PPAs) are AWS's custom contract vehicles for large customers spending $1M+ annually. To understand how they work, start with the Enterprise Discount Program guide, which covers qualification thresholds, discount tiers, and negotiation strategies. Today, AWS uses "PPA" as the umbrella term for all private pricing contracts, regardless of scope; our guide on how PPAs differ from EDPs clarifies the historical distinction and current contract structures.
How EDP/PPA Stacks with RIs and Savings Plans
EDP or PPA discounts can stack with Reserved Instance and Savings Plan discounts, further reducing the effective cost of covered usage. For example, if a 10% PPA discount applies alongside a 50% Compute Savings Plan discount, the combined effective discount may be approximately 55% off the original On-Demand price.
However, EDP customers should consider more than the headline discount when choosing between RIs and Savings Plans. Discounted RIs purchased through an AWS private pricing or volume discount arrangement may not be eligible for resale on the EC2 Reserved Instance Marketplace. That means organizations may remain responsible for the commitment even if their workloads change.
Before purchasing or renewing RIs, evaluate:
- Whether the RIs will be eligible for Marketplace resale
- Whether the commitment aligns with expected workload changes
- How RI exchanges, expirations, or migrations could affect EDP spend targets
- Whether Savings Plans provide enough flexibility to reduce overcommitment risk
Other AWS Funding Programs
Beyond long-term commitments, AWS offers co-funding programs that help offset migration or proof-of-concept costs without requiring spend locks. The AWS Migration Acceleration Program (MAP) provides funding for customers migrating workloads from on-premises or other clouds to AWS. Eligible migrations receive credits, technical support, and partner engagement to reduce migration risk and cost. Learn more about AWS MAP migration funding and how to qualify for migration credits that can offset 20-30% of migration services and temporary dual-running costs.
Measuring Commitment Performance
Buying commitments is step one. Measuring whether they're delivering ROI is step two. FinOps teams use three primary metrics to track commitment efficiency:
Effective Savings Rate and Coverage
Effective Savings Rate (ESR) measures the blended discount you're achieving across all commitment types (RIs, Savings Plans, EDP) versus on-demand baseline. Our detailed guide on effective savings rate explains how to calculate ESR, set benchmarks by service, and identify where under-commitment or over-commitment is costing you. High-performing FinOps teams target 40-50% ESR on compute, 30-40% on databases, and 50%+ on storage. Coverage ratio measures what percentage of your usage is covered by commitments versus on-demand—target 60-75% for stable production workloads to balance savings with flexibility.
Amortized Cost and Spot Layering
When you buy an upfront RI or Savings Plan, AWS charges you the full cost immediately but applies the discount over the term. To understand how to allocate these costs accurately, see our guide on amortized cost, which explains how amortized cost spreads upfront payments across the term for true per-hour cost visibility. Without amortization, your bill in month 1 looks enormous and months 2-36 look free—neither reflects actual cost.
A common misconception: "If I run Spot instances, Savings Plans don't apply." False. Spot and Savings Plans operate on different layers. Learn how Spot and Savings Plans work together—Spot instances receive up to 90% discount off on-demand before any other commitment, while Savings Plans apply to the on-demand portion of your workload. If you run 70% Spot and 30% on-demand, a Savings Plan will discount that 30% on-demand portion.
Optimize your AWS costs automatically with nOps
nOps was built on the best practices discussed in this article. It helps you save 50-60% automatically, with 5-minute setup and no infrastructure changes required.
Maximize savings. nOps continuously layers commitments in small hourly increments to capture 55%+ savings while minimizing overcommitment risk — even for dynamic workloads
Results-based pricing model: Customers typically save ~20% more by switching to nOps — and you pay only when you get better results.
Free Savings Analysis: Quantify exactly how much more you can save for no work on your part. We optimize, and you get the credit.
You can book a free savings analysis to find out how nOps can help you start saving today!
nOps processes over $4 billion in cloud spend and was recently named #1 in G2's cloud cost management category.
FAQ
What is a good Effective Savings Rate?
Industry benchmark: 40-50% blended ESR across compute, database, and storage. High-performing teams with mature FinOps practices achieve 50-60% on compute via layered Savings Plans, RIs, Spot, and EDP/PPA discounts. ESR above 60% often indicates over-commitment—you're locking in discounts but sacrificing flexibility needed when business priorities shift.
How much commitment coverage should I aim for?
60-70% coverage is the sweet spot for most production workloads, leaving 30-40% on-demand capacity for burst workloads (traffic spikes, batch jobs, seasonal demand), experimentation (testing new instance types or services), and growth headroom (expansion without re-purchasing commitments quarterly). Exception: stable, mission-critical databases (RDS, ElastiCache) can safely hit 90-95% RI coverage because they rarely change configuration.
Can Savings Plans be cancelled or resold?
Usually no. Savings Plans are non-refundable, non-transferable, and cannot be resold. However, AWS allows eligible active Savings Plans to be returned within seven days of purchase, in the same calendar month, when the hourly commitment is $100 or less, subject to return quotas. After that window, you remain responsible for the hourly commitment through the end of the term, even if you stop using the services. This contrasts with Standard RIs, which can be sold on the EC2 Reserved Instance Marketplace. AWS Support may cancel Savings Plans in extraordinary circumstances, such as a company shutdown or force majeure, but this is rare and requires executive engagement with your account team.
Do Savings Plans cover Fargate and Lambda?
Yes. Compute Savings Plans cover Amazon EC2 (all instance families, sizes, regions, OSes), AWS Fargate (ECS and EKS), and AWS Lambda (function compute duration). EC2 Instance Savings Plans do not cover Fargate or Lambda—they apply only to the specified EC2 instance family. Database Savings Plans cover Aurora, RDS, DynamoDB, ElastiCache, DocumentDB, Timestream, Neptune, Keyspaces, DMS, and OpenSearch Service.
What happens to my RIs if I sign an EDP?
Your existing RIs remain in effect. EDP/PPA discounts stack with Reserved Instance and Savings Plan discounts. AWS applies the EDP discount to your baseline usage, then RIs and Savings Plans apply their additional discounts on top. Strategic consideration: if you're negotiating an EDP, review your RI portfolio first—unused or underutilized RIs become more expensive dead weight once you have an EDP, since the baseline discount makes on-demand more attractive.
How far in advance should commitments be renewed?
RIs and Savings Plans: Renew 30-60 days before expiration. This gives you time to analyze utilization and coverage over the past term, adjust commitment levels based on growth or workload changes, and evaluate new instance families or regions. EDP/PPA: Negotiate 90-120 days before contract expiration. Multi-year enterprise agreements require executive approval, legal review, and multi-stakeholder forecasting—starting late compresses negotiation leverage. Set calendar reminders 90 days before any commitment expires to avoid paying on-demand rates during the renewal gap.
