Pricing & Billing
Reserved Instance
A discount in exchange for committing to a server for one to three years upfront, cheaper than on-demand for steady workloads.
A reserved instance trades flexibility for a discount. Commit to a specific instance type for a one or three year term, and the provider knocks a large amount off the on-demand rate, often 30 to 60 percent. AWS, Google Cloud, and Azure all sell this, sometimes as "reserved instances" and sometimes as "committed use" or "savings plans," with the deepest discounts for paying the whole term upfront.
The math works when your baseline is predictable. If you know you'll run a certain amount of compute around the clock for the next year, reserving it is simply cheaper than paying on-demand for the same thing. The risk is over-committing: reserve capacity you stop needing and you've prepaid for idle servers.
The common pattern is a hybrid. Reserve your steady baseline load, then use on-demand or spot instances for the variable part on top. Flat-rate VPS providers sidestep the whole calculation by just charging one predictable monthly price with no commitment required.