CloudCostCompareCloud pricing models explained: on-demand, reserved and spot
Every cloud sells the same server in more than one way. The hardware is identical; what changes is how long you promise to pay and how much the vendor may interrupt you. Knowing the three main models makes every price page easier to read.
On-demand
You pay for what you run, for as long as you run it, with no promise about next month. You can start a server now and delete it in an hour. This is the model our estimates use, because it is the one public price every vendor publishes in the same way, and it is the baseline other models are measured against.
The cost of that flexibility is a higher rate per hour than the other two models.
Commitments
You promise to use a certain amount for a fixed term, commonly one or three years, and the vendor charges a lower rate in return. The vendors call these different things: reservations, savings plans, committed use discounts. They differ in what exactly you commit to, an instance type, a family or a spend per hour, and in how much freedom you keep to change it later. The guide on reserved instances and savings plans covers the differences.
The risk is paying for capacity you stop using. A commitment is a bet that your usage is steady.
Spot and preemptible
You use the vendor’s spare capacity at a lower rate, and the vendor can take it back with short notice. This suits work that can stop and restart: batch jobs, rendering, build farms, some data processing. It does not suit a database or anything a customer is waiting on. See spot and preemptible instances.
Free tiers and credits
Most clouds also give a free allowance, and new accounts often get credits. These are a separate thing from the three models, they change often, and they are not in our estimates. Read how free tiers work before counting on one.
Which one an estimate shows
Our estimates and the price catalog show on-demand list prices. That is a deliberate choice: it is comparable across clouds, public and easy to check. It also means a real bill can be lower if you commit or use spot, and higher if usage grows.
When you read any estimate, ask which model it assumes. A figure that quietly includes a three-year commitment is not comparable with one that does not.
A simple way to use this
- Start everything on-demand while you learn how much you really use.
- After a few months, look at the part of your usage that never goes down. That steady floor is what a commitment should cover.
- Move work that can be interrupted to spot.
- Leave the variable part on-demand.
The glossary defines the other terms you will meet along the way.