How to understand cloud pricing models

Short answer

Cloud pricing includes on-demand pay-as-you-go, reserved capacity discounts, spot/preemptible instances, and committed use contracts.

Key differences

• On-demand: Highest flexibility, highest per-unit cost. Best for variable or unknown workloads.
• Reserved/Committed: 1-3 year commitments offer significant discounts. Best for steady-state workloads.
• Spot/Preemptible: Up to 90% discounts but can be interrupted. Best for fault-tolerant batch jobs.
• Savings Plans: Flexible commitment models based on spend rather than specific instances.

When to use each

• Use reserved instances for databases and always-on services.
• Use spot instances for CI/CD, rendering, and data processing.
• Combine models to balance cost and availability.