FinOps Pilote by AB Conseil
Rate optimization

Reserved Instances and savings plans: the commitment strategy worth millions

Commitments are the most powerful FinOps lever: about 50% savings on a prod VM, without changing a single application. Poorly calibrated, though, they lock in waste for three years.

How commitments work

The principle is simple: you commit to a level of consumption for 1 or 3 years, and the cloud provider gives you a large discount. There are two main families:

  • Reserved Instance: a commitment on a specific resource (SKU, region). The biggest discount, the least flexibility.
  • Savings plan: a commitment on an hourly spend, flexible across SKUs, regions and sometimes services. A bit less discount, much more flexibility.
Reserved InstanceSavings plan
DiscountThe biggestSlightly lower
FlexibilityLow (SKU, region)High (families, regions)
Services coveredVMs, databases, storage, data capacities depending on the providerMainly compute
Best forStable, known workloadsChanging estates, ongoing migrations

Our 4-step method

  1. Clean up before you commit. Rightsizing, cleaning and Stop/Start first. Reserving an oversized VM means paying three years for waste.
  2. Measure the baseline. Usage history by VM family (SKU), region and service, to reserve only what runs all the time.
  3. Choose the right commitment. Reserved Instance or savings plan, 1 or 3 years, shared or single scope. Beyond VMs: storage, databases, Synapse, Fabric, and an overall commitment with the cloud provider (MACC on Azure, a discount agreement on AWS).
  4. Manage it over time. Coverage and utilization tracked daily, exchanges and refunds when the architecture changes, renewals prepared ahead of time.

Coverage and utilization: the two KPIs to watch

  • Coverage: the share of eligible consumption covered by a commitment. 80% or more of the baseline is a good target.
  • Utilization: the share of the commitment actually used. A reservation used at 60% loses part of its discount.

Both KPIs are tracked in our dashboard, with alerts when utilization drops or an expiry date approaches.

The most common mistakes

  • Reserving before rightsizing the estate.
  • Reserving non-prod that should rather be shut down at night: a reserved VM that is stopped keeps paying for its reservation.
  • Over-reserving right before a migration or a decommissioning.
  • Letting reservations expire without renewal, and going back to pay-as-you-go without noticing.
  • Forgetting commitments beyond VMs: storage, databases, data capacities.

Reservations and Stop/Start don't stack

On a non-prod VM, a fixed-schedule Stop/Start saves 50 to 60%, almost as much as a reservation. But the two don't stack. In prod, the VM runs continuously: reservations apply. In non-prod, the best lever is an automatic Stop every evening with Start on demand, at about 90% savings.

What a reservation doesn't do

A reservation lowers the bill, but changes nothing in physical consumption, so nothing in the real carbon footprint. We always separate financial savings from footprint reductions. See our GreenOps page.

FAQ

1-year or 3-year commitment?

Three years gives the biggest discount for very stable workloads (ERP, prod databases). One year is more cautious when a migration, an architecture change or a decommissioning is planned.

What happens if a reservation is no longer used?

Cloud providers offer exchange and sometimes refund mechanisms, within certain limits. That is why utilization must be tracked continuously and architecture changes anticipated.

What coverage should you aim for?

80% or more of the stable baseline, with utilization close to 100%. Covering 100% of consumption is not a goal: the variable part should stay on pay-as-you-go.

Should non-prod be reserved?

Rarely. In non-prod, automatic Stop with Start on demand delivers about 90%, far more than a reservation, and the two don't stack.

First conversation

How much are you losing every month on a poorly optimized cloud?

SMEs: we are paid 20% of the annual savings achieved. Large enterprises: day-rate engagement. A first 30-minute conversation, no commitment.