When and why should you use the AWS on-demand instances?

What are on-demand instances?

Amazon’s On-Demand Instances are a pay-as-you-go pricing option that allows you to purchase uninterrupted Amazon cloud computing capacity on an as-needed basis. You just pay for the seconds that your On-Demand Instances are up and running; there are no long-term commitments. A running On-Demand Instance’s pricing per second is fixed and displayed on the Amazon EC2 Pricing, On-Demand Pricing page.

While the prices are fixed, the precise charges per instance are not uniform. Amazon’s On-Demand pricing schedule offers different rates according to instance type and server region. Although the multiple options may appear daunting at first, the benefit of On-Demand Instances is that they don’t require a lot of preliminary research. You can freely upscale and downscale the computing capacity you chose at first by adjusting the instances based on your application needs.

You have complete control over its lifecycle, deciding when to launch, stop, restart, hibernate, reboot, or terminate it. In layman’s terms, On-Demand Instances are Amazon’s approach of allowing you to buy or scale any amount of EC2 capacity based on your organization’s current needs.

Benefits and Cons of on-demand instances

By now, we’ve all realized that On-Demand Instances are a two-edged sword. While On-Demand Pricing has several strong advantages, it also has several drawbacks.


  • There are no upfront expenses. On-Demand Instances follow a pay-as-you-go system.
  • You have complete control over the EC2 instances, and they are always available across all Amazon EC2 regions.
  • The computational capacity can be dynamically scaled to meet the changing needs of your system. It gives you complete control over your IT resources and allows you to run on Amazon’s tested environment. Amazon EC2 cuts the time it takes to create and launch new server instances in half, allowing you to scale up and down quickly as your computing demands change.
  • You don’t have to figure out how many instances you’ll require. Beginners can try several deployments to get the best resource balance.
  • On-Demand EC2 instances are flexible enough to serve a wide range of workloads, including even and uneven processes, and are not susceptible to third-party interruptions.
  • With EC2 instances, there are no long-term commitments. You can start, stop, and end at any moment (there are no start or end costs), making it a very flexible alternative. They also let you free terminate EC2 instances when they’re no longer needed.
  • You just have to pay for the On-Demand Instances that you use. The hourly or per second use expenses are calculated here. They can also be used in EC2 for testing and application development.


  • The easily scalable structure increases the danger of accumulating volumes of underused resources.
  • On-Demand Instances are significantly more expensive than Reserved Instances and Spot Instances.
  • Amazon intricately breaks down its On-Demand pricing schedule into an extensively complex web of options, which can be confusing for beginners.

Should you go with spot instances or reserved instances over on-demand instances for better cloud cost optimization?

While On-Demand Instances and other popular types of AWS EC2 instances have many similarities, it’s the certain differences that define when and how to use them. Spot Instances, for example, are more appropriate in some circumstances than On-Demand Instances, and vice versa. When it comes to long-term commitments, Reserved Instances may be a preferable option.

 Comparing On-Demand Instances and Reserved Instances

  • Reserved Instances and On-Demand Instances have no physical distinction. Both provide you access to roughly the same EC2 computing capacities.
  • However, not at similar pricing rates. When comparing their cost schedules, it’s clear that Reserved Instances are less expensive than On-Demand counterparts. While the discounts aren’t as large as those offered by Spot Instance, they’re nonetheless noteworthy.
  • This cost difference is brought about by variations in commitment between the two categories. Reserved Instances will keep you committed for the long haul. You make some form of commitment at the beginning, and then you get to pay for the instance at a discounted rate.
  • Now, the reservations here run for one or three years. Three-year Reserved Instances tend to offer the best cost benefits as the discount rates are directly proportional to the commitment period. Unfortunately, it’s hard to commit to 3 years with servers nowadays. New instance types come out all the time and are faster and cheaper. Such long commitments are also known to make the reservation process exceedingly challenging. It takes a lot of calculation and analysis to accurately predict the amount and type of computing resources that your organization will need over three years. If you reserved the wrong instance type or no longer need it, you can also resell the reservation in the marketplace. Though you usually won’t get a back nearly as much as if you had just paid on-demand in the first place.
  • As a result, Reserved Instances aren’t recommended for dynamic applications with changing needs. Even if you choose the slightly more flexible Convertible Reserved Instances, the best applications to use are those that have consistent resource usage or predictable workloads.

Comparing On-Demand Instances and Spot Instances

  • Spot Instances, unlike On-Demand Instances, are not easily available for purchase. Instead, Amazon occasionally makes them available as spare EC2 instances. You bid for your instance. Get the instance at the market price if the spot market price is lower than your bid price.
  • However, there are no assurances; you will only be able to obtain spare instances if the market price falls below your bidding rates. The Spot Price is the technical term for this market price. And, as it turns out, the rates are constantly changing based on real-time market demand and long-term Spot Instance supply. More unused EC2 instances translate to lower Spot Prices, while a drop in the volume of unutilized EC2s affects the market prices negatively.
  • This is an intriguing model that will help you save even more money. Spot Instances are usually less expensive than On-Demand Instances, as you can see. Regardless of the market’s direction, the spare EC2 instances come with large discounts – perhaps up to 90% off what you’d have paid for On-Demand Instances otherwise.
  • As a result, when it comes to cloud cost optimization, Spot Instances are a viable option. However, don’t anticipate the discounted EC2 instances to take over all of the On-Demand Instances functions. In terms of flexibility and reliability, Spot Instances can’t compete.
  • The major downside of spot instances is that AWS can terminate your instance at any time. Remember that AWS is not obligated to provide you with the instance. Because of this and the generous pricing model, People sometimes merely bid at the on-demand price to boost their chances of receiving the spot instances.  You’ll note that Spot Instances, for example, are prone to interruptions. When the market price of your EC2 instances climbs above your bidding rates, Amazon has the power to terminate and take over your instances. Worse, the accompanying pre-termination notices give impacted users only two minutes’ warning.
  • Because of these attributes, Spot Instances are only a good cost-cutting option for test and development workloads that don’t require constant computing availability, flexible workloads that can function even with little computing capacity, and temporary tasks that require extra computing capacity.

So, to conclude, using On-Demand Instances and Spot Instances at the same time is the optimal approach. Such a complimentary architecture would keep primary computing resources at a minimum while periodically taking advantage of the extra power provided by cheap Spot Instances. There are also numerous ways to build your system so that you can use spot instances and switch to on-demand as needed.

When should you use On-Demand Instances?

Based on the attributes we’ve discovered about On-Demand Instances, we can infer that they’re ideal for:

  • The pay-as-you-go model allows you to test out AWS computing.
  • Processes that are only temporary and do not demand a long-term commitment. On-Demand Instances can be used to create short-term test environments, for example.
  • Applications that cannot be interrupted due to unpredictable or widely varying workloads.
  • Urgent deployments, as On-Demand Instances can be launched very instantaneously.
  • Workloads that operate 24 hours a day, 7 days a week.
  • Business operations that are experiencing steady growth.


With that, you’ll gain more clarity on the Amazon EC2 instances that suits not only your business structure and workload, as wells as your cloud computing budget. Fixating on one is not a wise option though. The end goal here is not settling for either On-Demand Instances, Spot Instances, or Reserved Instances. Instead, you should strive to reduce your cloud charges by combining all three of them. Strategic cost management comprises running less critical workloads on Spot Instances and Reserved Instances while maintaining the proper volume of On-Demand Instances.

The downside to this strategy of blending all three of them is, it requires a lot of complex analysis and consistent cost tracking. Fortunately, with a platform like OpsLyft, you can see where your cloud expenses are going and make smart cost-cutting decisions. To discover more, schedule a demo now.

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