Reserved vs On-Demand Calculator
Find the utilisation at which a reservation beats on-demand, including any up-front payment spread across the term.
Inputs
A 3-year no-upfront reservation typically lands near 40% of on-demand.
Set this for partial or all-upfront reservations.
A reservation bills all 730 hours whether the instance runs or not.
Monthly Saving from Committing
$301.01
Committed Monthly Cost
$294.19
On-Demand Monthly Cost
$595.20
Break-Even Running Hours
306hours/month
Break-Even Utilisation
42.0%
Effective Discount Achieved
58.0%
Saving over the Whole Term
$10,836.36
Commit or Stay Flexible
Comfortably ahead of break-even, so the commitment is worth making
Step by step
Values used
Instances under consideration = 10 instances; On-demand rate = 0.0960 USD/hour; Committed hourly rate = 0.0403 USD/hour; Up-front payment per instance = 0 USD; Commitment term = 3 years; Hours each instance actually runs = 620 hours/month
Reserved vs On-Demand
committed monthly = reserved rate × 730 + up-front ÷ term months; break-even hours = committed monthly per instance ÷ on-demand rate; break-even utilisation = break-even hours ÷ 730.
Monthly Saving from Committing
= 301.01
Committed Monthly Cost
= 294.19
On-Demand Monthly Cost
= 595.20
Break-Even Running Hours
= 306 hours/month
Break-Even Utilisation
= 42.0
Effective Discount Achieved
= 58.0
How it works
A reservation is a fixed monthly charge for the whole term, so the question is never the headline discount but how many hours you would have bought at on-demand rates instead. Dividing the committed monthly cost by the on-demand hourly rate gives that hour count directly, and expressing it as a share of 730 turns it into a utilisation threshold you can check against your own metrics. Commitments are the largest discount available without renegotiating an agreement, but they are the wrong tool for bursty or seasonal capacity — below the break-even utilisation you pay more than you would have on demand. Rates differ by region, family and agreement, so confirm both sides of the comparison on your provider's pricing page.
Formula
Reserved vs On-Demand
committed monthly = reserved rate × 730 + up-front ÷ term months; break-even hours = committed monthly per instance ÷ on-demand rate; break-even utilisation = break-even hours ÷ 730.
- 730
- Hours a reservation is billed for every month, running or not
- break-even hours
- Hours per month the instance must run before the commitment pays off
- up-front ÷ term
- Any partial or all-upfront payment spread evenly across the commitment
Frequently Asked Questions
How is Reserved vs On-Demand calculated?
committed monthly = reserved rate × 730 + up-front ÷ term months; break-even hours = committed monthly per instance ÷ on-demand rate; break-even utilisation = break-even hours ÷ 730. A reservation is a fixed monthly charge for the whole term, so the question is never the headline discount but how many hours you would have bought at on-demand rates instead. Dividing the committed monthly cost by the on-demand hourly rate gives that hour count directly, and expressing it as a share of 730 turns it into a utilisation threshold you can check against your own metrics.
Why does Reserved vs On-Demand matter?
Commitments are the largest discount available without renegotiating an agreement, but they are the wrong tool for bursty or seasonal capacity — below the break-even utilisation you pay more than you would have on demand. Rates differ by region, family and agreement, so confirm both sides of the comparison on your provider's pricing page.
What values do I need to enter?
This calculator takes 6 inputs: Instances under consideration, On-demand rate, Committed hourly rate, Up-front payment per instance, Commitment term, Hours each instance actually runs. The pre-filled defaults are a realistic starting point — replace them with figures from your own environment for a result you can act on.
Does an up-front payment change the break-even point?
Yes. Spreading the up-front across the term raises the effective monthly cost of the commitment, which pushes the break-even hours up. All-upfront usually buys a slightly deeper discount, but it also means the money is gone if the workload disappears in month four.