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Neither option wins because of your revenue. At $500,000 in annual recurring revenue, the cheaper commitment depends entirely on how your AWS compute usage is distributed across services, instance families, Regions, and time. For variable or shifting workloads, Compute Savings Plans are usually the safer starting point because they follow the usage. For a stable EC2 baseline that will not move, EC2 Instance Savings Plans or a Standard Reserved Instance can offer a higher advertised discount ceiling, at the cost of narrower scope. Treat AWS’s published maximum discounts as ceilings, not as the savings your account will realize.
Why $500,000 ARR cannot pick the winner
ARR measures what customers pay you. It says nothing about what you pay AWS. Two companies with identical revenue can have compute bills that differ several times over, depending on whether they run steady EC2 fleets, container workloads on Fargate, event-driven Lambda functions, or a mix that changes every quarter. Commitment pricing is calculated against eligible AWS usage at On-Demand rates, so that usage is the only input that matters.
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Before comparing products, pull the figures that actually drive the decision: eligible compute spend by service, instance family, Region, operating system, tenancy, and hour of day or month. Separate the steady baseline from launches, seasonal peaks, planned migrations, and workloads you expect to shrink. Only the baseline is a reasonable candidate for a multi-year commitment.
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What each option commits you to
The two products bind you to different things, and that difference drives most of the comparison.
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| Option | What you commit to | Term | Payment choices | Change rules |
|---|---|---|---|---|
| Compute Savings Plans | A dollar amount of eligible compute usage per hour, at Savings Plans rates | One or three years | All upfront, partial upfront, or no upfront | Commitment amount cannot be changed after purchase; the plan rate is fixed for the term |
| EC2 Instance Savings Plans | A dollar amount per hour, scoped to one instance family in one Region | One or three years | All upfront, partial upfront, or no upfront | Commitment amount cannot be changed after purchase; size, OS, and tenancy can vary within the family and Region |
| Standard Reserved Instances | A specific EC2 instance configuration, including instance type and Region | One or three years | All upfront, partial upfront, or monthly, depending on the RI option selected | Most constrained RI type; Regional size flexibility applies in documented cases |
| Convertible Reserved Instances | A specific EC2 instance configuration, with the right to exchange it | One or three years | All upfront, partial upfront, or monthly, depending on the RI option selected | Some configuration changes are allowed through manual exchanges |
The core distinction is the commitment basis. Savings Plans commit you to spending a set amount per hour at discounted rates, so any eligible usage counts toward the commitment regardless of its configuration. Reserved Instances commit you to a particular configuration, so the discount applies only to matching usage. A high discount helps only when eligible usage consumes it, which is why fit matters more than headline percentage.
Flexibility versus advertised discount ceilings
AWS publishes maximum discounts against On-Demand rates for each option. These are vendor figures, and they describe the best case within each product’s scope.
| Option | Published maximum discount | Scope AWS describes |
|---|---|---|
| Compute Savings Plans | Up to 66% | Eligible EC2 usage across instance families, sizes, Regions, operating systems, and tenancy, plus Fargate and Lambda |
| EC2 Instance Savings Plans | Up to 72% | Instance family and Region are fixed; size, operating system, and tenancy can change within that scope |
| Convertible Reserved Instances | Up to 66% | Changes across some configuration dimensions require manual exchanges |
| Standard Reserved Instances | Up to 72% | More constrained than Convertible; Regional size flexibility applies in documented cases |
Reading the ceilings correctly
- The maximums are not averages. Your effective discount depends on the service, instance family, Region, operating system, tenancy, term, payment option, eligible usage, and how much of the commitment is consumed.
- Savings Plans rates do not vary with the hourly amount you commit, so a larger commitment does not earn a deeper discount per dollar.
- Broad coverage and deep discount trade against each other. Compute Savings Plans can remain useful after a migration or rightsizing, while the higher-ceiling options pay off only while the workload stays inside their scope.
Matching the commitment to your usage pattern
The same $500,000 company can reasonably land on different products for different workloads. The table below maps common patterns to the option that usually fits, before you model real numbers.
| Usage pattern | Likely fit | Why |
|---|---|---|
| Steady EC2 baseline, same family and Region for years | EC2 Instance Savings Plans or Standard RI | Higher advertised ceiling, and the scope is unlikely to change |
| EC2 baseline that may move to new families or Regions | Compute Savings Plans or Convertible RI | Compute Savings Plans cover the move directly; Convertible RIs allow exchanges |
| Mix of EC2, Fargate, and Lambda | Compute Savings Plans | Only Compute Savings Plans include Fargate and Lambda in scope |
| Launches, seasonal peaks, or a planned migration | Commit only to the stable floor, or none | Commitments sized to temporary usage erode savings when the peak passes |
How to decide, step by step
- Start with AWS usage, not revenue. In the Billing and Cost Management console, export eligible compute spend for at least the period you will model, grouped by service, instance family, Region, operating system, and tenancy. Mark the portion that has been present every month.
- Model the options in Cost Explorer Purchase Analyzer. Open Cost Explorer, then choose Savings Plans, then Purchase Analyzer. You can compare plan type, one- or three-year term, payment option, and lookback period, and choose a recommended, target-coverage, or custom commitment. AWS documents the lookback period as falling within the last 60 days, so the modeled result reflects recent usage rather than your full history.
- Size the commitment to the floor, not the peak. A Savings Plan commits to hourly dollars; a Reserved Instance commits to a configuration. Either way, commitment that exceeds eligible usage is paid for whether or not it is used. A commitment sized slightly below your lowest steady hourly spend usually leaves less exposure than one sized to an average or peak.
- Compare cash flow as well as effective cost. Compare total cost over the full term and the timing of payments. An all-upfront option usually produces the lowest total outlay but ties up cash at purchase; a no-upfront option preserves cash but reduces the effective discount.
- Keep capacity separate from the discount decision. Savings Plans do not reserve EC2 capacity. On-Demand Capacity Reservations are a separate mechanism, and AWS’s billing guidance states that a Savings Plan can apply to eligible usage on reserved capacity. If a workload needs guaranteed capacity, analyze that requirement on its own.
- Plan for expiry and migration before you buy. When a Reserved Instance expires, its usage reverts to On-Demand pricing unless another benefit covers it. Savings Plans cannot be canceled during their term. Put a renewal review on the calendar well before each expiry date, and rerun the analysis before any migration that changes your usage shape.
Risks that erode the expected saving
- Unused commitment. Reserved Instances are billed for the full term whether or not the instances run. Savings Plans cannot be canceled, so an overestimated hourly commitment is paid in full.
- Scope drift. A workload that leaves the instance family or Region covered by an EC2 Instance Savings Plan or Standard RI stops receiving the discount for that usage.
- Expiry without renewal. Usage that falls back to On-Demand rates after expiry can raise the bill quickly if no one tracks renewal dates.
- Treating a commitment as capacity. A discounted rate does not guarantee that EC2 capacity is available when you need it.
What this analysis cannot tell you
Without your AWS bill, service mix, workload history, existing commitments, renewal dates, migration plans, target coverage, and cash constraints, no reliable winner or dollar figure can be stated for a $500,000 ARR business. Any break-even point depends on those inputs. Run the Purchase Analyzer on your own account data, check the results against the scope rules above, and choose the option whose scope matches the usage you expect to keep for the full term.
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