While trying to figure out the best deal for some EC2 instances we have running continuously (and inspired by Jordan Sissel's EC2 Reserved vs. On-Demand Chart), I charted the EC2 pricing curves for the various reserve options (light/medium/heavy utilization and 1- or 3-year terms). With reserve pricing, you're basically buying the right to run a specific instance type at a reduced hourly rate for a 1-year or 3-year term. For example, if you buy one "light-utilization" 1-year term for a small EC2 instance in your us-east-1a availability-zone, you pay $61 dollars now; and whenever you run at least one small instance in us-east-1a during the next 365 days, Amazon will automatically apply the reduced hourly rate to your usage for one of those instances (billing you at $0.034 an hour instead of $0.060 an hour for the instance).
Note that the "heavy" plans are a little bit different than the "light" and "medium" plans — Amazon will bill you each month for the full compliment of hours under the "heavy" plan, regardless of whether or not you actually use all the hours. In contrast, with the "light" and "medium" plans, Amazon will bill you only for the hours during which you had an applicable instance running. For example, if you've bought a "light" 1 year plan, and run an applicable instance for 100 hours in a 30-day month, Amazon will bill you $3.40 ($0.034 x 100 hours). But if you've bought a "heavy" 1 year plan, and run the same instance the same 100 hours, Amazon will bill you $10.08 ($0.014 x 24 hours x 30 days) instead.
Amazon's characterization of their reserve options as "light utilization", "medium utilization", and "heavy utilization" is also confusing, since you can use a "light utilization" plan heavily, and a "heavy utilization" plan lightly — you just have to think of the names as suggestions for how the plans might be most useful to you, rather than as restrictions on their use. And when you're using a number of instances of a certain type all the time, what really matters is how long you expect to continue to use that same number of instances in the future: one month, two months, a year, etc.
So this is how I use the chart I made (although it shows the "small-instance" costs for the us-east-1 zone, all the EC2 reserve pricing follows the same basic curves): I figure out how likely we are to continue using an instance type (either in its current role, or in some future role) for which we're currently paying on-demand prices, try to put that likelihood into months (like "there's a good chance I'll still be using it in 2 months, and probably will be in 6 months, but I might not be in a year"), and then take a look at where those months fall on the chart:
The X axis is months, and the Y axis is dollars. Here's the legend:
|Option Name||Term Years||$ Upfront||$ Hourly|
The Bottom Line
The chart shows that your best deal for an instance that you use 24/7 is "on demand" if you use it less than three months — but if you use it any longer, you would have been better off buying a "light utilization" plan. Here's a table of the best deal for a each length of time:
|00 - 03||On Demand|
|03 - 07||Light 1yr|
|07 - 10||Light 3yr|
|10 - 12||Heavy 1yr|
|12 - 16||Light 3yr|
|16 - 29||Medium 3yr|
|29 - 36||Heavy 3yr|
As an even rougher rule of thumb: less than half-a-year, "on demand"; half-a-year to a year-and-a-half, "light 3yr"; and over a year-and-a-half, "medium 3yr".
If you do actually use the heavy-utilization 3-year term plan for the full three years, it's a nice deal that can save you almost two thirds of what you'd pay for "on demand" over that time period (and not much more than what you'd pay a low-end VPS-hosting provider for a VPS with similar specs over the same time period) — but if you use it for less than half that time, you'll wish you had chosen any other option. Also, keep in mind that each reserved instance you buy is applicable only to a specific instance-type in a specific availability-zone — so if halfway through your term you stop using so many instances of that type, or move your usage of those instances to a different region, you'll be stuck with reserved instances you never use.
Other AWS Reserved Instances
I also included a chart for RDS instances on the same page as the full chart of EC2 instance pricing (below the EC2 chart). It looks quite similar to the EC2 chart, but if you look closely you'll see that the "break-even" points are slightly different: "light 3yr" becomes a better option than "on demand" around 3 months instead of 4, and as good as "light 1yr" in just 4 months; and "medium 3yr" becomes the best deal at just 14 months. I imagine the reserve options for other AWS services will be similar — same curves, slightly different deals.