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When you purchase Reserved Instances, you get two benefits: a capacity reservation for a number of EC2 instances you will launch at some future time, and a discounted hourly fee. The rest of the experience of launching and working with Reserved Instances is the same as working with On-Demand EC2 instances.
This section discusses how Amazon EC2 applies the pricing benefit of Reserved Instances.
With Reserved Instances, you pay an upfront fee for the capacity reservation on available Amazon EC2 instances based on the specifications (such as product platform, instance type, Availability Zone, etc.) that you defined during the purchase. After you purchase Reserved Instances, you cannot change these specifications. For example, if you purchased a c1.medium instance, you cannot change the capacity reservation to a c1.xlarge instance. (However, you can sell your unused Reserved Instances in the Reserved Instance Marketplace.)
In addition to the capacity reservation, you also get a discounted rate on the hourly fee for running On-Demand EC2 instances that are associated with the same account that purchased the Reserved Instances. For the discount to apply, the On-Demand instances must match the specifications for the Reserved Instances.
For example, let's say user A is running the following ten On-Demand EC2 instances:
(4) m1.small instances in Availability Zone us-east-1a
(4) c1.medium instances in Availability Zone us-east-1b
(2) c1.xlarge instances in Availability Zone us-east-1b
Then user A purchases the following six Medium Utilization Reserved Instances:
(2) m1.small instances in Availability Zone us-east-1a
(3) c1.medium instances in Availability Zone us-east-1a
(1) c1.xlarge instance in Availability Zone us-east-1b
When he purchases the Reserved Instances, user A pays an upfront fee for the capacity reservation so he can launch the six instances to his specifications when he needs them. In addition, he gets a discount on the hourly usage fees for the equivalent of six instances each month. Since he already has instances running when he purchases the Reserved Instances, Amazon EC2 will automatically apply the discounted hourly rates to the already running On-Demand instances that match the specifications for the Reserved Instances he purchased.
This is what happens:
Amazon EC2 applies the discounted usage fee rate for two m1.small Reserved Instances that user A purchased to two of the four running m1.small Amazon EC2 instances in Availability Zone us-east-1a.
The other two EC2 instances in Availability Zone us-east-1a will be charged at the current On-Demand rate.
Amazon EC2 doesn't apply discounted rates from the three c1.medium Reserved Instances that user A purchased because these c1.medium Reserved Instances are specified to run in a different Availability Zone from the zone currently running c1.medium Amazon EC2 instances.
The four running c1.medium Amazon EC2 instances will be charged at the current On-Demand rate.
If user A launches a c1.medium EC2 instance in Availability Zone us-east-1a, then Amazon EC2 will apply the Reserved Instance discounted usage fee rate to that instance.
Amazon EC2 applies the discounted usage fee rate for one c1.xlarge Reserved Instance that user A purchased to one of the two running c1.xlarge Amazon EC2 instances in Availability Zone us-east-1b.
The other c1.xlarge EC2 instance in Availability Zone us-east-1b will be charged at the current On-Demand rate.
In this example scenario, by purchasing the six Reserved Instances, user A saves on the hourly fee charged against two m1.small and one c1.xlarge On-Demand EC2 instances he had already running. At the same time, he is assured of the capacity to run the six Reserved Instances when he needs them.