Savings Plans

How It Works

A Savings Plan works by having you commit to a minimum amount of cloud usage, measured either in dollars per hour (spend-based) or in compute units per hour (usage-based), for a period of one or three years. In return, the cloud provider applies discounted rates to any usage that falls within that commitment. Usage above the committed amount bills at standard on-demand rates. The key advantage over older reservation models is flexibility: the discount applies automatically across eligible services and regions without locking you into a specific instance type or configuration.

AWS offers three types: the Compute Savings Plan (up to 66% vs on-demand), the EC2 Instances Savings Plan (up to 72% vs on-demand), and the SageMaker Savings Plan. Azure offers its own Azure Savings Plans (up to 65% vs on-demand) alongside Azure Reservations (up to 72%). GCP takes a different approach with Committed Use Discounts (up to 57% vs on-demand), which function similarly but are structured as resource-based or spend-based commitments rather than Savings Plans by name.

Why It Matters for Cloud Cost

Savings Plans are one of the most reliable levers for reducing cloud spend, but they require accurate forecasting to work. Commit too little and you leave discount headroom on the table. Commit too much and you pay for capacity you never use. Most engineering and finance teams struggle to find the right coverage level because cloud usage changes month to month, and the analysis needed to optimize commitments is time-consuming and technically complex. Without active management, companies often default to under-committing out of caution, accepting on-demand rates for workloads that run predictably every day.

Key Characteristics

• Savings Plans apply discounts automatically across eligible services without requiring a specific instance type to be locked in.
• Spend-based plans calculate your commitment as a dollar-per-hour floor, while usage-based plans commit to a specific compute capacity.
• Coverage gaps occur when actual usage exceeds the committed amount, with the overage billed at full on-demand pricing.
• Term lengths of one year or three years are available, with three-year terms offering larger discounts but greater lock-in exposure.

How Usage AI Handles This

Usage AI purchases and manages Savings Plans on your behalf through its Usage Flex Savings Plan product, covering EC2, Fargate, and Lambda with savings of 40 to 60% vs on-demand, with no upfront cost and a cashback plus credits guarantee on any underutilization.

See how Usage AI saves 30 to 50% on AWS, GCP, and Azure.

Common Questions

1. What is the difference between a Savings Plan and a Reserved Instance?

A Savings Plan applies discounts based on a committed spend or usage level and covers a range of services automatically, while a Reserved Instance locks a discount to a specific resource configuration in a specific region. Savings Plans are generally more flexible, though Reserved Instances can offer deeper discounts for stable, predictable workloads on specific instance types.

2. What happens if I don’t use my full Savings Plan commitment?

Any usage below your committed level is still charged at the committed rate, meaning you pay for capacity you did not consume. This underutilization is the primary financial risk of self-managed Savings Plans, and it is why accurate forecasting and daily monitoring matter.

3. Do Savings Plans work across AWS, Azure, and GCP?

Each cloud provider has its own version of commitment-based pricing. AWS offers Savings Plans directly by that name. Azure calls its equivalent Azure Savings Plans and also offers Azure Reservations. GCP uses Committed Use Discounts rather than Savings Plans, but the underlying mechanism of committing to usage in exchange for a discount is the same across all three.