Every company has a bedtime story it tells itself to sleep better at night. In cloud computing, that story is called Reserved Instances.
It begins with noble intentions: commit to capacity now, save money later. Predict your needs, plan your usage, and bask in the glow of responsible cloud spending. The theory is simple, the charts persuasive, and the sales rep reassuring.
Then reality wakes up.
The Promise of Predictability
The appeal of Reserved Instances is obvious. They make the unpredictable feel stable. By committing to specific usage for one or three years, you get a discount that looks impressive on a slide deck.
For finance, it’s comforting, a number you can forecast. For procurement, it’s strategic, a deal you can point to. For engineering, it’s irrelevant until the invoice arrives.
The problem isn’t the idea of a reservation. It’s the assumption that the future will look exactly like the past. In cloud computing, it rarely does.
The Great Commitment Trap
A Reserved Instance is like a gym membership. You pay up front, promising yourself you’ll use it consistently. The first few months go well. Then something changes. A new service launches, architecture evolves, and migration gets delayed. Suddenly, that “commitment” feels less like discipline and more like debt.
Cloud environments are designed for agility, yet Reserved Instances reward rigidity. They incentivise you to keep old workloads alive simply because they’re paid for. It’s not optimisation, it’s superstition.
You can’t call it “elastic compute” if you’re handcuffed to a three-year contract.
Discounts with Hidden Costs
On paper, Reserved Instances look like a clear win. You pay less per hour. But in practice, they distort how teams think about usage.
Once a resource is “prepaid,” people stop questioning whether it’s still needed. Idle machines stay online. Inefficient code stays unrefactored. Waste becomes invisible because it no longer appears as a cost spike.
I’ve seen teams boast about saving twenty percent on compute while quietly wasting thirty percent of it. That isn’t efficiency, it’s creative accounting.
The Illusion of Ownership
One of the more amusing contradictions in cloud culture is that companies still talk about “owning” capacity. Reserved Instances feed that illusion. You don’t own anything. You’ve just rented predictability from a vendor who understands your optimism better than you do.
In theory, you can resell unused reservations through a marketplace. In practice, it’s like trying to sell second-hand software licences, technically possible, rarely worthwhile. The liquidity never quite matches the marketing.
The cloud is supposed to free you from the sunk-cost mindset, yet Reserved Instances drag you straight back into it.
When Finance Meets Fantasy
Reserved Instances thrive on spreadsheets. They give CFOs a sense of mastery over a system that resists traditional forecasting. However, the metrics they simplify are often the ones that matter most.
A discount on unused capacity is not a saving; it’s a distraction. The objective measure of success isn’t how much you paid per CPU hour, it’s how much value that compute created.
It’s remarkable how rarely those two figures appear on the same page.
The Alternatives That Actually Work
Modern FinOps teams are quietly moving away from long-term reservations toward flexibility-first strategies. Spot instances, savings plans, and short-term scaling agreements offer better agility without the handcuffs.
Even better, automation now makes right-sizing dynamic. Machine learning tools can watch your workloads and adjust in real time, scaling up or down based on behaviour rather than best guesses.
In other words, we’re replacing commitment with awareness. The cloud doesn’t reward those who plan the best; it rewards those who notice fastest.
A Matter of Psychology
What fascinates me most about Reserved Instances isn’t the technology, it’s the psychology.
They appeal to our human desire for control. We like fixed costs and clean numbers. We want to believe that the future can be locked down if only we commit early enough.
It’s the same instinct that drives us to buy warranties, subscriptions, and lifetime licences for software we’ll stop using next year. Cloud finance isn’t just economics; it’s behavioural science.
Breaking the Spell
The way out of the fairy tale is education. Teams need to understand not just the cost model but the intent behind it. Reserved Instances were never designed to make workloads efficient. They were designed to make revenue predictable for the provider.
Once you grasp that, the decision becomes clearer. Flexibility is worth more than discounts. Real savings come from better architecture, not bulk buying.
Cloud isn’t a supermarket. You don’t save money by filling your trolley with more compute than you need.
A Happier Ending
The companies that have truly matured in their cloud strategy treat commitments as tactical tools, not strategic crutches. They reserve only what they must, automate what they can, and monitor everything relentlessly.
Their reward isn’t a lower line on a cost report. It’s the freedom to evolve without fear of breaking a contract. They’ve replaced the illusion of control with the discipline of observation, and that’s a much healthier bedtime story.
Andrew McLean is the Studio Director at Disruptive Live, a Compare the Cloud brand. He is an experienced leader in the technology industry, with a background in delivering innovative & engaging live events. Andrew has a wealth of experience in producing engaging content, from live shows and webinars to roundtables and panel discussions. He has a passion for helping businesses understand the latest trends and technologies, and how they can be applied to drive growth and innovation.
