Amazon EC2 allows you to prepay a reservation fee in exchange for much lower hourly instance rates. Savings abound.
However, there’s a little problem – if you decide to upgrade to a beefier instance, change the availability zone, or leave AWS altogether, the fee is non-refundable, and you can’t resell your reservation to someone else. So should you pre-pay or not?
I have a simple answer for you: if you’re likely to be using your Linux box for about 8.5 months or more, you should prepay for 3 years, because that’s how many months it takes for the cost of the reservation to amortize through the lower hourly rates. The same threshold for a Windows box is about 7 months.
The whole breakdown can be found in this Google Spreadsheet, which also has other data such as TCO and the 1-year reservation math.
I found that “months-to-breakeven” is a number that’s much easier to grasp than the accurate but rather dry pricing data on Amazon’s pricing page. Hopefully Amazon will add it there, or at least provide their prices as a public dataset so that I don’t need to copy-paste the relevant data together.
