Pricing models of cloud services can be complex and vary between cloud providers. But higher level concepts are similar across providers.

Pay-as-you-use

Pay-as-you-use (or pay-as-you-go) is the most common pricing model for cloud services. You pay for the resources you use, and you can scale up or down as needed. This model is also known as consumption-based pricing.

This pricing strategy is beneficial for services that can quickly scale up or down (horizontally). This allows to buy additional resources for peaks and return them when the peak is over.

Reserved Instances

Reserved Instances are a way to save money on cloud services. You commit to a certain amount of resources for a period of time (usually 1 or 3 years) and get a discount on the hourly rate.

The reason for the discount is that cloud providers can plan their capacity better if they know that you will use a certain amount of resources for a longer period.

Use more, pay less

Cloud providers often offer volume discounts. The more you use, the less you pay per unit. This is similar to buying in bulk in a traditional store.

Spot Instances

Spot Instances are a way to save money on cloud services. You bid on unused capacity and get the resources at a lower price. The downside is that the cloud provider can take the resources back if they are needed by someone else.

This pricing model is beneficial for workloads that can be interrupted and restarted without losing data.

Conclusion

The pricing model you choose depends on your workload and strategy.

  • Pay-as-you-use is the most flexible but can be very expensive.
  • Reserved Instances are good for workloads that are stable and predictable.
  • Spot Instances are good for workloads that can be interrupted and restarted.

Cost Calculation

Cloud providers usually offer a cost calculation tool that helps customers estimate the cost of their services. The tool takes into account the resources used, the region, and the pricing model.

Most pricing models are not as transparent as advertised. The actual cost is often higher than the advertised price. This is also because traffic costs are usually not included in the service price. Adding an additional 20% to the estimated price is a good rule of thumb.

Azure Pricing Calculator AWS Pricing Calculator