Reserved Instances (or similar offerings from cloud providers): This model allows you to commit to using a specific amount of compute capacity for a defined period (typically 1 or 3 years). In return for this commitment, you receive a significant discount compared to the on-demand pricing model. This is ideal for workloads that have consistent resource requirements over the long term, as you can accurately forecast your costs and benefit from substantial savings.
On-demand: While flexible, on-demand pricing is generally the most expensive option. For a continuous workload running for years, the accumulated cost would be significantly higher than with a reserved model.
Serverless: Serverless computing is excellent for event-driven or highly variable workloads where you only pay for the compute time consumed. For a continuous, steady workload, it might not be the most cost-effective as the resources would be constantly running and incurring charges.
Spot Instances (or similar offerings): Spot instances are a type of compute instance offered by major cloud providers (like AWS EC2 Spot Instances, Azure Spot Virtual Machines, and Google Cloud Preemptible VMs) that allow you to bid on unused compute capacity. These instances are available at significantly lower prices compared to on-demand instances, often representing discounts of up to 90%.
Think of it like this: Cloud providers have a vast amount of server capacity. Sometimes, this capacity isn't fully utilized. To make use of this idle capacity, they offer it to users at a reduced cost through the spot instance model.
The biggest drawback is the possibility of interruption. You cannot rely on spot instances for continuous, mission-critical workloads.