AWS, Azure & GCP · Cloud across providers

What cloud pricing models should you know?

HardpricingcommitmentsspotUpdated Oct 2026
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Short answer

On-demand pays by the second or hour with no commitment; savings plans and reserved capacity trade commitment for discounts; spot uses spare capacity at a steep discount but can be interrupted. Storage and egress add cost.

Cloud pricing is usage-based at its core, but providers layer discounts and risk transfer on top. Choosing a model is a forecast problem: you are trading flexibility for a lower unit price, and the discount is only real if utilisation matches the commitment.

The main models

  • On-demand: maximum flexibility, highest unit price, good for spiky or uncertain workloads
  • Reserved capacity: commit to a specific instance family or resource for one or three years
  • Savings plans: commit to spend per hour, often more flexible across instance families and regions
  • Spot or preemptible: use spare capacity at a large discount, with interruption notices and no guarantee
  • Committed-use discounts and sustained-use discounts vary by provider and service

Hidden costs often dominate the bill. Data egress, cross-AZ traffic, NAT gateway processing, load balancer hours, request charges and storage retrieval fees are easy to miss. A workload that looks cheap on compute can be expensive once network and requests are counted.

How to choose

  • Cover only the stable baseline with commitments, and leave spikes on on-demand
  • Use spot for fault-tolerant batch, stateless workers and CI runners
  • Model the break-even utilisation before signing a multi-year commitment
  • Re-evaluate when architecture or instance families change
A discount that locks you into an instance family you plan to leave can cost more than it saves. Commitments need an owner and an expiry review.

Follow-ups you should expect

Interviewers use these to check whether the first answer was understanding or memorisation.

  1. 1How do you decide how much baseline to cover with commitments?
  2. 2What workloads are safe to run on spot?
  3. 3Which network charges surprise teams most often?
  4. 4How do savings plans differ from reserved instances?

Say it in the interview

The main models are on-demand for flexibility, reserved capacity or savings plans for a discount in exchange for commitment, and spot for cheap but interruptible capacity. I cover only the stable baseline with commitments and keep spikes on on-demand. I also model egress, cross-AZ traffic and request charges, because those often decide whether a design is actually cheap.

Use this as a model, not a script. Saying it in your own words is what makes it survive follow-up pressure.

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