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Ensuring the Best Cloud Prices: Azure Reserved Instances & Azure Savings Plan

Discover the cost-saving benefits of Azure Reserved Instances and Azure Savings Plan. Learn how reservations work, the best approach to purchasing them and how to ensure the best pricing for your business.

Azure Reserved Instances

Azure Reservations (Reserved Instances) is a cost-saving payment plan ideal for customers who use Azure cloud computing resources on a consistent long-term basis. Allowing you to reserve virtual machines, virtual machine scale sets and other Azure resources for a one-or three-year term.

In return for agreeing to a longer-term commitment Azure offers discounted pricing up to 72% off the pay-as-you-go price.

With Microsoft’s price increases looming, in this blog we explore how RI can be an essential tool for you to mitigate these costs.

You will Learn:

  • The Benefits Azure Reserved Instances have for your business.
  • How Azure Reserved Instances Work.
  • The differences between Azure Reservations and Savings Plan.
  • The Best Approach to Purchasing Azure Reservations.
  • Renewing and Cancelling Azure Reserved Instances.
  • How We can Help Your Business.

Benefits of Azure Reserved Instances

Microsoft heavily rewards customers who commit long-term, as it makes capacity planning considerably easier. RI provides Microsoft with improved visibility into projected resource usage, saving them time and money.

As such, Microsoft are very accommodating to those wishing to use RI and offer heavy discounts upwards of 72% in comparison to on-demand pricing.

Prices are also locked for the duration of your payment term. With the 9% Microsoft cloud pricing increase coming soon, if you act quickly, this would allow you to lock into the current pricing.

Azure allows you to pay for your one-or three-year term upfront or monthly. Additionally there are no extra fees imposed on those who choose monthly instalments.

Essentially, through effectively utilising RI your business can achieve better cloud usage for less investment, increasing the availability of your desired VM types, even during periods of high demand.

How Azure Reserved Instances Work

Reserved Instances is a ‘use it or lose it’ payment plan. Payment works on an hourly charge, so if you don’t fully utilise a resource in the hour, your usage is not banked or refunded, it’s lost. Usage which exceeds the reserved resources is charged at an on-demand price rate.

This approach is designed to encourage businesses to fully utilise their Azure resources, and to avoid wasteful spending.

Reservations should be purchased based on analysis of resource usage and be dedicated to resources with 24/7 consistent baseline usage. It would not be efficient to use reservations exclusively for low usage, interruptible workloads.

Reservations are purchased at different scopes:

  • Shared, encompasses multiple reservations with matching resources across all your Azure subscriptions.
  • Single subscription, applies to only one Azure subscription.
  • Single resource group, applies to matching resources in a specific resource group.
Azure Reserved Instances purchase page showing options for scope level, virtual machine size, and region selection

Instance Flexibility Groups allow for a more flexible use of reservations and help avoid usage waste and paying on-demand pricing. Your business can utilise flexibility groups to pool RIs and apply the discount to any virtual machine that match the reserved instance parameters.

Azure Reservations vs. Savings Plan

Azure Saving Plan is another cost-saving option, fundamentally similar to reserved instances with a few key differences. Both are payment options designed to help you save money on your Azure services and apply to resources in scope. Which of the two is the best option for you will depend on your company’s specific needs and usage patterns.

The first key difference between the two is the level of commitment required. With Azure Reservations, you need to reserve capacity upfront, while with Azure Savings, you only need to commit to a certain level of usage.

Secondly, where as RI’s discounting is tied to specific regions and SKU types, SP allows for a higher level of flexibility by applying discounts to the compute usage of virtual machines based on pre-specified usage commitment per month.

While reservations can gain more flexibility through the use of flexibility groups, RI’s primary advantage is that overall, it provides a higher level of discounting compared to SP.

If your company has predictable and consistent usage patterns, Azure Reservations is usually the best option for you, but if your usage patterns are more varied, Azure Saving Plans will probably be better suited.

Before Committing

Before purchasing reservations, it is important you develop a plan of approach. This ensures you make the most cost-effective RI decisions for your business.

Ensure to monitor your usage, using tools such as Azure Cost Management, to gain a thorough understanding of which VMs and regions your company are utilising on a consistent basis.

Azure Advisor makes recommendations for the resizing of VMs. These should be reviewed prior to acquiring RIs, to ensure that performance is appropriate for your user’s needs.

Azure Reserved Instances using Azure Advisor to recommend VM sizes based on usage.

It is also important to consider your commitment length, although longer commitment will provide higher levels of discount, plans should only be committed to if long-term usage is guaranteed.  

Renewing and Cancelations

When your RI contract term ends, your reservations will go back to on-demand pricing by default. You can configure an automatic renewal process to continue getting reservation pricing on your VMs.

It is important to note that this does not extend the term of your current reservations rather creates a new one, so reservation prices may differ.

If for any reason you wished to cancel your reservation during your commitment term, Microsoft provides a cancellation option. Here you can opt out of a reservation commitment at any time for purchases up to 50,000 USD.

The midway cancellation of a reservation does, however, come with a 12% early termination fee.
If you develop a thorough plan of approach pre-purchase, you shouldn’t have to cancel and can avoid worrying about such fees.  

How We Can Help

Microsoft recently announced a 9% price increase that will take effect on April 1st 2023, therefore cost optimisation is as crucial as ever.  

Ensuring the best cloud pricing is only one piece of the puzzle. For tips on optimizing Microsoft expenses and handling the upcoming price hikes, read our blog on mitigating Microsoft’s price increase.

As a Microsoft Gold Partner, we at Vital are ideally placed to help you:

  • Understand your current Microsoft expenditure.
  • Optimise your consumption.
  • Secure the best Microsoft pricing.
  • Maximise your investment’s value.

For a no obligation review of your Microsoft cloud infrastructure get in touch here.