What Is an Azure Savings Plan for Compute?
The Azure Savings Plan for Compute is a pricing model offered by Microsoft Azure that provides significant cost savings over the regular pay-as-you-go billing model. It offers discounted rates of up to 65% compared to pay-as-you-go prices, in exchange for a commitment to consistent compute usage over a one or three-year term.
The Azure Savings Plan for Compute can be valuable for businesses that have predictable workloads and can commit to a certain amount of compute usage. While it provides dramatic cost savings, there is also a risk involved. Even if your compute usage decreases or stops altogether, you’re still obliged to pay for the committed usage. Therefore, it’s important to thoroughly assess your compute needs before opting for this plan.
The image below illustrates how savings plan costs are calculated. If your compute usage goes below the green line, you’ll still pay for the unused resources. Any compute resources you use within the savings plan quantity are charged according to the discounted rates. If you go over the savings plan quantity, you pay the regular pay-as-you-go rates.
This is part of a series of articles about Azure cost optimization
In this article:
- Key Features of Azure Savings Plans
- How Azure Savings Plans Work
- Azure Savings Plan Benefits and Considerations
- Best Practices for Azure Savings Plans
- Optimizing Azure Savings Plans with Eco from Spot by NetApp
Key Features of Azure Savings Plans
Flexibility in Changing VM Families, Sizes, and Regions
Azure Savings Plan for Compute provides more flexibility than the comparable discount model, Reserved Virtual Machines (VMs). Unlike with Reserved VMs, you’re not locked into a specific VM family, size, or region. You can change them as per your business needs without affecting your savings plan.
This flexibility is particularly beneficial for businesses that are in a growth phase or those that anticipate changes in their compute requirements. For instance, if your business expands into new markets, you can change the VM region to better serve your new customers, while still enjoying the same cost benefits.
Ability to Use Other Resources within the Savings Plan
When committing to a Compute Savings Plan, you can use other resources beyond VMs. All of the following are considered eligible resources for a Compute Savings Plan:
- Virtual Machines (not including Spot VMs)
- Azure Dedicated Hosts (only including compute costs)
- Azure Container Instances
- Azure Premium Functions
- Azure App Services (only in Premium v3 plan and Isolated v2 plan)
This provides additional flexibility, allowing you to distribute your cost commitment across all these resource types. For example, if you planned to use a certain number of VMs, and no longer need them, you can divert the costs to Azure Container Instances instead and still enjoy the Savings Plan discount.
No Upfront Payment Required
The Azure Savings Plan for Compute doesn’t require any upfront payment, making it a budget-friendly option for many businesses. This is unlike savings plans from other cloud providers, which require paying part of the commitment up front for maximum savings.
Discounts Over Pay-as-you-Go Pricing
The Azure Savings Plan for Compute provides a maximum discount of 65% over pay-as-you-go pricing. The actual amount of discount depends on several factors, including the type of services you use, the region in which they’re deployed, and the term of your commitment. Use the Azure Cost Calculator to estimate the actual discount for your specific use case.
How Azure Savings Plans Work
Commitment to a Consistent Amount of Compute Usage
The Azure Savings Plan for Compute works on the principle of commitment. When you opt for this plan, you are committing to use a certain amount of compute resources over a specified period—either one or three years.
This committed usage is measured in dollars per hour, and it applies to a range of Azure services (listed in the previous section). It’s important to note that you’re billed for your committed usage regardless of how much you actually use. This means that if your compute usage falls below your committed amount, you’re still billed for the full commitment.
Automated Cost Reduction on Eligible Resources
Once you’ve made a commitment, Azure automatically applies the discounted rates to your eligible resources. This happens without any manual intervention. You’ll start saving money as soon as your commitment begins. Any usage that exceeds your commitment is billed at the standard pay-as-go rates.
Expiration and Renewal
The Azure Savings Plan for Compute requires a periodic commitment. This means that you commit to a certain amount of usage per hour, for either one or three years. Once the term of your commitment expires, you can choose to renew it, modify it, or let it lapse.
Azure Savings Plan Benefits and Considerations
Significant cost savings over pay-as-you-go rates
The Azure Savings Plan for Compute offers considerable cost reductions compared to pay-as-you-go rates. By committing to a certain level of compute usage, you can reduce costs by up to 65% compared to on-demand rates.
Greater flexibility compared to Reserved Instances
The Azure Savings Plan offers greater flexibility than Reserved Instances. Unlike Reserved Instances that require you to commit to specific VM types in specific regions, the Azure Savings Plan applies to almost all compute services offered by Azure (with some limitations). This flexibility is important for businesses with fluctuating or unpredictable compute needs.
Simplified management and budgeting
The Azure Savings Plan simplifies management and budgeting processes. Unlike other pricing models, the Azure Savings Plan provides a single, simple commitment that covers all compute usage, making it easier to manage and budget. The plan eliminates the need for complex capacity planning and provides a straightforward way to forecast and control Azure spending.
Commitment to a certain usage level
One of the primary considerations of the Azure Savings Plan is the commitment to a certain level of usage. While this commitment allows for significant cost savings, it also means that you are agreeing to use a certain amount of compute power, whether or not you actually need it. This could potentially lead to waste if your compute needs decrease over the term of the plan.
Savings plans cannot be canceled
According to Azure’s cancellation policy, Compute Savings Plan purchases are final and cannot be canceled, refunded, or exchanged for Reserved VMs. However, you can trade an Azure Reservation for a Savings Plan during the term of the reservation.
Best Practices for Azure Savings Plans
To maximize the benefits of the Azure Savings Plan for Compute, follow these best practices.
Thorough Assessment Before Commitment
Before committing to the Azure Savings Plan, conduct a thorough assessment of your current and projected compute needs. Understanding your usage patterns can help you determine the level of commitment that will provide the most cost savings without leading to waste. Tools like Azure Cost Management and Billing can assist in this assessment.
Regularly Review and Adjust Commitments
Once you’ve committed to the Azure Savings Plan, it’s important to regularly review and adjust your commitments. As your business grows and changes, so too will your compute needs. Regular reviews ensure that your commitment remains in line with your actual usage, maximizing your cost savings.
Use Azure Cost Management and Billing
Azure Cost Management and Billing is a powerful tool for managing your Azure Savings Plan. It provides detailed insights into your usage and spending, helping you make informed decisions about your commitment level. Leveraging this tool can help you avoid waste and ensure that you’re getting the most out of your Azure Savings Plan.
Optimize Usage with Azure Advisor
In addition to Azure Cost Management and Billing, Azure Advisor can be a valuable tool for optimizing your Azure Savings Plan. Azure Advisor provides personalized recommendations based on your usage patterns, helping you identify opportunities to reduce costs and improve performance. By following these recommendations, you can ensure that your Azure Savings Plan is as efficient as possible.
Use Azure Hybrid Benefit When Applicable
Lastly, if you have existing on-premises Windows Server or SQL Server licenses with Software Assurance, you can use Azure Hybrid Benefit to further increase your savings. This benefit allows you to use your existing licenses in Azure, reducing the cost of running those workloads in the cloud.
Optimizing Azure Savings Plans with Eco from Spot by NetApp
Spot by NetApp’s Eco allows Azure customers to enjoy the long-term benefits of using Azure Savings Plans without worrying about financial lock-in and wasted resources.
You can maximize cloud savings on Azure with Eco’s intelligent planning, procurement, utilization and lifecycle management for Azure Savings Plans.