Azure Reserved Instances are an Azure pricing plan that can help you reduce cloud costs. It offers discounts in return to a commitment to use Azure offerings for a duration of one or three years. Azure Reservations are ideal for workloads with a consistent resource usage.
You can reduce costs by up to 72% when signing up for Azure Reservations. The discount is applied upon billing and does not affect the runtime state of any Azure resources. Once you purchase a reservation, the system automatically applies the discount to the relevant resources.
Azure lets you pay for reservations either upfront or on a monthly basis. The total cost of either of these options remains the same—there is no extra fee when you opt for monthly payments. However, note that monthly payments are available only for Azure products and do not apply to any third-party product.
In this article, you will learn:
Reserved Instance discounts are applied to resource usage, according to the options selected when you purchased the reservation.
Reservation discounts are offered on a "use it or lose it" basis. If there is no matching resource within an hour, the quantity reserved for that hour is lost. Unused reservation time cannot be carried over. This is illustrated in the diagram below—utilization under the orange line is pre-paid as part of the reservation. If the VM goes over the reserved level, extra usage is priced at pay-as-you-go rates.
Once you shut down your resource, the system automatically tries to apply the reservation discount to another resource that matches the scope. If the system cannot locate a resource that matches the scope, the reservation remains unused. Keep in mind that reservation scopes are flexible - you can change them after buying the reservation.
If your virtual machines (VMs) are running in different subscriptions assigned to your account, you can choose to make the scope “shared”. A shared scope tells the system to apply a reservation discount across all account subscriptions.
When the reservation period expires, the discount ends and Azure starts billing for the resources at pay-as-you-go rates. Reservations do not renew automatically by default, but you can enable automatic reservation renewal in settings.
You also have the option to go to the renewal settings and change the term, quantity, and billing frequency. Only users with owner access and subscription users can modify renewal terms.
Azure offers another pricing model that can result in substantial savings - read our guide to Azure Spot Instances
All reservations except Azure Databricks are applied hourly. To ensure reservations help reduce costs, you should purchase them based on an analysis of consistent baseline usage.
If you purchase more capacity than was previously used, your reservation may be underutilized. You should try to get the most out of reservations, because unused reservations cannot be saved for later use. Additionally, if your usage exceeds the reserved capacity, you will be charged the pay-per-use rate.
It is important to decide which VM size is best for your workloads, before committing to a reservation. You cannot change VM size during the reservation period. Promo series VMs are not eligible for reservation discounts and should be excluded from analysis.
To determine your historic usage:
The resulting CSV file will show you usage and billing details for your Azure VMs and other resources:
Image source: Azure
You can apply the following filters to your usage data, in order to determine relevant usage:
Use the above data to identify resources that are used continuously, and remove resources from the analysis if they are used less than 24 hours a day. Keep in mind that even if VMs are not used 24/7, you should still consider switching them to reserved instances, on the basis of a break-even analysis comparing on-demand to reserved instance costs.
Related content: read our guide to Azure cost management
Azure provides automated reservation recommendations. These are calculated by analyzing your hourly usage data over the past 7, 30, and 60 days. Azure calculates the cost of the reservation and compares it to the actual pay-as-you-go cost incurred during the period. Then, Azure recommends the quantity that can maximize savings.
For example, if workload uses 100 VMs regularly, but occasionally demand spikes to 150, Azure will calculate potential savings for a reservation of 100 VMs as well as 150. If the demand spikes are infrequent, the calculation may determine that you can save by purchasing 100 reserved VMs. However, if demand spikes are very common, it may recommend reserving more than 100 VMs to save costs.
There are a few things to keep in mind regarding automated reservation recommendations:
Related content: read our guide to Azure autoscaling
To purchase a plan, you must be the subscription owner or have access to a reservation purchaser role. Enterprise Agreement and Microsoft Customer Agreement billing admins—both owners and contributors—can give themselves reservation purchaser access.
Note that only Enterprise Agreements, Pay-As-You-Go Subscriptions and Microsoft Customer Agreement Subscriptions support reservations.
You have three options to set the reservation scope:
|Type of Azure Subscription||Billing Scope|
|Microsoft Customer Agreement||Billing Profile|
|Individual Pay-As-You-Go Subscriptions||All Eligible Subscriptions|
Here is how you can purchase a reservation:
Image Source: Azure
4. Choose Add to cart and then Close.
5. Select Next: Review + buy.
You can view and manage existing reservations under Reservations in the Azure portal. It may take up to one day for your reservation to be applied after the purchase.
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for up to 20 instances