Managing your organization’s cloud expenses might seem like a challenging puzzle; balancing flexibility, performance, and affordability can feel like a Rubik's cube. That is where Azure Reserved Instances come in. These Reserved Instances are designed to optimize performance while significantly lowering costs in the cloud. Whether your organization is very budget conscious or has critical workloads to manage, Azure Reserved Instances will change the way you think about cloud expenses without affecting performance.
This blog will cover all the details you need regarding Azure Reserved Instances, their advantages, how they work, and the right times to opt for them.
What are Azure Reserved Instances?
Azure Reserved Instances is a strategic cloud pricing option available on Microsoft Azure. Companies can take advantage of the pricing to get up to 72% off VMs and other resources if they commit to 1 year or 3 years of usage.
Azure RIs are a lot more predictable than the flexible pay-as-you-go model, which charges you hourly based on the services used, because it offers significant savings for financial budgeting by constraining set costs of resources like Virtual Machines, SQL Databases, or Cosmos DB. Even when using the RI, there is reduced pricing offered for steady workloads that have fixed consumption schedules, maintaining high performance.
Key Benefits of Azure Reserved Instances:
Cost Savings: Save up to 72% when compared to pay-as-you-go rates.
Predictable Pricing: Improved economic management by budgeting and forecasting spending accurately with fixed rates.
Flexibility: Options to exchange or cancel reservations within certain limits.
Why Use Azure Reserved Instances?
1. Substantial Cost Savings
Azure RIs can prove helpful for companies trying to control cloud expenses. Cost optimization may be achieved by reserving resources for either 1 or 3 years, which can result in discounts that help reduce operational expenses. These savings are particularly important for organizations that have workloads with long-term computing resource needs, like virtual machines or databases.
For example, a company managing steady workloads in Azure VMs may pay almost 70% more annually if they opt for Reserved Instances instead of the Standard pay-as-you-go rates.
2. Budgeting and Predictability
Azure RIs fundamentally remove the uncertainty that comes with variable cloud bills. When Reserved Instances are purchased, companies can set a fixed hourly rate. This lets enterprises plan their annual budgets with increased precision. This is crucial for companies that want fewer financial surprises but still have to manage large-scale cloud operations.
3. Guaranteed Service Availability
Reserved Instances guarantee continuous service availability by securing resource capacity well in advance. This is invaluable for mission-critical applications and businesses that require uninterrupted access to cloud resources.
How Azure Reserved Instances Work
(Image Source: Azure)
Azure RIs functions like setting aside a certain amount of computing capacity, power or other services, power, or other services for a defined time period (1 or 3 years). After the “reserving” is done, Azure will automatically apply the discounted rate on any relevant resources consumed within the reservation scope.
Example Scenario:
If your organization makes a reservation for a Standard D2 VM in the US East 2 region, the corresponding virtual machines within the same region will automatically receive the Reserved Instance price benefit.
Reservation Scoping Options
Azure provides great flexibility with scoping options, thus enabling organizations to customize discounts as per their eligibility:
Shared Scope: Applies discounts across multiple subscriptions bound to the same billing account.
Single Subscription Scope: The reserved rate can be applied only to the resources approved on a specific Azure subscription.
Resource Group Scope: Discounts can be contained to a specific resource group, thus enabling better control for lack of precision.
How Azure Applies Discounts
Azure cloud employs an economy-of-scale approach, i.e., a “use-it-or-lose-it” model. Corresponding resources automatically enjoy the discount, but unused reservation hours do not carry over to the subsequent billing cycle.
Example Scenario:
If your organization reserves 1,000 VM hours and consumes 900 hours in a particular month, the remaining 100 are wasted.
Payment Options
Azure RIs have two payment methods:
Upfront Payment: Pay the entire reservation cost upfront and enjoy maximum savings.
Monthly Payment: Spread the cost over time (with no extra fees for monthly payments).
Key Features and Considerations
1. Flexibility to Exchange or Cancel
One common misconception is that Reserved Instances are inflexible. Azure allows companies to modify, exchange, or cancel reservations based on evolving requirements:
Exchanging Reservations: You can exchange Reserved Instances for new RIs with different configurations or scopes.
Canceling Reservations: You can cancel unused reservations and receive a refund for the prorated unused amounts based on the refund policy (up to $50,000/year).
2. Ideal for Predictable Workloads
Azure RIs are useful in situations where resource provisioning is needed. Hosting standard databases or running high-performance applications is considered ideal. If your workloads are ever-changing, opt for Savings Plans.
Azure Reserved Instances vs. Savings Plans
When comparing Azure’s pricing options, it is necessary to compare RIs and Savings Plans
Feature | Azure Reserved Instances | Azure Savings Plans |
Commitment Duration | 1 or 3 Years | 1 or 3 Years |
Flexibility | Resource-specific | Broad service and regional flexibility |
Maximum Savings | Up to 72% | Up to 65% |
Best For | Predictable workloads | Dynamic, variable workloads |
Implementation and Management
Purchasing Azure Reserved Instances
Here’s a quick guide to purchasing your first Azure Reserved Instance:
Sign in to the Azure Portal.
Search for "Reservations" in the search bar and select "Add.”
Select the resource type you want to reserve (e.g., VMs, SQL Databases, Azure Cosmos DB).
Define the scope: Single Resource Group, Single Subscription, Shared Subscriptions, or Management Group.
Select the Billing Subscription.
Once you are done with Scope and Billing, select the Azure region, VM size or service tier, Reservation term (1 year or 3 years), the number of instances, and payment option (upfront or monthly).
Double-check all details and click on Buy.
After purchasing, start benefiting from discounted rates. Confirm user permissions and monitor your Reservations as needed.
Managing Reservations
Monitor Usage: Regularly track reservation utilization via Azure Portal or APIs to avoid underutilization.
Adjust Scope: Modify the reservation's scope to match changing subscription requirements.
Optimize with Tools: Use Azure cost-monitoring tools to ensure optimal savings and uncover potential inefficiencies.
Common Pitfalls to Avoid
Overcommitting Resources: Over careful planning might lead to holding excess reserves funds, leading to wastage.
Ignoring Usage Patterns: Not taking into account available usage data may lead to ineffective reservations.
Static Management: Not making use of Azure Advisor for periodic reviews and changes can stifle progress.
Conclusion
Azure RIs greatly help in cloud cost management without compromising performance. With proper usage, strategic planning, and execution, expenditures can be minimized, and resource availability can improve. Take advantage of cost optimization opportunities today through Azure Reserved Instances!
FAQs
How does Azure apply reserved instance discounts?
Azure automatically applies reserved instance discounts to running virtual machines that match the attributes and quantity of the reservation. These discounts are prioritized based on usage, ensuring reserved capacity is utilized before applying pay-as-you-go rates. However, the discounts operate on a "use-it-or-lose-it" basis, meaning unused reserved hours cannot be carried over.
Can I exchange or cancel reservations?
Yes, Azure allows flexibility with reservations. If your needs change, you can exchange a reservation for another one of equal or greater value. Additionally, you can cancel a reservation, though it may incur a cancellation fee.
Can I change the reservation scope after purchase?
Absolutely. Azure lets you modify the reservation scope after purchase to either a single subscription or shared scope across multiple subscriptions, depending on your organizational needs. This enables greater flexibility in how the reserved instances are utilized.
Do Azure Reserved Instances renew automatically?
Azure Reserved Instances do not automatically renew by default, but you can enable the auto-renewal setting at any time before the reservation expires. If auto-renewal is enabled, it will automatically renew unless you manually disable it. The renewal price becomes available 30 days before the current reservation expires, allowing you to manage and plan your reservation renewals effectively.
What happens if I exceed my reserved instances?
If your usage exceeds the reserved instance capacity, Azure will charge the additional usage at the standard pay-as-you-go rate. To avoid unexpected costs, consider monitoring your usage and adjusting reservations as needed to match your resource demands.
Join Pump for Free
If you are an early-stage startup that wants to save on cloud costs, use this opportunity. If you are a start-up business owner who wants to cut down the cost of using the cloud, then this is your chance. Pump helps you save up to 60% in cloud costs, and the best thing about it is that it is absolutely free!
Pump provides personalized solutions that allow you to effectively manage and optimize your Azure, GCP and AWS spending. Take complete control over your cloud expenses and ensure that you get the most from what you have invested. Who would pay more when we can save better?
Are you ready to take control of your cloud expenses?
