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What Are Azure Reserved Instances?

Rob Waggoner

Azure has continued to refine its Reserved Instance model to the point that it has become very easy to leverage. The concern with Azure Reserved Instances hasn’t been about implementation, but rather “will it save me money” and how much money should I commit a year in advance. Initially, Reserved Instances required a yearly payment in advance; this financial commitment alone made it hard for most companies since they had to write a check to cover their Azure spend for the next 12 months.

Smiling teacher showing something on screen to mature student in the computer room-1

Now Azure has implemented the ability to reserve your instance for a year and get the yearly Reserved Instance pricing but pay for the commitment monthly instead of a single annual payment. Basically, as long as you feel you will be using the resources for a full year, you can commit now and receive a lower VM cost and still pay over time. As Azure says, committing to Reserved Instances can save you up to 35% for a 1-year reserved instance, or as much as 52% for a 3-year reserved instance commitment. Of course, each VM size has different Reserved Instance pricing discounts, so be sure to investigate the savings for the VM size of interest. If we could be of any assistance, feel free to contact us.

Azure does not offer Reserved Instance pricing on all of their VM sizes. You can take a look at the restrictions, but the high points are that Reserved Instance pricing is not available for:

  • A-series, Av2-series, or G-series VMs.
  • Preview or Promo VMs - Any VM-series or size that is in preview or uses a promotional meter.
  • Reservations aren't available for purchase in Germany or China regions.
  • Insufficient quota - A reservation that is scoped to a single subscription must have vCPU quota available in the subscription for the new RI.
  • Capacity restrictions - In rare circumstances, Azure limits the purchase of new reservations for a subset of VM sizes, because of low capacity in a region.

A very significant item to take note of is that Reserved Instances are the most cost-effective for VMs that are running 24x7. This is because Azure charges you for reserved instance reservations even if you do not have enough VMs running to consume your reservation. The best way I’ve found to envision this is that a reserved instance allocates hardware, 24x7, for your utilization. You are paying for this 24x7 reservation even if you aren’t using it, so as they say, use it or lose it!

Another way to think about it is Azure Reserved Instances being like a faucet that trickles money out every minute into a bucket. If you have VMs running, the trickling money is going into the bucket and paying for VM utilization. If you decide to turn off your VMs for an hour, the faucet continues to trickle the money out, but the bucket has moved, so it just ends up on the ground. Regardless of the situation, you want to make sure you aren’t wasting money with Azure Reserved Instances.

With all that said, don’t worry about trying to figure it all out on your own. We will talk more about reserved instances over the coming months, or you’re welcome to reach out to us.

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