Azure Reserved Instances

Cloud Cost Optimization is hot topic for many companies as Cloud footprint and spending grows. One of known ways to save costs is paying for your IaaS VM instances (cloud servers) upfront and get discounted pricing. This article has focus on practicalities how to leverage use of Microsoft Azure Reserved Instances.

What is Azure Reserved Instance?

Azure Reserved Instance (RI) works like a discount “coupon” for infrastructure portion of cost (discount varies on instance type and region, it might reach up to 72% compared to pay-as-you-go pricing) that will be applied to a running cloud instance that meets the parameters of the RI purchased.

In exchange for the discount it is needed:

  • To commit for 1 or 3 years
  • To agree to specific parameters where the discount can be applied
  • To pay everything upfront

How to consume the “coupon”? 

Microsoft has no way to map RI to specific VM and there are only two ways to consume RI benefits:

  1. Randomly share RIs across all VMs in all your subscriptions under Enterprise Enrollment (aka Shared scope);
  2. Randomly share RIs across all VMs in selected subscription(s) (aka Subscription scope).

In practice challenge might come if you have multiple Cost Carriers that share Azure costs. It can be impossible to guarantee that benefit of upfront investment by a single CC would be received by the same CC.

What flexibility does Azure Reserved Instances provide?

  • Change assignment of RI benefits between the enrollment (shared scope) or subscription (subscription scope) levels.
  • RIs are exchangeable: this benefit allows to swap out one Azure RI for another (different region or VM family) without paying the termination fee. In this case, the prorated refund is received based on unused amount which applies fully to new purchase price.
  • RIs are refundable (up to $50,000 per year), with 12% termination fee on remaining value.

Example of discounts

Exact discounts can be checked at https://azure.microsoft.com/en-us/pricing/details/virtual-machines/windows/ , example:

NB! Actual discounts are the difference between EA and RI price, not the published RI discount of the list.

Conclusion

Azure RI can be effective way to get Azure consumption costs down, but implementing this for environments with complex charge-back structure can become very complex. Winning strategy can be to consider and plan usage of RIs in the early stages of Cloud Adoption.
Good luck!

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