What are Azure Reserved Instances and their benefits?

Microsoft recently introduced Azure Reserved Instances (Azure RI) to help Azure’s most active customers save on long-term VM usage. By committing to a one or three-year benefit, Azure customers can now reserve VMs in advance at a deep discount, saving them as much as 82% off standard pay-as-you-go pricing. Ideal for customers with relatively predictable workloads and resource requirements, Azure RI can also help customers budget and plan months or even years in advance. Yet despite the required up-front commitment, Azure RI does not lock you into a rigid, fixed, long-term structure. Rather, Azure RI has a high degree of flexibility, allowing users to make ongoing adjustments or even cancel the service with minimal downside. Azure RI also has a number of clear advantages over competing Amazon (AWS) reserved VM instances. With all these strong points in mind, it’s no surprise that a growing number of Azure’s most active customers are leveraging Azure RI as a highly cost-effective alternative to pay-as-you-go cloud computing.  Azure Reserved Instances are available through our Azure 1-Tier CSP partnership and compliment our Azure Consulting Services and Azure Managed Support Services.

Cost savings

Brian Hillger, Microsoft’s Senior Director of C+E Business Planning, gave an in-depth overview of the new Azure RI service during a recent talk at Microsoft Ignite. He placed the greatest emphasis on cost savings. To illustrate precisely how the savings will impact Azure VM customers under different scenarios, Hillger presented a graph of common VM scenarios and the corresponding savings customers will enjoy with a one or three-year Azure RI benefit. For example, one of the most popular VM instances, the Dv2 Series, is discounted 46% under a one-year Azure RI term, and 65% under a three-year term.

Azure Hybrid Benefit: even deeper discounts

For owners of on-premises Windows Server licenses with Software Assurance, the Azure Hybrid Benefit provides deep discounts on Azure cloud services. Combined with a three-year Azure RI term commitment, Azure Hybrid Benefit can lead to the highest level of savings on VMs—up to 82% off pay-as-you-go pricing. Here Hillger shows us how the Hybrid Benefit further deepens the various discounts already noted above.

Windows Server (Standard Edition)

For each Windows Server Standard license, Azure gives you up to two virtual machines with a total of up to 16 cores at the base VM (Linux) rate. Note, however, that under this agreement, you will be effectively transferring your Windows Server Standard license to your cloud-based VMs and “will no longer use that license on premises.”

Windows Server (Datacenter Edition)

On top of the Azure Hybrid Benefit offered to Windows Standard license holders, the Datacenter Edition allows you to keep applying your license to your on-premises resources while extending that same license to your cloud-based VMs.

Making changes

An understandable fear of making a long-term financial commitment is that the project requirements driving your cloud computing needs could change at any time. Halfway through a project, you might even find that you no longer need Azure VMs at all. In such situations, a rigid, long-term commitment could lead you to lose money in the final equation, no matter how much the plan might save you on paper. However, Azure has already factored these concerns into their reserved instance offering. Knowing the rapidly evolving landscape of IT-dependent demands in 2018, Azure has ensured that the service includes a generous, flexible exchange and refund policy.

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Exchange

If you simply need to make a change to your reserved VM instances due to new requirements, Azure offers a prorated refund that covers the unused portion of your committed funds, which you can then apply to a new Azure RI plan of either one or three years. There is no penalty for this process.

Cancellation

Azure allows you to cancel your reserved instance plan at any time. To calculate the refund you will receive, begin with the prorated amount of your unused financial commitment, then subtract “an early termination fee of 12 percent.”

Azure RI vs AWS

The Azure team points out that there are at least five key advantages that Azure RI offers over Amazon (AWS) EC2 reserved instances:

1. Greater savings for Windows Servers

Thanks to the Azure Hybrid Benefit, Azure RI results in greater savings for Windows Server users.

2. An easier onramp

Azure RI’s intuitive, streamlined, straightforward purchase process is simpler and easier than the AWS purchase process.

3. Reservation assignment options

As illustrated in the example above, you can assign your reservation at either the Azure enrollment level or at the subscription level, as your budgeting needs dictate. AWS does not offer this type of flexibility.

4. All plans eligible for exchange

While Azure allows you to exchange your reservation with any Azure RI plan, AWS only allows exchanges with three-year “Convertible RIs.”

5. Canceling an RI plan results in a direct refund

Azure gives Azure plan holders a direct, pro-rated refund (subject to a termination fee) when they cancel their Azure RI plan. AWS, on the other hand, requires that their RI holders sell their reservations “in a secondary marketplace.”

Advanced advantages

Prioritized capacity

In addition to cost savings, customers leveraging Azure RI will also receive the benefit of prioritized capacity in global, public Azure regions. This translates to greater reliability, availability and performance predictability for your workloads.

Assigning reservations

Many companies have multiple Azure subscriptions. In Hillger’s talk, he points out that your HR, IT and Finance departments, for example, might all have their own Azure subscriptions. Taking into account the common situation of multiple subscriptions, Azure RI gives businesses the freedom to choose whether they would prefer to assign a particular Azure RI benefit to their company’s overall Azure enrollment, or to a specific subscription (such as HR’s). Both options have their advantages. The main advantage of having a “floating” assignment at the enrollment level is that any department with an Azure subscription (HR, IT, Finance, etc.) can leverage it. On the other hand, as Hillger points out, if the cost of VM usage is coming out of a single department’s budget, then you will probably want to assign the benefit to that department alone.

Of course, you can buy several Azure RI benefits and assign them any way you wish. For example, you may have a floating Azure RI benefit available to all departments; and another assigned solely to HR; and still, another assigned only to IT. The Azure RI service has the inherent flexibility to handle these common situations, and much more complicated ones, without any conflicts or concerns. Naturally, you may want to experiment with how you assign one or more Azure RI benefits. The service also makes this easy. Moreover, your assignment is not set in stone. You can re-assign a particular RI benefit at any point after you purchase it.

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Getting started

The Azure team has streamlined the Azure RI onramp for simplicity. All you need to do is complete a few simple fields. To get started, visit the Azure Portal and click on the search icon in the header. Then begin typing Reserved VM Instances. The corresponding service will appear in the auto-complete results menu. After selecting it and reading Azure’s brief introduction to the service, click the blue Create button at the bottom of the pageThis will take you to a simple form with only seven fields to fill out.

Choosing a subscription

After giving your reserved VM instance a name, you need to choose the subscription you want to assign it to from the drop-down menu. Note that you need to have at least one Azure subscription before you can create a reserved instance.

Selecting a scope

Once you’ve chosen the subscription you wish to use, you need to decide on the scope of your reserved instance benefit. There are two options: Shared and Single subscription. Be sure to review Azure’s detailed explanation of the difference before making this decision, although you can change it later. In short, if you choose Shared, your RI will be applied to all the subscriptions within your “billing context,” which depends on the subscription you selected above. If you choose Single subscription, then your RI will only be applied to your selected subscription.

Region and VM type

Next, you will need to select an Azure region for your VMs to run in. If you already have VMs running that you want to reserve, then you will want to choose the Azure region they are running in. Otherwise, you can choose any region you wish from the drop-down menu. Then you will need to select the size and type of VM you would like to reserve.

Term and quantity

The second-to-last field, Term, asks you to choose between a one and three-year benefit. For the last field, you will need to enter the quantity of VMs that you would like your benefit to encompass.

Calculating your savings

Once you’re satisfied with your entries and selections, click the blue Calculate cost button at the bottom of the form. This step gives you a chance to see both the cost and the savings, of your reserved instance before you make the commitment. After seeing the calculated cost, you may choose to adjust and fine-tune your reserved instance for maximum efficiency and savings before finally clicking Purchase and activating your benefit.

For more information on Azure RI and other Azure services that can save you money on cloud computing, contact us.

About Ed

Ed is an 18 year veteran of the hosting industry and was part of the team at Verio that helped drive the early adoption of the Internet as we know it today. At Applied Innovations, Ed consults with prospective clients and partners to help them identify the best path forward with their own digital transformation as they look to embrace and adopt the cloud. Ed combines his strong technical understanding of the Internet, Security and Cloud scale with his ability to communicate and simplify complex solutions into a strategic plan that makes sense for the customer and aligns with their business strategy