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How Azure’s New Reserved Instances Are Different

How you can leverage the substantial savings offered by Azure RIs

Lavi Ferdman
VP of Sales

Azure Reserved Instances

Microsoft has just released Reserved Instances (RIs) for Azure. Reserved Instances aren’t a new development on the cloud as AWS has offered them since 2009, but Azure RIs work a bit differently.

What are Reserved Instances?

One key thing to note about RIs is that they are not actual instances. Instead, RIs function more like coupons or vouchers which are applied to instances when it comes to billing. Essentially, Azure gets a guarantee that you’ll be using their service longterm and you get a discount in exchange that.

Whilst Pay-as-you-go and Low-Priority Instances are bought on a pay-as-you-go model, purchasing RIs means buying access to a certain number of VMs at a cheaper rate than Pay-as-you-go.These purchases can be made all upfront (to get the cheapest price) or partially upfront with the rest in installments, with terms usually lasting one or three years.

What are some Of The benefits?

Well, excluding the most obvious benefit being to savings, RIs do offer other benefits to users. Firstly, they can make budgeting more predictable and add a feeling of reassurance in connectivity.

As the price and cost is all upfront and non-variable, this can simplify company budgeting compared to when using the varying prices of Low-Priority VMs and not require constant budgeting which comes with Pay-as-you-go Instances.

In terms of reassurance, it can give companies a degree of confidence that they will not struggle for connectivity as they will always have access to VMs for when they need them.

So how are Azure RIs different?

Azure RI prices are around 37-46% cheaper for a one-year term and 60-72% cheaper for a three-year term (the prices are ranged as instance families are priced differently). These savings are pretty substantial, yet they can be even larger.

Azure Hybrid

If users take advantage of the Azure Hybrid Benefit, these savings rise to 56-68% for one-year terms and 68-82% for three-year terms. If you’re unsure what Azure Hybrid Benefit is exactly or if it might apply to you, check out Microsoft’s Azure Hybrid Benefit FAQ page.

Flexibility & Simplicity

The flexibility of their RIs is key. Azure RIs can be allocated at either Azure enrolment level or at a subscription level. In common terms, this means that RIs can either be utilized by an entire company using Azure or by specific departments which have their own subscriptions. This means that a department where RIs are wanted can both budget for and be allocated these RIs specifically, instead of RIs being integrated into a whole company’s Azure usage.

Azure RIs are also more flexible in terms of exchanging and cancellation. After users purchase an amount of RIs but then find the need for these RIs changing (for example in the early completion or scaling- down of a project) they can exchange these RIs for a prorated refund. Once this refund has been received, the company can use this refund to purchase new RIs without incurring any additional fees or charges.

Convert Region or Instance Family without making a 3-year commitment

Azure RIs are by definition “Convertible and Flexible” and can be exchanged for Instances in different regions AND different families. Azure RIs are the only RIs that can be exchanged for those in a different region without committing to a 3-year term.

Exchanging Azure RIs is done by calculating the remaining value of unused RIs, then subtracting that value from the next purchase. So, if you purchase $100 of RIs and use $50 you can use this discount on your next RI purchase without any future charge. If your next purchase is less than you remaining RI value (only $40) then it counts as cancellation of some Instances which would incur a small fee.

As for cancellations, Azure allows cancellations with a prorated refund, minus an early termination fee of 12%.

What are some Of The drawbacks?

Azure RIs might just be the most flexible and attractive RIs on the market, but there are still some aspects to consider before committing to any RIs, including those offered by Azure:

    • Lock in – the payment system means that to get the best deals, users have to pay upfront for periods of three years. This means a large initial cost will be incurred along with a certain amount of “lock-in” for the term of the RIs. Yes, these RIs can be exchanged, yet users may find themselves losing money if they have to cancel.
    • Scalability – As RIs are purchased in a quantity over a time period, they are not easy to scale. They are perfect for when workload remains at a steady level, but where demand varies users can find themselves needing to “top up” Instances using Pay-as-you-go.
    • Advance planning – the length of purchase periods for RIs means that users need to be able to predict with some level of accuracy future needs and requirements. Azure RIs are much more malleable than standard offerings from elsewhere, but will always be less flexible than Pay-as-you-go offerings.
Lavi Ferdman
VP of Sales