Azure Savings Plan vs. Reserved Instances: What works better?

The biggest obstacle in reducing your customer’s Azure spend is to know what strategy works best for the desired outcome. Some partners lean towards applying Reserved instances against compute requirements, such as virtual machines, dedicated hosts, or container instances, to save the customer some money or ultimately, bring their migration and modernization deal over the line. Luckily, Microsoft has your customer’s pocket in mind, making it possible that all efforts are available to migrate their infrastructure or resources to Azure.

What is the Azure Savings Plan?

The Azure Savings Plan is a flexible pricing model designed to provide cost savings across various Azure services. Unlike traditional pay-as-you-go pricing, the savings plan offers discounts in exchange for a commitment to a certain level of usage over a one- or three-year period.

With the Azure Savings Plan, you commit to spending a specific amount per hour for a set term. This commitment can be applied to a wide range of services, including VMs, databases, and storage. If your usage exceeds the committed amount, the additional usage is billed at standard rates. So, if your usage is below the commitment, you still pay the committed amount, ensuring predictability in your spending.

The plan covers various services and regions, allowing you to adapt your usage without losing the benefits of your commitment.With a single commitment covering multiple services, managing and predicting your cloud costs becomes easier.Significant discounts compared to pay-as-you-go pricing help reduce overall cloud expenditure.

What are Reserved Instances?

Reserved Instances are a cost-saving option specifically for Azure VMs and other compute resources. By reserving capacity for one or three years, businesses can save up to 72% compared to pay-as-you-go pricing.

When you purchase an RI, you commit to using a specific VM type in a particular region for a fixed term. This commitment guarantees that the capacity will be available for your use, and in return, you receive a substantial discount.

RIs offer the highest discounts, making them ideal for workloads with predictable usage patterns. Reserved capacity ensures your resources are available when needed, which is crucial for critical applications. Azure offers the ability to exchange or cancel reservations under certain conditions, adding a layer of flexibility to your commitment.

Comparison between Azure Savings Plan and Reserved Instances

- Flexibility vs. Specificity: The Azure Savings Plan provides greater flexibility than Reserved Instances, covering multiple services and regions with a single commitment. This makes it suitable for businesses with variable workloads across different Azure services. In contrast, RIs are more specific, focusing on VM types and regions, making them ideal for stable, predictable workloads.

- Commitment and Savings: Both options require a commitment to achieve savings, but the level of commitment and potential savings differ. RIs generally offer higher discounts but require a more specific commitment. The Savings Plan offers broader applicability with slightly lower discounts.

- Usage and Predictability: If your organization has a predictable usage pattern for specific VMs, Reserved Instances can provide the most significant cost savings. However, if your usage spans various services and fluctuates, the Azure Savings Plan offers a more versatile and manageable approach.

Choosing the Right Option

Selecting between the Azure Savings Plan and Reserved Instances depends on your organization's specific needs and usage patterns. Here are a few tips to help you decide:

- Analyze Usage Patterns: Review your historical usage data to identify patterns and determine which option aligns best with your consumption.

- Consider Flexibility Needs: If your workloads are dynamic and span multiple services, the Azure Savings Plan may offer better flexibility.

- Evaluate Cost Savings: Compare potential savings from both options based on your expected usage to determine which provides the best financial benefit.

- Hybrid Approach: Consider a hybrid approach where you use both the Azure Savings Plan and Reserved Instances to optimize different parts of your workload. This can help you achieve the best of both worlds – flexibility for dynamic workloads and maximum savings for predictable ones.

Some best practices

All approaches and strategies are not all suited for every application for cost optimization, therefore some best practices should always be applied for maximum savings.

- Regular Review and Adjustment: Regularly review your cloud usage and adjust your savings plans or reserved instances accordingly. This ensures that your commitments align with your actual usage and that you continue to maximize your savings.

- Utilize Azure Cost Management Tools: Azure provides a suite of cost management tools that can help you track, analyze, and optimize your cloud spending. Make use of these tools to gain insights into your usage patterns and identify opportunities for further savings.

- Educate Your Team: Ensure that your customers are well-versed in the cost-saving options available in Azure. This knowledge will help them make informed decisions and optimize your cloud expenditure effectively.

- Monitor and Report: Implement monitoring and reporting mechanisms to keep track of your savings plans and reserved instances. This helps in maintaining visibility into your cloud costs and ensures that you can take timely actions to optimize spending.

Effective cloud cost management is critical for maximizing the value of your Azure investment. Both the Azure Savings Plan and Reserved Instances offer substantial savings, but the right choice depends on your specific usage patterns and business needs. By understanding the nuances of each option, you can make an informed decision that optimizes your cloud costs while ensuring the performance and availability of your critical applications. Regular reviews, leveraging Azure's cost management tools, and educating your team are essential practices to keep your cloud expenditure in check and maximize your savings.

Feel free to contact your Surestep Ambassador team for more information on how to skill your team for best Azure cost savings at This email address is being protected from spambots. You need JavaScript enabled to view it..