Optimizing Azure Reserved Instances for Cost Savings is a smart move for businesses looking to reduce their cloud expenses.
To get started, you'll want to understand how Azure Reserved Instances work. They allow you to reserve a set of virtual machine instances for a one- or three-year term, providing significant cost savings compared to paying for them on-demand.
Azure offers a variety of Reserved Instance offerings, including Windows and Linux options, as well as different instance sizes and pricing tiers. This flexibility means you can choose the Reserved Instances that best fit your business needs.
Reserving instances for a one-year term can provide up to 72% cost savings over on-demand pricing, while a three-year term can offer up to 81% savings.
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Choosing the Right Instance
To determine the right instance, you should analyze your usage information to help identify which reservations you should purchase.
You can find this information in your usage file, which shows your charges by billing period and daily usage.
To avoid buying the wrong size, refer to the AdditionalInfo field in your usage file or usage API to determine the correct VM size.
Choose the Right VM Size
Before you buy a reservation, it's essential to determine the right VM size for your needs. To do this, you should analyze your usage information to identify which VM instances have high usage on a daily basis.
Check the ConsumedService value in your usage data to determine if the usage is eligible for reservation discounts. This information will help you decide which services to apply the reserved instance discounts to.
You can use the usage file and APIs to analyze your usage information. The usage file shows your charges by billing period and daily usage, making it easier to determine what reservation to purchase.
To avoid buying the wrong VM size, refer to the AdditionalInfo field in your usage file or usage API. This field will give you the correct VM size, ensuring you get the reservation discount you expect.
Here's a list of services that get the reserved instance discounts when the instance size flexibility setting is on:
- Virtual machines
- Virtual machine scale sets
- Container service
- Azure Batch deployments (in user subscriptions mode)
- Azure Kubernetes Service (AKS)
- Service Fabric
Remember to check the ConsumedService value in your usage data to ensure your usage is eligible for reservation discounts.
Use Recommendations
Use recommendations can be a huge help when choosing the right instance size for your Azure VMs. You can use reservation recommendations to help determine the reservations you should purchase.
Azure Advisor provides purchase recommendations for individual subscriptions. This can be a great starting point for making informed decisions about your instance sizes. You can also use the APIs to get purchase recommendations for both shared scope and single subscription scope.
Here are some ways to get reservation recommendations:
- Purchase recommendations and recommended quantities are shown when you purchase a VM reserved instance in the Azure portal.
- Azure Advisor provides purchase recommendations for individual subscriptions.
- You can use the APIs to get purchase recommendations for both shared scope and single subscription scope.
- For Enterprise Agreement (EA) and Microsoft Customer Agreement (MCA) customers, purchase recommendations for shared and single subscription scopes are available with the Azure Consumption Insights Power BI content pack.
These recommendations can help you make the most of your instance sizes and reduce costs.
Next Steps
Now that you've chosen the right instance for your needs, it's time to take the next steps.
To get the most out of your Azure Reservations, be sure to regularly view your reservation utilization. This will help you identify which resources are being used the most and where you can optimize your costs.
If you need to make changes to your reservations, you can exchange and refund them if necessary. This can be a lifesaver if your business needs change unexpectedly.
Don't forget to renew your reservations before they expire to avoid any service disruptions. You can also transfer reservations between tenants if needed.
If you're trying to track down who purchased a particular reservation, you can find the reservation purchaser from Azure logs.
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Purchasing and Management
You can simplify the virtual machine purchasing experience by selecting and purchasing Azure Reserved VM Instances with a few easy steps in the Azure portal.
To view your reserved instance purchase details, navigate to the Reservations menu on the left side of the Azure portal. This menu provides a summary of your reserved instance purchases, including the number of reserved instances purchased.
To make changes to your subscription that receives reserved instance benefits, you can sign in to the Azure portal and update the applied subscription scope by associating a different subscription under the same account.
Here are the steps to view and manage all reservations and reservation transactions as a billing administrator:
- Sign in to the Azure portal and navigate to Cost Management + Billing.
- In the left menu, select Products + services > Reservations.
- The complete list of reservations for your EA enrollment or billing profile is shown.
- Billing administrators can take ownership of a reservation by selecting it and then selecting Grant access in the window that appears.
Simplify Virtual Machine Purchasing
You can simplify the virtual machine purchasing experience by selecting and purchasing Azure Reserved VM Instances with a few easy steps in the Azure portal.
With Azure Reserved VM Instances, you can reduce your virtual machine costs up to 72 percent over Pay-As-You-Go prices on all VMs, or up to 82 percent savings when combined with the Azure hybrid benefit.
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To buy a reserved VM instance, you'll need to have an owner role or reservation purchaser role on an Azure subscription, and for EA subscriptions, the Add Reserved Instances option must be enabled in the EA portal.
Here are the steps to buy a reserved VM instance:
- Sign in to the Azure portal.
- Select All services > Reservations.
- Select Add to purchase a new reservation and then click Virtual machine.
- Enter required fields.
You can also use the Add more option to quickly add additional instances, but this option isn't available for other subscription types.
To determine the right VM size before you buy, consider the following fields:
By considering these fields, you can ensure that you're buying the right VM size for your needs and maximize the benefits of Azure Reserved VM Instances.
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Purchase Restriction Considerations
When purchasing Reserved VM Instances, there are some important considerations to keep in mind.
Some VM sizes are not eligible for reservation discounts, including A-series and G-series VMs, as well as Preview or Promo VMs.
You'll need to check your subscription's vCPU quota before buying a reservation. If the quota is insufficient, you won't be able to purchase the reservation.
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For example, if your subscription has a quota limit of 10 vCPUs for D-Series and you already have two standard_D1 instances deployed, you can only buy a reservation for 8 standard_D1 instances.
Capacity restrictions can also limit the purchase of new reservations for certain VM sizes, especially in regions with low capacity.
Here's a breakdown of the VM sizes that are not eligible for reservation discounts:
- A-series VMs
- G-series VMs
- Preview or Promo VMs
If you need to change the billing subscription for an existing reservation, you won't be able to do so after it's been purchased. Instead, you'll need to use the exchange process to set the right billing subscription for the reservation.
View Purchase Details
Viewing your reserved instance purchase details is a breeze in the Azure portal. You can access this information via the Reservations menu on the left side of the portal.
To view your purchase details, simply sign in to the Azure portal and navigate to the Reservations menu. You'll see a summary of your reserved instance purchases, including the number of reserved instances purchased.
You can also change the subscription that receives reserved instance benefits by signing in to the Azure portal and updating the applied subscription scope. This is done by associating a different subscription under the same account.
If you're an Enterprise Agreement (EA) customer, you can programmatically view how the reservations in your organization are being used through the API. This will provide you with unused reservation hours, actual cost, and amortized costs.
To view the billing subscription for an Azure reservation, follow these steps: sign in to the Azure portal, select All services > Reservations, select the reservation, select Renewal, and then select Replace this reservation with a new reservation purchase. This will show you the billing subscription of the current reservation along with other details.
Change Billing Subscription
Changing the billing subscription for an Azure reservation can be a bit tricky. You can't simply change it after a reservation is purchased.
To change the billing subscription, you'll need to use the exchange process. This is because subscription transfer doesn't transfer an Azure reservation.
You can use the exchange process to set the right billing subscription for the reservation. This is a better option than trying to change it manually.
The exchange process will allow you to update the billing subscription, as well as other details like scope, quantity, term, and billing frequency.
Default Managers
The person who bought the reservation and the account owner for the billing subscription get Azure RBAC access to the reservation order by default.
Enterprise Agreement and Microsoft Customer Agreement billing contributors can manage all reservations from Cost Management + Billing.
A Reservation administrator for reservations in their Microsoft Entra tenant (directory) also has default management access.
A Reservation reader has read-only access to reservations in their Microsoft Entra tenant (directory).
To see the default managers in action, imagine you're part of a large organization with multiple billing contributors. In this case, those contributors can manage all reservations from one central location.
Here's a list of the default managers:
- The person who bought the reservation
- The account owner for the billing subscription
- Enterprise Agreement and Microsoft Customer Agreement billing contributors
- A Reservation administrator for reservations in their Microsoft Entra tenant (directory)
- A Reservation reader
Frequently Asked Questions
What is a reserved instance on Azure?
Azure Reserved Instances are discounted pricing plans that commit you to using Azure services for 1-3 years, ideal for consistent workloads. By reserving instances, you can significantly reduce your cloud costs and optimize your budget
What is the difference between pay as you go and reserved instance Azure?
Pay-as-You-Go and Reserved Instances differ in commitment and pricing: Pay-as-You-Go offers flexibility with standard rates, while Reserved Instances provide discounts for fixed-term commitments
What is the difference between Azure service plan and reserved instances?
The main difference between Azure Savings Plans and Reserved Instances is flexibility and scope of commitment, with Savings Plans offering flexibility across services and Reserved Instances tied to specific VM configurations. Choose between them based on your organization's needs for flexibility and cost savings.
Sources
- https://azure.microsoft.com/en-us/pricing/reserved-vm-instances
- https://learn.microsoft.com/en-us/azure/virtual-machines/prepay-reserved-vm-instances
- https://github.com/MicrosoftDocs/azure-docs/blob/main/articles/cost-management-billing/manage/ea-portal-vm-reservations.md
- https://learn.microsoft.com/en-us/azure/cost-management-billing/reservations/manage-reserved-vm-instance
- https://getnerdio.com/resources/azure-reserved-instances-explained/
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