A Crash Course in Azure Reserved Instances

Bert Sawicki

After experiencing COVID-19 business disruption, companies are trying hard to save a penny wherever they can. Optimizing your cloud spend as you move to the cloud is one area where you can save on your IT costs.

Helping companies save money by moving to Azure is something I love doing in my role as Microsoft Solution Associate (MSA) at Connection. Azure Reserved Instance (RI) is one of the best tools in my MSA tool kit to help customers save money. Let me explain what Azure RI is and how it can optimize your cloud spend. 

What are Azure Reserved Instances? 

A reserved instance is committing to using a virtual machine in Azure for one or three years in exchange for a discount on the cost of the machine. This helps you save money in two ways. The first is the obvious one: cost savings of reservation pricing, vs. pay-as-you-go style pricing. The second way Azure RI helps you save money is by encouraging you to have a long-term cloud investment strategy, which results in increased savings. 

It is important to note that you are only “reserving” the compute portion of the virtual machine with an Azure RI. You still need to pay for the software (if you are using Windows Server). So how do you save money on the Windows server licensing? You can utilize Hybrid Use Benefits, which allows you to leverage your current on-premises license investment to lower the cost of the license in Azure. Software Assurance on your on-premises Windows Server and/or SQL Server licenses is what you need to unlock this additional benefit on Azure.

Related Content: Azure Hybrid Benefits: A Refresher

What if you don’t have Software Assurance?

Here is a cool feature that is unique to Azure RI via a Cloud Solution Provider (CSP): Recently, Microsoft introduced the ability to buy Windows Server OS in the same reservation style—only available through a CSP now. This is a not always a cost savings, but it is a convenient way to procure your Windows Server OS while you reserve your virtual machines.  

What are your payment options with Azure Reserved Instances? 

In addition to paying for the RI upfront, Microsoft now allows you to pay monthly, which allows you to keep the VM spend in Operational Expenses. The monthly payment option is a game changer for small- and medium-size businesses who do not have available cash to pay for the whole year up front. 

What are the things to consider before you choose Azure RI?

One of the most important tasks to perform before you purchase Reserved Instances is VM right sizing. You want to ensure that you maximize your Azure investment by selecting the virtual machine that will meet the demands of your workloads without over sizing the VM and therefore spending more than is necessary. Another important factor to remember is that licensing is separate from the Reserved Instance and must be taken into consideration when calculating cost savings

We had a customer who recently moved the bulk of their workloads to Azure, and they were concerned about the growth of their consumption, as it was more than they had anticipated. Our Azure team looked at their environment and discovered several underutilized VMs—some that weren’t being used at all. You pay for VMs whether you are using them or not, so make sure you shut down unused resources. We recommended they resize several of their VMs and purchase a three-year RI. These steps allowed the customer to reduce their monthly Azure spend and bring costs more in line with what they’d anticipated. 

What’s next?

The most important part of your Azure journey is monitoring your environment and planning for growth. Every business has different needs and priorities, so there are many things to consider when moving workloads to Azure. 

Here at Connection, we have a seasoned team of Azure resources to help you identify the right size VM for each workload and when to apply Reserved Instances. 

Bert is an experience solution architect focused on Azure and an avid San Francisco 49ers fan. In his free time Bert enjoys mountain biking, cooking, and being with his family.