Azure Reserved Instance vs. Azure Savings Plan best use case scenario?

Question

Folks,

I need some help if there is any saving or price differences when deploying Azure VM using Azure Reserved Instance vs. Azure Savings Plan.

based on my understanding:

https://azure.microsoft.com/en-us/pricing/offers/savings-plan-compute/

• Can be used as required basis, and customer can purchase it on demand for each Azure VM deployed for one year period.
• Removing the Azure VM before the savings plan expiry date, will forfeit the remaining balance.
• Cheaper annually as it is billed yearly.

https://azure.microsoft.com/en-us/pricing/reserved-vm-instances/

• Used for long terms production scenario, and customer can purchase it on demand for each Azure VM deployed for a minimum of three years period.
• Removing the initially reserved Azure VM before the reserved instance expiry date, will forfeit the remaining balance, and cannot be used with replacement Azure VM.
• Cheaper in the long run

any help and suggestion would be greatly appreciated.

Thank you in advance.

Answer 1

Hello @EnterpriseArchitect

Both Azure reservation and savings plan apply to the infrastructure part of the resource and not the license. Purchase model is same as well either monthly or upfront. Purchase is available for 1 or 3 years for both and they are billed per hour basis.

Key difference between Azure reservation instance and savings plan are as below.

1. Azure reservation is purchased for a specific region and a specific sku type ( you can have flexibility enabled however, that will only apply to the same sku family ) Only way to switch the sku type is through RI exchange
2. In savings plan for compute( as we're discussing VMs), there is a great level of flexibility where the only information that's required is choosing the scope, Azure plan amount and the term. There is no need to choose a region or sku type.

Azure savings plan will apply to maximum discounted compute resource and you can switch it to any resource based on the scope irrespective of the region or compute resource type.

In addition, for RI cancellation there is a cap of 50$ USD refund supported. However, in case of Azure savings plan once commited and cancelled the amount is forfeited.

Key benefit of Azure savings plan is that it gives a great deal of flexibility and helps reduce idle discount hours. Based on business requirements either RI or savings plan or both can be purchased to benefit at maximum level.

Hope this helps.

Regards
Divya

Answer 2

@dkrishnaveni-MSFT , Recommendation engine evaluates the hourly on-demand usage for resources in the given scope over the past 7, 30 days, Once the azure advisor gives the recommendation during the same time if there is a decrease in the workload then the commitment amount will be higher and the savings plan will be underutilized,
Instead of recommendation with Azure Advisor, how can we calculate the commitment amount (average) for the savings plan for a given workload.

Answer 3

This is purely billing and there will not be performance degradation. You'll start seeing pay as you go pricing when the term ends or when the utilisation exceeds the purchased plan in any given hour.

Regards
Divya.

Answer 4

Is there any guidance around Azure Savings plans with Up-Front Capacity Reservations?