What are the two pricing options for Azure services?
For Microsoft, the concept of cost optimization is foundational to success in the cloud. As one of the five pillars of their Microsoft Azure Well-Architected Framework, cost optimization as a practice encourages cloud administrators to adopt the process of build, measure, and learn. Show
That process would look something like this:
These steps appear simple enough, however getting cost optimization right can be challenging for many reasons. One common challenge in particular is not fully understanding how Azure Reservations work. In this article, we’ll explain all there is to know about Azure Reservations. Let’s get started. What are Azure Reservations?Azure Reservations are pre-purchase commitments that reduce cloud consumption costs by reserving resources in advance. However, this pricing option does not apply to every resource on Azure. You can only leverage Azure Reservation discounts on a subset of virtual machines, app services, storage platforms, databases, or analytics services. Microsoft splits Azure Reservations into two broad categories: Reserved Instances and Reserved Capacity.
Reserved InstancesAzure Reserved Instances is a pricing option that allows you to reserve capacity on a subset of virtual machines for a period of one or three years. By committing and prepaying for the Azure virtual machine and compute component, you can reduce the cost by up to 72 percent. However, this discount only applies to your virtual machine cost—it does not apply to any pre-installed software, networking, or storage costs. The table below details the inclusions and exclusions:
Reserved Instances Minimum RequirementsYou can apply Reserved Instance pricing to both Windows and Linux virtual machines running on Azure. However, not every configuration is eligible for this discount. This pricing plan excludes virtual machines that form part of the A-series, Av2-series, and G-series. Any promotional virtual machines or images in preview are also ineligible. Reserved Instance Options
Hybrid Cloud Solutions Demo See the best multi-cloud management solution on the market, and when you book & attend your CloudBolt demo we’ll send you a $100 Amazon Gift Card. Book demo Reserved CapacityReserved Capacity, like Reserved Instances, offers pricing discounts for pre-committing to services. The difference between the two offerings is the selected resources. Reserved Instances refers to a pricing plan that applies to virtual machines. Reserved Capacity covers everything else eligible for an Azure Reservation. Depending on the service and length of commitment, Reserved Capacity savings can range up to 65 percent. Azure also excludes individual components. Depending on the consumed service, you may still pay the full price for software, networking, and storage. The table below details the inclusions and exclusions:
Reserved Capacity Minimum RequirementsLike Reserved Instances, Reserved Capacity is not a universal discount for all data services running on Azure. Microsoft applies Reserved Capacity pricing to data solutions running on a minimum of 8 vCores for SQL Databases or 20,000 Request Units (RUs) for Azure Cosmos DB. Reservation discounts on App Services are only available on the Premium V3 and Isolated tiers. Reserved Capacity Options
RecommendationsHow recommendations are calculatedAzure’s recommendation engine evaluates your hourly usage over the past 7, 30, and 60 days. Azure typically recommends selecting the quantity of reservations that maximizes your savings. Estimated costs are simulated both with and without reservations for comparison, and this calculation includes any special discounts you may have applied to your on-demand usage rates. Recommendation quantity and savings are calculated for a 3-year reservation when available. If a 3-year reservation isn’t purchasable, the recommendation is calculated using the 1-year reservation price. Recommendations available in Advisor consider your past 30-day usage trend. Other Considerations
ScopeOnce you purchase an Azure Reservation, Microsoft automatically applies the discount to resources matching the reservation’s options and quantity. It implements the discounted pricing to the scope you set during the purchase process; this could be a subscription, resource group, or single resource. For example, reserving an instance and applying it to a resource group will use the Reserved Instance discount for any compute elements in that collection. Similarly, purchasing Reserved Capacity and setting the scope to the subscription will apply the discount to eligible Azure data services at that level. Determining the scope and reservation to purchase requires analysis. Microsoft recommends you only buy a reservation after examining the consistent base usage of the identified resource. For virtual machines, MeterCategory, ServiceType, and ResourceLocation are metrics that provide the usage insight you need. Similarly, MeterCategory, MeterName, and MeterSubCategory help determine usage statistics for the Azure Synapse Analytics service. In addition to analyzing usage data, Microsoft also provides resources that offer recommendations based on consumption patterns. The Azure Portal provides recommendations during the reservation purchase process. The VM BI Coverage report that forms part of the Cost Management Power BI app is another valuable resource that Enterprise customers can use. Azure Advisor, a built-in Azure service that analyzes configurations and usage telemetry, also offers reservation recommendations. A comprehensive approach to hybrid cloud management
PricingDepending on the service, Microsoft applies reservation pricing as detailed in the table below:
It is important to note reservation discounts work on a “use-it-or-lose-it” basis. Since the costing is measured per hour, if you do not have matching resources for that period, you forfeit the reservation quantity. Reserved hours cannot be carried forward or accumulated. Leveraging Azure Reservations optimizes your cloud consumption cost. In addition to this primary benefit, there are other advantages in subscribing to this service. These include higher cost savings with the Azure Hybrid Use Benefit, payment flexibility, operational agility, and predictable budgeting and forecasting. Higher Cost Savings for Azure Hybrid Use BenefitIf you are an existing Microsoft Enterprise Agreement customer with Software Assurance, you can also get a further discount by leveraging the Azure Hybrid Use Benefit (HUB). Combining the reserve pricing discount with HUB can increase savings by up to 80 percent for virtual machines. RI Payment Plan Comparison Pay Monthly or AnnuallyWhen signing up for Azure Reservations, the terms offer either a one or three year option. Even though it is a yearly contractual commitment, Microsoft gives you a choice to pay for your services monthly or annually. The cost per hour for either payment plan does not differ. Operational AgilityEven though reservation pricing refers to a particular resource, you set it to a specified scope. This configuration increases operational flexibility. For example, should you have two virtual machines in a scoped resource group, you can split the instance saving across identical resources. In this way, should you shut down the one virtual machine, you do not lose the reserved pricing benefit as Azure applies it to the other resource in the scope. Predictable Budgeting and ForecastingOne of the challenges many organizations face when migrating to Azure is estimating their forecasted expenditure. As Azure Reservations provide a fixed monthly or annual charge, it minimizes the potential unpredictability of Azure costing. Cancellations and ExchangesEven though Azure Reservations commit you to a one or five-year term, Microsoft does give you the flexibility to cancel or exchange your prepayment engagement. However, depending on your commitment’s remaining length and usage, the refund or credit differs. There is also a refund cap of $50,000 and a termination fee of 12 percent in most instances. The table below provided by Microsoft details the various scenarios.
Charges Covered by Azure Reservations
Use CasesAzure Reservations work well when you have a predictable usage pattern. If you know that you will be using a particular resource for an extended period, then an Azure Reservation is a perfect use case. Conversely, intermittent, scalable, or scheduled workloads are not suitable for reservations. For example, if you reserve a virtual machine instance but find that you need to shut it down regularly, then a Reserved Instance may not be the best option. This pricing model works well for servers that need to remain online such as domain controllers. Optimizing Your ReservationIf you find that your reservations are underutilized, there are several steps you could take to ensure you leverage the full benefit of your commitment. 1. Use Instance FlexibilityReserved virtual machine instances give you the option to optimize instance size flexibility. This configuration allows you to apply the reservation to virtual machines in the same instance size flexibility group. For example, if you purchase a reservation for a Standard_D5S_v2 virtual machine, you could apply it to other virtual machines in the same tier, such as a Standard_D1S_v2. 2. Change the scope to sharedChanging the reservation from single scope to shared increases flexibility and use of the Azure Reservation as it will apply the discount to more resources. 3. ExchangesIf you cannot utilize the full benefit of your reservation, you could exchange it and use the credit to purchase a reservation for a better-suited resource. A comprehensive approach to hybrid cloud management Only solution with automated discovery, testing, provisioning, security, and cost management A `single pane`for infrastructure spanning on-premise, private cloud, and multiple public clouds A comprehensive framework that extends your existing tool investments and fills the gaps ConclusionYou can save up to 80% on your Azure purchases by committing to, or paying in advance for reserved instances and reserved capacity. You can save on your purchases of virtual machines, storage, database, analytics, and caching services, however the discounts won’t apply to ancillary services associated with a reserved resource such as networking and bandwidth. If your plans change, Microsoft offers help in the form of instance flexibility, scope changes, and the option to exchange your reservations, however they are subject to refund caps and exchange fees. All things considered, at least a portion of your environment can always benefit from discounts offered by reservations without any considerable risk. Which two services can you use in Azure?What are the Various Azure Services and How does Azure Work?. Virtual Machine. This service enables you to create a virtual machine in Windows, Linux or any other configuration in seconds.. Cloud Service. This service lets you create scalable applications within the cloud. ... . Service Fabric. ... . Functions.. What are the most common Azure billing options?The three most common Azure billing models. A traditional Enterprise Agreement. An Enterprise Agreement (EA) is traditionally used for on-premise systems and now, as a commitment-based agreement for enrolments for both cloud and on-premise. ... . Cloud Service Provider. ... . Pay-as-you-Go.. What are the different types of Azure subscriptions?Azure offers three subscription types: monthly, hourly, and monthly-hourly. All three subscription types offer different benefits and pricing. The monthly subscription offers the least expensive option and provides access to the full Azure platform.
How many types of Azure services are there?Here are the different Azure cloud service types: Infrastructure as a Service (IaaS) Platform as a Service (PaaS) Software as a Service (SaaS)
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