Understanding Azure Virtual Machine Reservations

Basics of Virtual Machine (IaaS) Reservations on Azure

by Greg Kaffenberger

n the fast-paced world of cloud computing, finding cost-effective solutions is paramount. Azure Virtual Machine Reservations offer an avenue to save significantly on your Azure VM usage costs. In this article, we’ll delve into the basics of Azure VM Reservations, discussing what they are, how they work, and various optimization strategies.

What is an Azure Virtual Machine Reservation?

An Azure Virtual Machine Reservation is essentially a commitment you make in the Azure Portal, pledging to use a specific virtual machine for either 1 or 3 years. Let’s illustrate this with an example: suppose you opt for a D2s_v5 for your application, with the confidence that it will be online for at least a year.

Without a reservation, you’d pay approximately $70.08 per month, totaling $840.96 annually. However, committing to Azure by reserving the D2s_v5 for a year can yield substantial savings. You’d pay only $495.99 annually, slashing your costs by $344.97, a 41% reduction. The savings become even more enticing with a 3-year commitment, where you can save a staggering 62%, totaling $958.96 over three years compared to on-demand pricing.

Here’s a concise table for easier reference:

Reservation TermD2s_v5 Annual Cost
No Reservation$840.96

How are Reservations applied?

It’s crucial to understand that reservations and virtual machines are separate entities. Your VM remains on a pay-as-you-go basis, while the reservation applies separately. Think of it as canceling out an hour of pay-as-you-go costs and replacing it with an hour of reservation costs.

For instance, if you purchase a 3-year reservation for a D2s_v5, the standard $0.188 hourly cost is eliminated, replaced by a reduced $0.0364 hourly rate. It’s important to note that this $0.0364 will be billed each hour for the entire reservation term, regardless of whether you turn off or delete the VM.

Upgrading a Virtual Machine with a matching reservation.

Azure Virtual Machine Reservations offer more flexibility than meets the eye. Consider two upgrade scenarios:

  1. Upgrading Instance Size: Suppose you need to scale up from a D2s_v5 to a D4s_v5. Since reservations and VMs are separate, upgrading poses no issues. By default, reservations feature “instance size flexibility,” allowing them to accommodate the D4s_v5 while deducting the applicable amount. This may result in a monthly charge of $96.72 (D4s_v5) – $70.08 (D2s_v5) + $26.64 (D2s_v4 reservation).

  2. Project-Based Updates: If you need to update an application by creating a new D2s_v5, make the necessary changes, and then switch off the original VM, reservations shine in this scenario. While the second D2s_v5 is active, you’ll pay $0.188 per hour. Once you power down the initial D2s_v5, the reservation will detect the second instance and remove the $0.188 hourly charge, replacing it with the $0.0364 reservation fee.

Keep in mind that instance size flexibility only applies within the same series, such as the Ds_v5 series used in our examples.

Other Azure Virtual Machine Reservation Options

Azure offers two additional options that significantly impact how you purchase and apply reservations:

  1. Capacity Priority: By toggling between “Instance Size Flexibility” and “Capacity Priority,” you can prioritize capacity over size flexibility. This means your VM gets placement and power-on priority over others, a valuable option in scenarios where immediate access is crucial.

  2. Reservation Scope: In large organizations with multiple subscriptions, resource groups, and diverse management structures, the reservation scope becomes pivotal. Azure allows for various combinations to accommodate complex procurement structures, catering to your organization’s specific needs.

For further information on reservation scoping, refer to the Microsoft article.

In conclusion, Azure Virtual Machine Reservations offer a robust solution to optimize your cloud spending. By understanding their nuances and exploring various options, you can harness their full potential and maximize your cost savings in the Azure cloud.

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