Microsoft Azure offers its customers two primary commitment-based savings options: Azure Savings Plan and Reserved Instances (RIs). Understanding the differences between these two can help organisations make knock-out decisions about their cloud spending strategies.
Here's a detailed comparison of your options. Tread carefully. A misaligned choice can lead to financial inefficiencies and operational challenges. Regular review, adaptation, and expert advice are key to ensuring your Azure plan aligns with your organisation's evolving needs.
Azure Savings Plan
Flexibility in usage: Azure Savings Plan offers more flexibility than Reserved Instances. It allows customers to apply savings across any Azure service that supports the Savings Plan based on usage.
Scope of services: This plan is not limited to specific services like VMs or databases but can be applied to a wide range of services, making it ideal for diverse cloud workloads.
Commitment term: Similar to Reserved Instances, customers commit to a one or three-year term. However, the commitment is based on a specified amount of spending per hour rather than specific resources.
Savings calculation: Savings are calculated based on the amount you commit to spend per hour, regardless of the services used. This offers a more generalised approach to savings.
Ideal for variable workloads: The Azure Savings Plan is well-suited for businesses with variable usage patterns that might change over time because of its flexibility.
Reserved Instances
Specific resource allocation: With Reserved Instances, you are committing to a specific type of resource (like a particular VM size) in a designated region for a one or three-year term.
Greater savings for predictable workloads: If your workload is stable and predictable, RIs can offer greater savings than the Savings Plan, as discounts are applied to specific, consistent resource usage.
Exchange and cancellation options: Azure offers limited options to exchange or cancel Reserved Instances, offering some flexibility.
Scope of services: RIs are typically available for virtual machines, SQL databases, and other specific Azure services, which makes them more restrictive compared to the Savings Plan.
Ideal for stable, long-term workloads: Organizations with stable and long-term workloads will find RIs more cost-effective, as they can tailor their commitment to match their exact resource needs.
Choosing the right option
Choosing the right plan is critical (not a surprise). Here are some things you should consider before taking the plunge. If it gets too complicated, reach out and we can give you some guidance.
Assess your workload: Reserved Instances may offer more significant savings if your workload is predictable and consistent. For variable and evolving workloads, a Savings Plan might be more beneficial.
Consider flexibility needs: If you need the flexibility to change services or configurations, the Savings Plan provides more options.
Budgeting and Financial Planning: RIs require a clearer understanding of specific resource needs, while Savings Plans need a commitment to a certain level of spending.
Long-term strategy: Both options require a long-term commitment, so consider your future cloud strategy.
Summary
Azure Savings Plans and Reserved Instances offer cost-saving opportunities but cater to different cloud usage patterns and organisational needs. A thorough analysis of your cloud usage, budget, and plans is crucial to determining which option aligns best with your organisation's objectives. In some cases, combining both might provide the optimal cost-saving strategy.
