The Azure billing landscape is a labyrinthine one, with its share of twists, turns, and, occasionally, dead ends. For the uninitiated, the path through this maze is fraught with confusion, especially when it comes to optimising costs with Azure Savings Plans and Reserved Instances (RIs). This post aims to clear the fog and elucidate the sequence and strategy for applying these cost-saving mechanisms.
Understanding the Lay of the Land
At the heart of the matter is understanding how Azure Savings Plans and RIs reduce costs. Azure Savings Plans offer a reduced rate in exchange for committing to a consistent usage (measured in $/hour) over 1 or 3 years. In contrast, RIs offer a discount for committing to a specific instance for the same duration.
The Order of Application: What Comes First?
Azure’s recommendation for maximising savings is a sequential approach: first RIs, then Savings Plans. Why? Because RIs are tailored for stable, predictable usage and offer the highest discounts. Savings Plans, while flexible, might lead to overcommitment if based on current pay-as-you-go (PAYG) costs that don’t account for future RI purchases.
Here’s the twist: Azure’s cost recommendation engine “Calculations are based on your actual on-demand costs, and don’t include usage covered by existing reservations or savings plans” https://learn.microsoft.com/en-us/azure/cost-management-billing/savings-plan/purchase-recommendations – This means if you already have RIs, the engine won’t use their discounted rates in its Savings Plan suggestions.
The Strategy for Deployment
- Assess Your Workloads: Examine your workloads and identify which ones are consistent enough to benefit from RIs.
- Purchase Reserved Instances: Once you’ve earmarked your consistent workloads, purchase RIs for them. This locks in the highest possible discount for these workloads.
- Re-evaluate PAYG Costs: Post RI purchase, reassess your actual on-demand costs. They will likely have dropped as some usage is now covered by RIs.
- Consider a Savings Plan: With your new baseline costs in hand, consider a Savings Plan for variable workloads, ensuring the commitment matches your adjusted PAYG costs.
Why This Sequence Matters
If you reverse the order, securing a Savings Plan based on initial PAYG costs, and then purchase RIs, you risk having a Savings Plan commitment that exceeds your needs. This would negate the very cost savings you’re aiming to achieve.
The Pitfalls of Missteps
A misstep in this sequence can be costly. Let’s say you’ve committed to a Savings Plan based on a $100/hour PAYG cost. Then, you purchase RIs, which drop your actual PAYG costs to $70/hour. You would still be paying the Savings Plan commitment based on the original $100/hour rate, even though your needs have decreased.
In Conclusion
The order of applying Azure cost-saving measures is not just a matter of preference—it’s a strategy. By first securing RIs and then considering a Savings Plan, you align your commitments with your actual usage, ensuring you’re not paying for what you don’t need.
Remember, the first rule of cost optimisation is understanding your usage. The second is knowing how to apply the tools at your disposal. Navigate wisely, and the path to savings is straightforward.
For detailed pricing and further reading on Azure Savings Plans and RIs, reference the direct URLs from Microsoft’s documentation:
- Azure Savings Plans details: https://learn.microsoft.com/en-us/azure/cost-management-billing/savings-plan/purchase-recommendations
May your journey through the Azure cost optimisation landscape be a well-informed and lucrative one.
Marc Kean 