Examining Azure Reserved Instances: One Piece of the Cloud Expense Puzzle

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While Amazon Web Services (AWS) continues to dominate the public cloud market, later entrants have been gaining ground with Microsoft Azure doubling its market share last year to 13%. Azure’s increasing momentum is due, in part, to new services and consumption models including Reserved Instances (RIs) that were announced at Microsoft Ignite last year. Let’s do a quick rundown of the highlights from the RI announcement.

Similar to AWS RIs, Azure RIs allow users to buy reserved Virtual Machine (VM) instances for one or three year periods. The advanced purchase of the entire time period results in a much lower hourly rate – up to 72% cheaper than on-demand pricing, depending on the region and instance series. You can also save up to a whopping 80% If you qualify for Azure Hybrid Benefit.

For now, Azure requires users to pay the full amount up-front for RIs. This makes them a great option for predictable and consistent workload needs. It makes sense to use RIs for workloads that run 24/7, rather than those that run intermittently, because you’ve already paid for the entire time period. RIs are strictly about pricing and do not affect the runtime state of your VMs. For customers with an Enterprise Agreement, Microsoft deducts the reservation cost from existing monetary commitments.

RIs are available for either Windows or Linux operating systems, and you can use RIs for VMs, Azure Batch service (for large-scale parallel high-performance computing batch jobs) and VM scale sets.

However, there are some restrictions. Azure RI is not available for every type of VM or in every country.

The following VM types are not available for RI, as of August 2018:

  • Classic VMs
  • Cloud Services VMs
  • A-series, Av2-series or G-series
  • Suppressed-core VMs
  • Promo VMs
  • VMs belonging to Dev/Test subscriptions

As for geographical restrictions, the reserved instance for the pay-as-you-go subscription is not available in Brazil, India, China, Taiwan, Russia, Korea, Argentina, Hong Kong, Indonesia, Liechtenstein, Malaysia, Mexico, Saudi Arabia, South Africa and Turkey.

RIs provide predictable pricing, prioritized compute capacity and some flexibility for exchanging or canceling reservations, should your business needs change.


Managing Azure Reservations

Planning what to reserve is a complex process particularly when you have multiple subscriptions across regions. To further complicate things, It is also necessary to perpetually monitor and manage RIs for optimal usage. Many conditions can change such as your workload size, VM types, new VMs made available that may be more cost effective, etc. You may have RIs that are unused or underutilized, and you may have to keep an eye on RI renewals. A lot of similar factors determine the profitability of your RI investment.

Azure provides a range of management options to assist you in this process.

Selecting reservation scope

You have two options when it comes to the scope of RIs – shared or single subscription. The shared option makes the RI available to all subscriptions in your enterprise agreement which increases the likelihood that the RI will get used. Azure also allows you to change the scope of the reservation.

Splitting a single reservation

Once you have more than one resource instance in a reservation, it may be necessary to assign instances within that reservation to a different subscription to ensure optimal utilization. For example, if you purchased 7 RIs of D2 VMs and specified the scope for subscription A but noticed over time that 4 of those RIs are underutilized, you can split your reservation and assign some of those RIs to subscription B for better utilization.

Instance-size flexibility

Azure Reserved VM Instances have instance size flexibility which automatically applies RI savings to other VMs within the same region and the same RI group. This feature can apply your RI purchases to VMs that are not currently being used.

For example, if you purchase a D8s_v3 RI in the East US region but are not running the VM, instance size flexibility applies the 8-cores RI benefit to other Ds_v3 VMs running in the same region. The RI benefit could take the form of two 4-core VMs (D4s_v3) or half the cost of a single 16-core VM (D16s_v3).

However, the reservation discount doesn’t apply to VMs in different size series groups. Continuing with the above example, reservation discounts from the DSv3 series VMs do not apply to VMs in the DSv2-series. Moreover, within the size series group, the number of VMs to which the reservation discount applies depends on factors such as the VM size chosen at the time of RI purchase and the VM sizes that are running.

Exchanging an RI

Azure allows users to exchange RIs at any time. All RI features can be changed including instance family, size, geo-region and term. The remaining time is credited to the next new RI purchase. The new RI purchase must be of equal or greater value than the prorated amount and for a full 1-year or 3-year term.

Cancelling an RI

You can cancel at any point in time during the reservation period with a 12% early termination fee along with a $50,000 refund cap per calendar year.  

Under the right conditions with careful planning and ongoing management, Azure RIs offer users a way to significantly reduce their public cloud TCO.  

Reserve Instances are, of course, just one piece of an ever-growing cloud expense puzzle. A puzzle that frequently involves multiple public and private clouds that are part of a hybrid enterprise cloud strategy designed to accommodate all workloads at the right time and place.

Nutanix Beam removes the guesswork from this process with machine intelligence driven recommendation algorithms that analyze workload patterns and continuously suggest optimal purchasing decisions. Beam supports both AWS and Azure cloud providing seamless cloud services expense management.

Beam also provides security and compliance for multi-cloud environments, with one-click remediation for cloud vulnerabilities, generating insights into cloud compliance and security vulnerabilities in real time so that you can resolve potential threats before they become business problems.  Head here to give Beam a try today!

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