Balancing Flexibility and Stability: Microsoft Azure Reserved Instances

intY’s very own CTO, Spencer Wilkinson, has his say…


Being able to quickly respond to changing situations is essential for any business. That’s what attracts many companies to Microsoft Azure — you only pay for what you use.

But there’s a fine balance between flexibility and stability. That’s where Microsoft Reserved Instances comes in.

While Microsoft Azure offers an ever-expanding set of cloud services, Reserved Instances is a virtual machine on the Microsoft Azure public cloud that has been reserved for dedicated use for one or three years.

Who Is Azure Reserved Instances Right for?

Whether RIs are right for you all comes down to how confident you are that you’ll still be using that particular service in a year or even three years.

If the service is a core part of your business and you’re sure you’ll still be using it, then Reserved Instances offer a great opportunity to save money.

If your business has a high degree of change or uncertainty, then the flexibility of Microsoft Azure may offer better value.

It’s a bit like a mobile phone contract: if you take out a long contract, there’s a risk that your needs and usage may be quite different in a few years’ time.

What are the benefits of Reserved Instances?

Used correctly, Reserved Instances (RI) will help all businesses save money.

Rather than paying as you go, Reserved Instances (RI) require a one-time, upfront payment. Think that rules it out for small businesses? Think again.

Despite the upfront cost, RIs can offer savings of 72% compared to Microsoft’s standard on-demand, pay-per-use VM pricing model.

When you combine the best of both worlds with the Azure Hybrid Benefit, that could increase to savings of 80%, though, for most businesses, RIs will average out at a significant 50-60% saving.

As well as savings, knowing what infrastructure costs are coming over the next year or three years can really help with accurate forecasting and budgeting.

What’s the down side of Reserved Instances?

Though savings are always welcome, it’s important to evaluate RIs in the context of your wider business. Just because RIs can save money doesn’t mean they’re right for everyone.

If your main motivation for switching to the cloud was the cost savings, then RIs should be a great fit.

If getting rid of your dependency on a particular supplier or hardware was the main driver behind your move, RIs might not be the best choice, despite the savings.

When you’re calculating the potential savings, you’ll also need to keep in mind that RIs don’t include software costs.

How to make the most of Reserved Instances?

The golden rule for RIs is, only reserve what you need — don’t oversubscribe.

Start by only switching over services that are in constant use. Any downtime will eat into those cost savings.

There’s also no big penalty for going over the amount you’ve reserved; it’s charged at your standard pay-as-you-go rate or negotiated price if you’re an EA customer.

For example, if you’ve purchased 75 Reserved Instances, your charges for hour 79 will be:

75 Reserved Instances (pre paid)
75 hours of Windows software-only costs (not included in RIs)
5 hours of (Windows + HW) combination meter price. This will be your negotiated price if you are an EA customer or your pay-as-you-go price.

What’s the best way to get started with Reserved Instances?

If you’ve decided RIs are right for you, here are a few tips to help you nail the switch and maximise your savings.

Start by looking at your range of services and deciding which you’re certain you’ll still offer in a year. Those are the best candidates for switching to RI.

Do things gradually. Start with one database, evaluate the cost savings in a few months, and if it’s working well move more to RI.

There’s also no need to dive straight into a three-year RI: it’s much easier to upgrade a one-year contract to a three-year rather than downgrading, so unless you’re certain that service will be running in three years, minimise the upfront investment by choosing a one-year plan

Parting thoughts

As a cloud purist, a three-year RI goes against all I believe in. Yes, it’s a great way to save money and used correctly they have the potential to save businesses thousands… but cloud for me is change, cloud is continuous change… not fixed for three years.

If you’re not sure whether RIs are the right choice for you or you have questions, have a chat with our team by calling +44 (0)1454 640500 or getting in touch through our website.

A balance between RIs and flexible pay-as-you-go options is the future of cloud software.

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