Your Essential 2025 Cost Guide

Are the escalating costs of your Azure bill leaving you in shock every month? You’re far from alone. Many organisations find themselves watching, alarmed, as their cloud expenses incrementally spiral upward, turning what initially seemed like a savvy IT strategy into a budgeting conundrum.

The silver lining? You don’t have to sacrifice robust cloud capabilities for predictable costs. Azure Reservations provide a strategic route that can reduce your cloud expenditures by an impressive up to 80%, delivering the financial predictability that finance teams crave.

This guide will assist you in transforming your Azure investment from a financial burden into a competitive edge.

What Are Azure Reservations?

Azure Reservations can cut down your costs by as much as 80% compared to pay-as-you-go rates! To take full advantage, you need to consistently utilise supported resources such as Virtual Machines, App Service Plans, Databases, and Storage.

To reap these savings, purchase one-year or three-year Reservation plans via the Azure portal. The more you invest upfront, the greater the savings.

Discounts are automatically applied to matching resources within your chosen scope, which could be Resource Groups, Single/Shared Subscriptions, or even Management Groups (currently in preview). Not only will this lower your monthly Azure bill, but Reservations will also ensure predictable resource capacity.

It’s important to note that Azure Reservations act as a billing discount; their application does not change the operational state of your resources. Different discounts apply based on Resource Type, so refer to the accompanying image for the latest pricing details.

Types of Azure Reservations Available

Microsoft offers two primary types of Azure Reservations, hinged mainly on the Resource Type you wish to reserve.

These types are:

• Azure Reserved Instances
• Azure Reserved Capacity

Azure Reserved Instances

With Azure Reserved Instances, you can achieve savings of up to 72% on your Windows or Linux virtual machine costs. This discount can leap to 80% when leveraging Microsoft’s Azure Hybrid Benefit—provided you already pay for your Windows or SQL Server core license or possess a Linux subscription.

Microsoft will assist you in determining whether Azure Reservations suit your Virtual Machines by offering recommendations derived from your usage history over the last 7, 30, or 60 days, along with an overview of potential savings.

Azure Reserved Capacity

When opting for Azure Reserved Capacity, you can enjoy savings of up to 67% on Azure database resources, including:

• Azure SQL Database
• Azure Cosmos Database
• Azure Database for MySQL
• Azure Database for PostgreSQL
• Azure Cache for Redis
• Azure Synapse Analytics

Acquiring Reserved Capacity enables easier cost management for both predictable and variable workloads, refining your budgetary planning and financial forecasting.

Supported Resources List

Currently, Azure Reservations support the following Resources:

Analytics

• Azure Data Explorer
• Azure Databricks
• Azure Synapse Analytics
• Data Factory

Compute

• App Services
• Azure Cache for Redis
• Azure Dedicated Hosts
• Azure VMware Solution
• JBoss EAP Integrated support (App Service)
• Virtual Machines
• virtual machine Software Reservation

Databases

• Azure Cosmos DB
• Azure Database for MariaDB
• Azure Database for MySQL
• SQL Arc-enabled Managed Instance
• SQL Database
• SQL Managed Instance
• PostgreSQL

Internet of Things (IoT)

Management and Governance

Software

• Azure Red Hat OpenShift
• Red Hat Plans
• SUSE Linux

Storage

• Azure Files Reserved Capacity
• Azure Managed Disks
• Blob Storage

Comparing Azure Reservations with Savings Plans

Launched in late 2022, Azure Savings Plans provide a new cost-optimisation approach alongside the traditional Azure Reservations.

Savings Plans require a commitment to a fixed hourly spend across compute services, yielding savings of up to 65% while offering increased flexibility across regions and instance types. These plans are perfect for dynamic workloads that often shift.

Reservations necessitate a commitment to specific resources and configurations, possibly granting greater discounts (up to 72-80% when using Azure Hybrid Benefit) and covering a broader array of services beyond just compute. Ideal for stable, predictable workloads, they offer a different approach to managing costs.

Your decision should reflect the characteristics of your workloads, the required flexibility, and your discount priorities. For a detailed breakdown, check our comparative analysis of Azure Savings Plans versus Reservations.

5 Advantages of Azure Reservations

Implementing Azure Reservations comes with a plethora of benefits. Let’s explore them:

1. Cost Efficiency

If your workloads are uniform on qualifying resources, committing to one- or three-year Azure Reservation plans can yield savings of up to 80% compared to pay-as-you-go costs.

2. Predictable Expenses

Prior to purchasing a Reservation, tools like the Azure Calculator, Azure Advisor, or dedicated APIs can help ascertain whether these reservations would be beneficial for your needs.

3. Enhanced Efficiency and Reliability

Upon acquiring Azure Reservations, you can track their effectiveness and, if applicable, extend the coverage to additional resources. You have the flexibility to cancel (with associated fees) or automatically renew Reservations as needed.

4. Adjustable Reservation Settings

Once you secure an Azure Reservation, modifying its scope (Resource Group, Single subscription, Shared subscriptions, or Management Group) is possible. Should business needs shift—like an unexpected increase in compute capacity—costs can still be managed with options like VM instance size flexibility for Azure Reserved Instances and vCore size flexibility for Azure Reserved Capacity.

5. Flexible Payment Plans

When acquiring an Azure Reservation, you can choose to make a single payment upfront or spread the cost over monthly instalments. The advantage is that monthly payments mirror the total payment of an upfront annual payment—no additional fees for this flexibility.

Key Considerations Before Purchasing Azure Reservations

Before diving into the Azure Reservations commitment, there are several important aspects worth pondering. Below are key points designed to help you in your decision-making process.

Identify Resources Appropriate for Reservations

• Only resources with a steady workload genuinely reap the rewards of Azure Reservations. For instance, resources that power down outside operational hours will not yield reservation benefits. Prior to committing, evaluate your environment to pinpoint Azure resources that consistently maintain workloads and confirm their supported resource types.
• Identify which Resource Group, Subscription, or Management Group houses your resources.
• Verify your resources are situated in regions where reservations can be purchased, as they’re unavailable in Germany or China.
• Confirm that your resources are in Azure data centres that support reservations. Certain locations such as Argentina, Belarus, Brazil, and others are currently unsupported.
• For Virtual Machines, ensure they are of approved types, as A-series, Av2-series, and G-series VMs are not eligible for Reservations.
• If operating Virtual Machines, consider bringing your own licenses to maximise potential savings (which could reach up to 80%).

Seek Recommendations for Potential Benefits

• Utilise available tools for recommendations on potential advantages. Options include:
• The Azure Reservation purchase experience
• The Azure Advisor
• The Azure Calculator
• The Cost Management APIs

Choose the Right Term for Your Needs

Azure Reservations can be obtained for one or three years. Generally, the longer the term, the greater the savings potential. Choosing the suitable term depends on the anticipated life cycle of your resources. Taking this into account will help enhance your savings and operational effectiveness.

Consider Possible Business Requirement Changes

The resource capacity you purchase may meet your current needs, but future demands could differ.

Azure Reservations accommodate VM instance size flexibility for Azure Reserved Instances and vCore size flexibility for Azure Reserved Capacity to support changing requirements. If varying demands are foreseeable, ensure you enable these options when finalising your Azure Reservations.

Steps to Create and Manage Azure Reservations

This section takes a hands-on approach to explain how to create and manage Azure Reservations effectively.

Note: To purchase and oversee Azure Reservations, you must hold either Owner or Reservation Purchaser rights for the subscription(s) linked to the resources you wish to reserve.

Creating Azure Reservations

Obtaining an Azure Reservation is straightforward and can be done within the Azure Portal.

1. Log into the Azure portal; use the following link to navigate directly to the purchase Reservations page.

2. Choose the Resource Type for your desired Reservation.

You will need to select the Scope of the Reservation in the screen that appears, with available options as follows:

• Single Resource Group – Discounts apply exclusively to matching resources within the selected Resource Group.
• Single Subscription – Discounts apply to matching resources in a specific subscription.
• Shared Subscriptions – Discounts apply to matching resources across eligible subscriptions.
• Management Group – Discounts apply to matching resources across the subscriptions within the Management Group and billing scope.

Depending on your selected scope, choose the appropriate Subscription(s), Management Group, or Resource Group containing the resources for which you’d like to purchase a Reservation.

The lower section of the screen shows recommendations from the Azure Reservations Purchase experience to assist you in determining whether acquiring Reservations is advantageous. Use filters to narrow options by Region, Size, Term, and Billing frequency.

3. Select the resources for which you wish to purchase a Reservation and click the Add to cart button.

4. Complete the purchase via the shopping cart after selecting the relevant resources.

Once you have purchased a Reservation, it is automatically applied to all matching resources within the Reservation’s specified Scope, allowing you to reap the benefits immediately.

Viewing and Managing Azure Reservations

After purchasing one or more Azure Reservations, you have the capability to view and manage them. This lets you monitor how effectively the Reservations are performing while enabling management options. You can:

• Change the Scope of the Reservation to allow different or additional resources to benefit.
• Split a Reservation into two to allocate some of the instances purchased to another subscription.
• For Azure Reserved VM instances, adjust the Optimise settings.

To see or manage an Azure Reservation, follow these steps:

1. Log in to the Azure Portal.
2. Navigate to All Services > Reservations.
3. Click on the Reservation you wish to view or manage.

Note: To manage Reservations, you must either be the buyer of the Reservation or the Account Owner for the subscription linked to it.

Checking Azure Reservation Utilisation

You can view the utilisation percentage of your Reservations along with the resources that are utilising them.

There are three methods to access Azure Reservation utilisation:

• Via the Azure portal, if you have RBAC access.
• Through Power BI desktop or the Cost Management app.
• Utilising APIs, PowerShell, and CLI.

Viewing Azure Reservation Utilisation in the Azure Portal

If you possess RBAC access to the Azure Reservation, you can view utilisation using the following steps:

1. Log into the Azure portal.
2. Select All Services > Reservations. The list will display the Reservations you’ve access to, including their utilisation percentage in the last column.
3. Click on the utilisation percentage for the resource if you wish to see historic utilisation specifics.

Using Power BI to View Azure Reservation Utilisation

To explore Azure Reservations and their utilisation via Power BI, the following capabilities are levered:

• The Cost Management Connector in Power BI Desktop – To gain access to your Reservation purchase date and utilisation records, consult the Cost Management connector documentation.
• The Cost Management Power BI app – Contains pre-developed reports that you can tailor for your specific needs.

Access Azure Reservation Utilisation via APIs

If you’re seeking to incorporate Reservation utilisation information into your PowerShell or CLI scripts, APIs will allow you to access this data.

Read further: How to Monitor Azure Reservation Utilisation to Save Costs?

Reservation Trade-In Options

Azure offers flexible avenues to modify your Reservations as your cloud requirements evolve:

Exchange Options

You have the opportunity to exchange reservations for others of the same type (for different sizes, regions, quantities, or term lengths), with the pro-rated value of your original reservation applied to the new one. The new purchase must at least match the remaining value of your existing reservation.

Trade-In for Savings Plans

Reservations related to VMs, Dedicated Hosts, and App Services can be swapped for Azure Savings Plans, ideal for dynamic workloads requiring greater flexibility. You may trade in up to 100 reservations simultaneously, with the pro-rated refund credited toward the new plan.

Policy Alterations

Microsoft is revising its reservation exchange policy. While instance size flexibility remains an option, exchanges across different instance series or regions will eventually face limitations. Microsoft pledges to give at least six months’ notice before implementing these changes.

Refund Options

Refunds can be issued up to $50,000 per billing scope within a 12-month rolling window, with the pro-rated amount returned based on the remaining term.

Note: The self-service trade-in for Azure Savings Plans was inaugurated in October 2022 along with Azure Savings Plans. Policy modifications concerning compute reservation exchanges were originally supposed to come into effect on January 1, 2024, but Microsoft has extended the grace period until further notice.

For step-by-step instructions on the exchange processes, please refer to our Azure Reservations exchange and refund guide.

Steps to Exchange Azure Reservations

Reservations offer flexibility and interchangeability options among Reservations of the same type. You can also exchange a Reservation to obtain another Reservation of a similar type in a different region—for instance, switching a West Europe Reservation for one in North Europe.

Note that exchanges between different types of Reservations are not permitted. For example, you cannot exchange a Cosmos DB Reservation for an SQL Database Reservation.

To perform a Reservation exchange, follow these steps:

1. Log into the Azure Portal.
2. Navigate to All Services > Reservations. The list displays the Reservations you can access.
3. Select the Reservation you’d like to change and choose Exchange.
4. Select the VM product you wish to acquire, input a quantity, and click Next: Review.
5. Review the exchange details, then complete the transaction.

IMPORTANT: Starting January 1st, 2024, the benefits of Azure Savings Plans, which offer greater flexibility for Azure Compute, will no longer permit the exchange of Compute Reservations (Azure Reserved virtual machine Instances, Azure Dedicated Host reservations, and Azure App Services reservations) purchased after this date. Reservations acquired prior to this date may still be exchanged once more.

Cancelling and Renewing Azure Reservations

Azure Reservations also provide options for cancellation, manual renewal, or automatic renewal of your Reservations.

Cancelling an Azure Reservation

While it does come at a cost, cancelling a Reservation after purchase is possible.

For instance, you might find after a year that the resources in your three-year Reservation will no longer be utilised, and you cannot link the Reservation to different resources. In that case, cancellation is an option. Be sure to read the Cancel, Exchange, and Refund Policies article before proceeding.

To cancel a Reservation, follow these steps:

• Log into the Azure Portal.
• Navigate to All Services > Reservations. The list shows the Reservations to which you have access.
• Enter the Reservation you wish to cancel and select Return.

Renewing Azure Reservations Management

After your Reservation term (whether one or three years) finishes, it won’t auto-renew. Failure to renew will mean you’ll lose the cost benefits tied to your Reservation, reverting resources to standard pay-as-you-go pricing.

Fortunately, Azure alerts you via email approximately one month before your Reservation expires, providing a window to decide on renewing either manually or by opting for automatic renewal through the Azure Portal.

Managing Renewal

To access renewal options for your Azure Reservations, follow these steps:

• Log into the Azure Portal.
• Navigate to All Services > Reservations. This section lists Reservations you have access to.
• Select the Reservation you’d like to renew and click on Renewal.
• From here, you can manually renew or select the “Automatically purchase a new reservation upon expiry” option for seamless renewal.

Note: Should you choose not to renew your Azure Reservations, your services will continue to run as normal, though the billing model will revert to standard rates.

Success Story: Document360’s Strategic Use of Azure Reservations

Document360, a Knowledge Base platform serving teams and customers alike, implemented Azure Reservations to trim costs while maintaining high system performance.

Here’s how they accomplished this:

Document360 strategically reserved resources including Virtual Machines, App Service Plans, and Azure Redis Cache in advance. Their approach led to an estimated 30% reduction in Azure costs. The team effectively balanced cost control with optimal system performance.

By utilising Azure Reservations, Document360 not only achieved savings but also optimised their resource consumption.

Interestingly, Document360 realised further savings by transitioning some tasks to Linux machines instead of Windows, showcasing the financial benefits of leveraging Azure Reservations.

Key Insights from Document360

Aligning with the Scale-Out Rule

When considering Azure Reservations, align resource reservations with your scale-out default instance count. This ensures optimal utilisation of reserved resources while synchronising with your system’s scalability requirements. Doing so maximises cost savings and maintains infrastructure performance.

Scaling Beyond Reservations

Should your system require scaling beyond the count of reserved resources, any additional resources will incur standard rates, not the reserved ticket prices.

Despite the substantial savings that Azure Reservations provide, remember that any extra capacity needed during scaling will attract regular charges. Be cognizant of this when planning reservations and allocating resources.

Upfront Payments

Azure Reservations generally necessitate upfront payment, which may pose a significant initial investment affecting your budget.

However, the option for monthly payment frequency is available, requiring only the initial payment for the first month outright.

Management Complexity

Managing Azure Reservations can be intricate, especially when accommodating numerous resources. Effective monitoring of cloud spend, alongside tracking and optimizing reservations, is essential for sustained cost-efficiency.

Service-Specific Restrictions

Certain Azure services may have specific limitations concerning reservations. Always review the terms and conditions for each service prior to any commitments.

Streamline Your Azure Bill with Turbo360 Cost Analyzer

The previous section highlighted Document360, a product from our company’s suite. Like any enterprise using cloud resources, we must meticulously oversee our Azure costs to prevent overspending.

For this purpose, we sought robust cost-monitoring capabilities along with insights into cost reduction strategies. Upon discovering existing solutions fell short, we developed the Turbo360 Cost Analyzer.

Initially, the Document360 team was unaware of the potential advantages of Azure Reservations. Now that Turbo360 Cost Analyzer offers support for Azure Reservations, the Document360 team has easily tapped into this benefit, successfully lowering their Azure bill through these reservations.

Turbo360 Cost Analyzer Overview

The Turbo360 Cost Analyzer module allows users to:

• Examine Azure costs across multiple tenants or subscriptions.
• Monitor expenditures against budgets and identify trends.
• Optimise Azure resources to minimise costs.

This product aids Azure cost management by categorising resources into Cost Management Groups. Possible Cost Management Groups include:

• Remote branch offices.
• Your hosted PaaS/SaaS solutions.
• Development and test environments.
• Customer environments you maintain.
• Individual departments in your organisation.

Each Cost Management Group features customisable dashboards and functionalities for analysing, monitoring, and optimising Azure spending while also managing access by configuring role-based access permissions.

Optimising Azure Costs with Turbo360

There are several avenues to efficiently manage your Azure costs using Turbo360:

Optimisation Schedules

Based on your usage behaviours, you can set schedules to automatically turn resources on/off, or upgrade/downgrade tiers for various Azure services, thus avoiding unnecessary charges.

Right-Sizing

Monitoring utilisation and analysing your Azure resource data through Turbo360 can assist in optimising resource allocation, resulting in cost savings, enhanced performance, and superior resource utilisation.

Read further: Azure Rightsizing for Maximum Performance and Cost Efficiency.

Reservations

Gain in-depth insights into the usage patterns of resources for which Azure Reservations have been made. From this data, you receive tailored recommendations for acquiring Azure Reservations, leveraging existing Reservations, or modifying SKUs, as demonstrated by the Document360 team.

In Conclusion

Azure Reservations present a powerful strategy for organisations eager to gain control over unpredictable cloud expenditures. By committing to workloads for durations of 1-3 years, you can achieve savings of up to 80% compared to pay-as-you-go pricing, all while sustaining the adaptability required to meet evolving business needs.

Whether managing Virtual Machines, databases, or storage resources, recognising the advantages and limitations of Azure Reservations will empower you to maximise your cloud investment.

Ready to optimise your Azure costs further?

Turbo360 Cost Analyzer grants you comprehensive insights into Azure spending across all resources and subscriptions, delivering actionable recommendations specific to your environment. Start your free trial today and transform your Azure bill from an unwelcome surprise into a strategic asset.

Common Queries About Azure Reservations

In this segment, we address popular questions related to Azure Reservations.

1. Are Azure Reservations transferable?

Absolutely. You can adjust a Reservation’s scope (within Resource Group, Subscription, or Management Group) or exchange multiple Compute Reservations in tandem.

2. What distinguishes Azure Reserved Instances from On-Demand Instances?

On-demand resources utilise the Pay-as-you-go model, whereas Reserved Instances necessitate the pre-purchase of Azure Reservations, leading to significant cost reductions.

3. Which is preferable: Azure Reservations or Pay-As-You-Go?

This depends on your usage patterns. Reservations excel for consistent workloads over extended periods. Assess resource stability, compatibility with reservation types, and anticipated usage duration before making a choice.

4. How are Azure Reservations calculated?

Reservations are automatically allocated to qualifying resources within your selected scope, generally calculated on an hourly basis, although Azure Databricks and Synapse Analytics utilize alternative methods.

Further Reading