Azure: Pay-As-You-Go vs. Reserved VM Instances

We’ve been using Azure for hosting a VM to run our ChMS. It seems to have been working very well. As expected, our first year’s non-profit credit has run out, so now it’s going to start costing us until the year is up and we can, hopefully, renew the credit.

The Azure Dashboard just gave me a pop-up with the recommendation that I switch from Pay-As-You-Go to a Reserved VM Instance to save a bunch of money.

Can anyone give me an objective opinion about if this is a good idea? In plain English please, IT is not my native language. :slight_smile: Thanks!

You would need to purchase on-premise Windows Server licenses with Software Assurance (SA), for the whole duration of the reserved VM unless you are using Linux which I believe doesn’t require purchasing (may need to check). You should be able to purchase Windows Server Standard Core licenses from Techsoup since they do come with free two years Software Assurance.

You can save a lot of money moving to reserved instances but do note that you would need to pay upfront which might bypass the Azure sponsorship credits you enjoy annually. You should have USD$3,500 Azure credits granted annually. You would need to do some calculations to see which path cost less.

Once you have the Windows Server licenses with SA and purchased upfront the reserved instances, you will need to switch your existing VMs to use the Azure Hybrid Benefit by changing an option in your portal; if not you will still be made to pay for you Windows Server licensing through Azure.

FYI that the Azure Reserved Instance once purchased will automatically look for the exact instance in your subscription to discount. Make sure they are in the same subscription, VM size and region.

Only if you want to use your Hybrid Benefit. You can do reserved instances but the license itself isn’t discounted. I believe since the credits are provided annually it shouldn’t matter too much that you pay the reserved instance price up front but definitely be aware that’s how it works.

FYI: All TechSoup licenses come with SA out of the box, but you would need to renew SA elsewhere or buy new licenses to keep your hybrid benefit. I recommend (highly) keeping any Microsoft products you are actively using, or plan to use again, under SA at all times, as they continue to increase prices on their products and products move to supporting fewer old versions of software.

Yes Alex is right that you can use the Reserved Instances without the Azure Hybrid Benefit.


So, these “cost savings” graphics aren’t really apples-to-apples since Pay-as-you-go includes software licensing and RIs don’t. Anyone already done the math on the actually cost difference for a Windows server running SQL?

Here is the simple math for Azure D2 v3 instance (2 vCPU, 8GB Ram):

3 years Pay as you go = $5,545
3 years Reserved = $3,602 (35% savings)
3 years Reserved with Azure Hybrid Benefit = $1,185 (VM) + ($64 (WS2016 Standard) x 2) (4 years of SA through Techsoup) = $1,313 (76% savings)

Microsoft Azure is an excellent Iaas(Infrastructure As A Service) Provider and is almost considered among the top 3 hosting providers in the industry along with the likes of Amazon’s AWS. So, it seems like you are on the right path.

Whereas Switching from Pay-As-You-Go to a reserved VM instance just to save money then it’s a no form my side. You see It would not end up in less money instead it will cost you more. As, you will have to manually manage the VM which could be a very time taking process and on the other hand if you hire someone to manage it then it will cost you a lot more.

Reserved instances are a lot more complex than they appear on the surface.

  1. You aren’t reserving a single VM, but the license to run a VM of that size. This means you’re free to spin up / tear down at will, using any orchestration tools you see fit.
  2. Azure has a concept of reserved instance size flexibility, where you are able to “pay the difference” if your workload changes and you need to run a different (larger) instance size.

In any case, day to day management of the instances is identical, you just pick up a little more paperwork to deal with as far as keeping track of your reserved instances and making sure they’re properly allocated.

Reserved VM Instances on Azure do give a lot of savings. Not sure what you meant by “it will cost you more”.