Azure Saving Plans
From the development of the cloud flexibility, comes the progress of enabling commitment on compute, storage, databases, and other services that make up overall consumption as the cloud evolves.
But as the breadth of commitments expand, tracking those becomes harder, up to the point that it may take a CRM to track the services, quantity, sizes & expiration dates.
The most flexible model of commitment in Azure is called, Azure Savings Plans, which allows you to forgo several of the points that we highlighted above and focus on other issues.
The Savings Plan is a concept that was invented by Amazon Web Services and was an enormous success in allowing technical and financial teams reduce the stress of tracking and managing the commitments. It allows the user to commit to a fixed hourly spend on compute services for one or three-year terms. This eliminates the headache of allocation behind the scenes and allocates the savings to the associated usage for you.
How does it work:
The user commits to spend an amount every hour of the day, let us say $10. Azure calculates the cost of each individual VMs (Virtual Machine) hourly rate and applies that cost against the Savings Plan, once the committed amount is consumed by the existing VM’s the remaining cost is charged with Pay-As-You-Go prices.
The Savings Plan coverage is applied to the more expensive resources first and then to the smaller units to ensure it provides the highest savings possible.
If in an hour, the commitment cost is not reached – that is wasted cost.
Azure have now adopted this model into their cloud commitment offering, but with one distinct improvement, for a limited time, they allow converting existing Reservations into the new Savings Plan.
The way this works is as follows:
The remaining commitment is calculated to an hourly rate and that becomes the new hourly commitment of rate, which will remain until the original expiration date of the Reservation [ex: a 4 D2s_v4 reservation is $192.34 per month, divide that by 730 hours (monthly hours) and the hourly commitment is $0.26.
While the offer to convert Reservations to Savings Plans is in effect, Microsoft is also not charging the cancellation fee for RI (Reserved Instances) cancellations.
Now all this sounds like a wonderful product, and you may ask yourself, “Why is Azure doing this and what is the catch?” Well, there are 2 answers to that question:
- Savings Plans offer flexibility and an easier way to achieve savings on compute consumption without the need to worry if you want to move from one virtual machine type to another (Dsv4 to Dsv5, or from D4s_v4 to E8_v3), since the saving plan will cover the cost of both based on the hourly spending.
- The catch is that the discount percentage provided by Savings Plans is lower than that of regular Reserved Instances. Some RI’s can provide a 41% discount (depending on the location and virtual machine type), a Savings Plan discount for the same machine and the same location is 20%, which is a significant reduction.