Comparing Azure Reserved Instances (RI) and Azure Savings Plan

Azure Reserved Instances (RI) and Azure Savings Plans (ASP) are both cost-saving options offered by Microsoft Azure, but they differ in some key aspects.

Reserved Instances

Instance Reservation: RIs are essentially commitments made in advance to purchase Azure services for a specific type of virtual machine, within a specific region, for either a one- or three-year term. This commitment assures a significant discount compared to pay-as-you-go pricing. Instance Type and Flexibility: RIs are specific to the VM type, family, and region you select during purchase. This specificity can limit flexibility if your needs change. If your workload requirements shift or you need different types of VMs, you might not fully utilize the reserved capacity. Payment Structure: There are two payment options for RIs: All Upfront (providing the maximum discount), or Partial Upfront (a lower upfront cost with slightly reduced savings compared to All Upfront), and No Upfront (which has a higher hourly rate but no upfront payment). Savings: The savings with RIs can be substantial—up to 72% compared to pay-as-you-go rates. However, these savings are tied to the specific instance you've reserved and might not apply to other resources or instance types.

Azure Savings Plans (ASP)

Instance Flexibility: ASPs offer more flexibility compared to RIs. They allow you to commit to a certain amount of usage in dollars per hour, rather than a specific instance type. This means the savings are applied based on the aggregate usage of certain services within Azure, not tied to particular instances. Usage Coverage: ASPs cover a broader range of services including VMs, databases, Kubernetes, and more. This versatility allows for more flexibility in utilizing the committed amount across various services based on your needs. Payment Structure: ASPs offer flexible payment options. You commit to a specific amount per hour for a one- or three-year term, and you're billed based on your actual usage at the discounted rate. This means if your usage varies, your savings adapt accordingly. Savings: Savings Plans offer similar savings to RIs, up to 72%, but they are applied more flexibly across various services, allowing you to optimize your cost savings across a wider array of resources.

Choosing Between RIs and ASPs

Predictable vs. Variable Usage

If your usage is relatively predictable and you can commit to specific instances, RIs might yield higher savings. However, if your usage fluctuates or if you need flexibility across multiple services, ASPs could be more advantageous.

Instance Specificity

RIs are tied to specific instance types and can limit flexibility. ASPs offer more adaptability across various services and instance types.

Administrative Overhead

ASPs might involve less administrative overhead as they are more adaptable to changes in usage patterns compared to managing individual RIs. Ultimately, the choice between Azure Reserved Instances and Azure Savings Plans hinges on the predictability of your workload, the level of flexibility needed, and the variety of Azure services you intend to utilize for cost savings.

Azure Reserved Instance vs Azure Savings Plan

This table offers a concise comparison between Azure Reserved Instances (RI) and Azure Savings Plans (ASP), highlighting their differences across various important aspects, aiding in making an informed decision based on specific business needs and workload characteristics.

Aspect	Azure Reserved Instances (RI)	Azure Savings Plans (ASP)
Instance Reservation	Reserved for specific VM type, family, and region for 1 or 3 years	Commitment based on dollars per hour usage across various services for 1 or 3 years
Instance Flexibility	Tied to specific VM instances, less flexible if workload changes	More flexible, covers a wide array of services and instance types
Payment Structure	Upfront payment options (All Upfront, Partial Upfront, No Upfront) with significant discounts based on reservation	Commitment-based on usage, billed based on actual usage at discounted rates
Savings Coverage	Discounts applicable to specific instances, providing high savings	Discounts applicable across various Azure services, allowing for more flexible cost optimization
Savings Potential	Up to 72% cost savings compared to pay-as-you-go rates, but tied to specific instances	Up to 72% cost savings compared to pay-as-you-go rates, more adaptable across services and instance types
Usage Predictability	Suitable for predictable workloads with consistent resource needs	Ideal for fluctuating workloads or uncertain resource requirements
Administrative Overhead	May require more management due to specific instance ties	Potentially lower administrative overhead due to adaptability across services and instance types
Best Use Case	Predictable workloads with fixed resource needs	Variable workloads or when flexibility across a broader range of services and instance types is needed