Microsoft Reserved VM Instance User Manual
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A Beginner’s Guide to Microsoft Azure www.vastITservices.com
A Beginner’s Guide to
Microsoft Azure Reserved
Virtual Machine Instances
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A Beginner’s Guide to Microsoft Azure www.vastITservices.com
PAGE 2
1UNDERSTANDING
RESERVED VIRTUAL
MACHINE INSTANCES
Microsoft Azure offers three different purchasing options for compute resources:
pay-as-you-go (PAYG), where you pay full price, Batch, where you purchase
low-priority virtual machines (VMs) at a reduced price compared with normal VMs,
and Reserved, where you are paying an all upfront payment for the cost of the
virtual machine. Azure Reserved Virtual Machine (VM) Instances have support
for Linux, Windows, SQL Server, Oracle, and more. To put it simply, when you
purchase an Azure reservation you’re essentially purchasing a coupon.
Azure Reserved VM Instances allow you to make a commitment to utilize specific
virtual machine instance types in return for a discount on your compute costs. The
benefits? Savings and prioritized capacity.
A reservation consists of 6 components:
• Subscription (EA or PAYG)
• Scope (Single Subscription or Shared)
• Location (select the region)
• Virtual machine size (e.g. D2 v3)
• Term (1 or 3 years)
• Quantity (number)
Additionally, Microsoft allows you to achieve a greater cost savings by leveraging
Reserved VM Instances combined with the Azure Hybrid Benefit. The Azure Hybrid
Benefit covers the cost of the Windows OS on up to two virtual machines per
licence, so you only have to pay for the base compute costs.
CLOUDOLOGIST TIP
EA (Enterprise Agreement)
Customers will have
reservation purchases
deducted from their
Monetary Commitment
balance. Pay-as-you-go
customers will be billed
for the reservation
upon purchase at the
All Upfront price.
*Based on Windows OS in East US region
1 Year Reserved 3 Year Reserved 3 Year Reserved
with Hybrid Benefit
Discount Range
19-55% 31-66% 63-86%
A Beginner’s Guide to Microsoft Azure www.vastITservices.com
PAGE 3
1UNDERSTANDING
RESERVED VIRTUAL
MACHINE INSTANCES
Since reservations are a pricing discount applied to any virtual machine
instance usage of a specific type (e.g. D2 v3 in East US running Windows),
you will be billed at a discounted percentage, rather than the base
pay-as-you-go amount. In other words, by giving Microsoft a “head’s up,
” they give you a discount. Microsoft evaluates the available reservations
and running instances on an hourly basis, and then randomly applies
reservations to usage. Each usage of a VM instance for the hour gets
evaluated to determine if there is an applicable reservation to cover it.
For example, here is a comparison of D2 v3 pricing:
D2 v3
Instance OS PAYG Price 1 Year
Reserved
3 Year
Reserved
3 Year
Reserved
with Hybrid
D2 v3
Windows
Linux
$0.192/hour
$0.10/hour
$0.15/hour
(~22%)
$0.058/hour
(~42%)
$0.13/hour
(~33%)
$0.038/hour
(~63%)
$0.38/hour
(~80%)
n/a
Reservations are both a powerful feature and a possible source of confusion for
customers. The confusion is often driven by customerspurchasing reservations
for a specific purpose (e.g. the marketing department), only to find the cost
benefit is applied elsewhere.
*Based on East US region
KEY QUESTIONS
TO CONSIDER
1. What percentage of
my virtual machines
do I expect will be
running one year from
now? Three years
from now?
2. How likely are the
virtual machines to
stay within their
current region?
3. How likely am I to
change the virtual
machine size (e.g.
switching from
D2 to D4)?
A Beginner’s Guide to Microsoft Azure www.vastITservices.com
PAGE 4
2MAKING A COMMITMENT
DON’T BE AFRAID TO JUST GO FOR IT.
All organizations who are concerned with their spend in the cloud need to be
looking at reservations. We use what’s called the “payback period” to calculate
the exact number of months it would take before you see a price benefit,
assuming 100% usage. This metric is invaluable for mitigating the risks of
reservations by identifying how long you must actually use them before they
break-even. The payback period is calculated by comparing the cash outlay for
pay-as-you-go usage and the proposed offering over each month in a term, and
then identifying the month at which the cost for the on demand instance usage
exceeds the cost for the reserved offering.
You can calculate your break-even point, by calculating the savings compared
to pay-as-you-go pricing. For example, if you purchase a memory optimized VM
such as an E8 v3 running Windows in East US, the annualized cost of running it
24x7x365 with pay-as-you-go is approximately $7,905.60 ($658.80 per month
x 12 months in a year). If the instance runs continuously throughout the year, and
if you had purchased a one year reservation for that machine, the cost would be
$5972.52 ($497.71 per month x 12 months in a year). The difference is
a 24% savings.
Here’s the reality: the 1 year term reservation for an E8 v3 will break-even after 9
months. This is when you can shutdown a VM and still benefit from the reservation’s
pricing discount. For a 3 year reservation, the break-even point occurs around
23 months (just under two years). For a 3 year reservation with the Azure Hybrid
Benefit, the break-even point usually occurs after 8 months. If you are running
Windows OS, the most cost-effective option is the 3 year reservation with the
Azure Hybrid Benefit.
We see that an E8 v3 running
Windows in the East US region
will cost 78% lessper month with
a 3-year all upfront reservation
and the Azure Hybrid Benefit.
A Beginner’s Guide to Microsoft Azure www.vastITservices.com
PAGE 5
3GET INVOLVED
RIS PUT YOU BACK IN CONTROL, ENJOY IT.
Microsoft has different costs for different types of virtual machines (e.g.
Windows, Linux) that can be launched and each type has different pricing.
At any reasonable scale, purchasing reservations on a per virtual machine
basis will be almost certainly unmanageable, so group your virtual machines
based on one or more topics (e.g. environments, function, application) so
that you can evaluate the cost by group.
Once you have grouped your infrastructure, focus on the most expensive
group first. Since Reserved VM Instances are really targeted at “always-on”
infrastructure, you can choose to not evaluate groups whose infrastructure is
only on < 65% of the time.
Before making a purchase you will also need to identify where your reservations
will live within each group you want to purchase. Your decision really comes
down to one of simplifying the purchase versus maximizing the cost and
capacity benefit of the purchase. The general best practice is to purchase
reservations where you have specific usage.
Microsoft enables you to modify your reservations in the following ways:
• Changing the Scope from Single Subscription to Shared, or vice versa.
• Exchanging Reserved VM Instances across any region and series.
• Cancelling your Reserved VM Instances at any time for an adjusted refund.
When you purchase Reserved VM Instances you are required to select
a quantity, for example 20 VM instances in one purchase. After this purchase
you may decide to change the scope of half of these Reserved VM Instances.
To do this you must split the reservation into multiple reservations via API/
PowerShell or the CLI. For example, you can split the reservation of 20 VM
instances into two reservations of 10 VM instances. You can then change the
scope of 10 VM instances to Subscription 2, and leave the other 10 as
Subscription 1. After splitting reservations, you can also merge reservations
from the same order and with the same scope to make them easier to manage.
A Beginner’s Guide to Microsoft Azure www.vastITservices.com
PAGE 6
3GET INVOLVED
As of August 2018, Microsoft offers instance size flexibility for Azure
Reserved VM Instances. With instance size flexibility, reservation discounts
can be applied to different VM sizes in the same size series group. For
example, if you buy a reservation for a E16s v3, the reservation can apply
to the other sizes in the E2s-64s v3 series group (e.g. E2s v3, E4s v3, etc).
Instance size flexibility automatically applies to any existing reservations
with shared scope. This feature needs to be enabled for reservations with
a single scope.
In addition to changing the reservation scope, you also have the ability
to exchange your reservations across any region and series. With Azure
Reserved VM Instances you can not only achieve a large potential savings,
but you can also cancel them and receive a prorated refund, minus a 12%
termination fee, for the remaining months of the reservation, thereby
decreasing underutilization. Now you just have to go for it.
NAVIGATING RESERVATION SCOPE
When purchasing a reservation, Microsoft offers two “scope” options:
Single Subscription or Shared. The scope you select will determine how
many subscriptions can leverage the benefit and how the Reserved VM
Instance is applied to those subscriptions. To help you determine which
scope makes sense for you, here are some guidelines:
Use Single Subscription scope:
If you want to have reserved compute capacity for the selected
subscription.
Use Shared scope:
If you want reservations to be able to “float” across your entire
Azure account.
A Beginner’s Guide to Microsoft Azure www.vastITservices.com
PAGE 7
4MODELING YOUR
PURCHASE
MAXIMIZE OPPORTUNITIES TO SAVE.
The goal of any scaling organization is to identify patterns in usage that
translate into time- and money-saving efficiencies. But when you’re dealing
with billions of data points across multiple systems, where do you begin?
Using VAST View™, you can easily model a purchase for specific subscriptions,
regions (e.g. East US), or virtual machine series (e.g. DS2). All those billions of
data points are tracked, organized, and analyzed instantly. You can view your
upfront cost, annual and monthly savings, coverage, and, perhaps most
importantly, your break-even point.
While the recommendations provided from VAST View™ will be the optimum
for the settings you have configured, you’re still in complete control. For
example, if VAST View™ recommends purchasing 18 Standard DS2 v2
reservations in the East US region for Windows, you can choose to purchase
only 9 based on your organizational knowledge of future virtual machine usage
(e.g. you expect a reduction in load that affects this virtual machine type).
VAST View™ takes the hassle out of Reserved VM Instance management
by providing the modeling, optimization, and amortization capabilities
needed to help you feel confident about your purchasing decisions.
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A Beginner’s Guide to Microsoft Azure www.vastITservices.com
CONCLUSION
Microsoft Azure Reserved VM Instances are an effective way to reduce your
Azure spend. While the concept of reservations may be new to you, just
remember that they enable you to make an all upfront payment towards your
compute costs, thereby providing prioritized capacity.
Whether you’re actively pursuing Reserved VM Instances as a cost-saving
measure, or just beginning to explore it as a possibility. Learn more about
about the platform by visiting www.vastITservices.com
VAST View™ is a trademark of VAST IT Services.
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