I think most of you have probably heard or read about Reserved Instances (RI) and Azure Hybrid Benefit (AHB) before. If so, keep reading anyway because I’ve noticed that it is often unclear how these types of contracts work – and I’m here to help. What are the “rules” exactly? What happens when you want to quit early, what other options do you have? And if you haven’t heard about RI or Azure Hybrid Benefit before, this post is must read.
The basics
Reserved Instances apply to various types of Azure Compute resources, virtual machines mainly – at least that’s what we’ll focus on during this article. In simple terms, you agree on a 1- or 3-year contract to rent a certain number of virtual machines.
For that commitment you will get an interesting discount on your virtual machines’ Azure compute costs, over 70% in some cases. This will mainly depend on the type of VM selected. In general, the more expensive VM types will come with a bigger discount.
The so-called tipping point for using RI’s will differ per VM type (meaning, when it is not interesting to agree on a 1- or 3-year contract but go with Pay as you go instead). Depending on the type of VM you want to use and the number of hours you would like it to be turned on will mainly determine if RI’s will be an interesting discount model to consider or not.
A comparison that can be made using the Azure Calculator, for example. Or using a platform like vmchooser. If you don’t know it, give it a try, really nicely done.
The advice would be to start using your environment first (unless you are already certain) and apply costs optimization (1- or 3-year contract) at a later stage. Just so you have a good feel of the number of hours the VM’s will be turned on, on average.
In practice, in most cases RI’s will save you on costs.
Automation and other ways to save on licenses
Also, instead of investing in Reserved Instances, technologies like autoscaling can help reduce your monthly/yearly compute costs as well. Up to a point where this might be more interesting than RI’s even. When considering RI’s for Windows Virtual Desktop hosts, the Nerdio autoscaling mechanism can help reduce costs to over 70%, no separate contracts needed. In fact, as soon as you turn it on and configure it, it will show the minimum and maximum costs instantly, on the same page.
In some cases (not often) you might be able to purchase licenses cheaper (when compared to Pay as you go and/or the RI pricing per year, for example) through a Microsoft licensing program – there are multiple, the CSP program being one of them as well. If so, make sure that Software Assurance (SA) is included. That way you are allowed to bring your licenses into azure because of the Hybrid Use Benefit that’s part of SA. Often, a combination of RI’s and AHB works out very nicely.
WVD = Linux license pricing and Linux license pricing = AHB, true?
By the way, did you know that turning on Azure Hybrid Benefit in the Azure Calculator will give you the same VM price as selecting a Linux license? Try it. Assuming you started out with a Windows license, of course.
Though, only if you leave it at the default CentOS Operating System, select Ubuntu, or Suse Linux Enterprise. The other versions listed are a bit more expensive.
This concept applies to WVD as well. Microsoft tells us that Windows Virtual Desktop session host virtual machines are charged at Linux compute rates for Windows 10 single, Windows 10 multi-session and Windows Server. As highlighted above, it will depend on the version of Linux selected.
So, depending on your view, when it comes to Windows Virtual Desktop you could say that license pricing is the same as selecting AHB when looking at a single Server VM, for example (meaning, not calculating costs by adding WVD to the Azure Calculator), or that pricing is the same as selecting on of the above-mentioned Linux license types.
I would not recommend using/selecting Linux pricing to compare it with AHB when using the calculator. The concept behind AHB is that you bring an existing Windows Server and/or SQL license into Azure. A license which you already own and purchased through a Microsoft licensing program including Software Assurance or through a CSP subscription into Azure. And, as we’ve seen, not all Linux licenses are equal.
Both give you the option to make use of AHB.
This way you don’t have to pay for the Windows/SQL license on/through Azure, in most case this will give you another, potentially major discount.
Be aware though, that with Windows Server Standard licenses, your licenses are transferred to a cloud-based VM and can no longer be used on-premises. You can get up to two VM’s in Azure (max of 16 cores). Unless we’re talking about Windows Server Datacenter licenses. With Windows Server Datacenter licenses you can have up to two VM’s in Azure and any number of VM’s on-premises, running on Hyper-V, for example.
What about those 1-3-year contracts?
In the case of Reserved Instances, you can choose between a 1- or 3-year contract. Earlier, you needed to pay RI’s upfront instead of monthly, so capex instead of opex, basically. That is no longer the case, you can now pay for RI’s on a monthly basis as well, at least for “normal” VM types.
If you apply Reserved Instances to Windows Virtual Desktop, at least according to the current Azure calculator, you will still need to pay upfront. I’m not a 100% sure if these can be payed monthly as well. Your Microsoft representative can probably answer this question for you.
OK, it’s a contract, what happens if I want to quit early? Good question, and this is often a point of confusion. It’s actually quite simple. When you want to get out of, let’s say a 3-year contract you will have to pay a fine of 12% for the remainder of that contract.
Example…
3-year contract x 1000 per year. You’ve been using RI’s for 2 years. You have 1-year left = 1000. Fine = 12% of that 1000. Easy, and not too expansive, right? I understand that these amounts are relative, of course.
The rest of the amount will be refunded. In the above example that would mean you’ll pay 120 and get 880 back when you cancel out of the mentioned 3-year contract.
NOTE, currently there is no cancellation fee. It is not clear when the fee will be applied again.
According to Microsoft: Azure Reservations provide flexibility to help meet your evolving needs. You can exchange a reservation for another reservation of the same type. You can also refund a reservation, up to $50,000 USD in a 12-month rolling window, if you no longer need it. The maximum limit of the refund applies to all reservations in the scope of your agreement with Microsoft.
Something to keep in mind, especially when dealing with larger environments.
Another option you have is exchanging Azure RI’s (across any region or service) as long as they are of the same type. Meaning, no VM exchange for a SQL PaaS instance, for example, which makes sense.
Changing VM sizes during the running contract is also possible, automated even. Read more here.
Reserved Instances use-cases
Let’s say you have a WVD hostpool and users are constantly connecting, perhaps 24×7 even, though the number of users will vary depending on the time of day. In this case you might want to have a couple of hosts running all the time, or near to 80/90% at least minus maintenance etc. Here RI’s make sense.
If you make use of autoscaling technology, RI’s are a perfect fit for your base capacity machines which will probably be turned on most of the time.
A domain controller up in Azure would pretty much be running 24×7 as well. Print and file servers are another good example.
Steady, predictable workloads, that’s what RI’s are made for. Databases, webservers, you name it.
Another use-case might be to reserve capacity in the case of a DR scenario. Where you might want to have multiple machines in stand-by mode ready to go when needed.
And I’m sure we can come up with many more.
Most of the time (except for the B model VM’s – do the math) Reserved Instances together with Azure Hybrid Benefit make an perfect combination to help save you on costs.
Hope this cleared up a thing or two. Let me know if I can help.