Azure Reserved Instances (RIs) are one of the biggest cost-saving opportunities in cloud - up to 72% off pay-as-you-go pricing. But they're a commitment, and committing to the wrong thing can be expensive.
How Reserved Instances Work
When you buy an RI, you're committing to pay for a specific amount of compute capacity for 1 or 3 years. In exchange, Microsoft gives you a significant discount.
Example:
- A D4s_v3 VM costs ~£115/month pay-as-you-go
- With a 3-year RI: ~£45/month
- Saving: 61%
The catch? You're paying whether you use it or not.
When RIs Make Sense
Stable, predictable workloads - Production databases, core application servers, domain controllers. Things that run 24/7 and won't be decommissioned soon.
After right-sizing - Don't buy an RI for a D8 if you should be running a D4. Right-size first, then commit.
When you have visibility - You need to know what you're actually using before you commit. At least 3 months of usage data is ideal.
When to Avoid RIs
New or uncertain workloads - That new project might be cancelled. That VM might get containerised. Don't commit until you know the workload is stable.
Dev/test environments - These should be turned off outside business hours. Pay-as-you-go with auto-shutdown is usually cheaper than RIs.
Rapidly changing architectures - If you're mid-migration or planning a major refactor, wait until the dust settles.
Short-term projects - If the workload will be gone in 6 months, an RI doesn't help.
RI Purchasing Strategy
Start Conservative
Don't try to cover 100% of your compute with RIs on day one. Start with the obvious candidates:
- Identify VMs that have been running 24/7 for at least 6 months
- Confirm with application owners they're not going anywhere
- Buy RIs for 50-70% of that capacity
- Review quarterly and add more as you gain confidence
Use Instance Size Flexibility
When you buy an RI for a D4s_v3 in the Ds_v3 series, the discount can apply to any size in that series - D2s_v3, D8s_v3, etc. It's normalised by a ratio.
This gives you flexibility. If you right-size a D8 to a D4, your RI still applies.
Consider Scope
RIs can be scoped to:
- Single subscription - Discount only applies to that subscription
- Shared - Discount applies across all subscriptions in your enrollment
Shared scope is usually better - if you decommission a VM in one subscription, the RI automatically benefits another subscription.
The Hybrid Benefit Stack
Combine RIs with Azure Hybrid Benefit for maximum savings:
- Azure Hybrid Benefit - Use existing Windows Server licenses (up to 40% off)
- Reserved Instance - 1 or 3 year commitment (up to 72% off)
- Right-sizing - Don't pay for capacity you don't use
Stacking all three, you can reduce costs by 80%+ compared to pay-as-you-go.
Savings Plans vs Reserved Instances
Microsoft now offers Savings Plans as an alternative to RIs. Key differences:
Savings Plans:
- Commit to a £/hour spend, not a specific VM size
- More flexible - applies across VM families and regions
- Slightly lower discount than RIs
Reserved Instances:
- Commit to specific VM series
- Instance size flexibility within series
- Higher discount, less flexibility
For most customers, we recommend a mix: RIs for the truly stable core workloads, Savings Plans for the rest.
How We Help
Our FinOps assessments include RI analysis. We look at:
- Current RI coverage and utilisation
- Unused RIs (wasted money)
- RI purchase opportunities with projected savings
- Right-sizing that should happen before committing
The goal is maximum savings with minimum risk.
Want to know if Reserved Instances are right for your workload? Get a free savings snapshot that includes RI recommendations.