Azure Savings Plans: All You Need To Know

Microsoft Azure’s pricing structure is primarily based on a pay-as-you-go model where businesses are charged based on their resource consumption. However, with the growth of your business, your cloud cost also adds up. Azure offers multiple pricing strategies to deal with these rising cloud costs. One such solution is the Azure Savings Plans.

Azure Savings Plan for Compute is a pricing model that offers significant cost savings for organizations with a consistent or predictable workload. It ensures that even when your resource consumption spikes up, you can maintain cost efficiency by benefiting from lower prices for compute resources.

---

What is Azure Savings Plan?

Azure Savings Plan is a cost-saving model that helps you reduce your cloud spending by committing to an hourly spend on select Azure compute services. Instead of paying the usual pay-as-you-go rates, you get a discount of up to 65% on select Azure compute services. by committing to a consistent usage level for one or three years. The plan covers a range of services like virtual machines (VMs), App Service environments, and container instances.

One of the key benefits of the Azure Savings Plan is its flexibility. It applies savings across multiple services and regions, allowing businesses to use a variety of compute resources without being tied to specific VMs or services. This means you can scale your operations while still keeping your cloud spending in check.

---

Why do you need a Savings Plan for Azure?

Cost management is a key factor that determines the profitability and success of a business. As more businesses move their workloads to the cloud, effective cloud cost management is essential to build sustainable business growth. By offering significant discounts on your compute resources, Azure savings plan offers you the flexibility to scale your business across different Azure services. If your organization has predictable workloads or consistent cloud usage, a savings plan helps you to balance cost efficiency without sacrificing operational flexibility.

By committing to a savings plan, you not only gain cost predictability but also benefit from long-term savings. This makes it easier to manage your cloud budget and avoid unexpected spikes in costs. Best of all, the savings are automatically applied to eligible services across various regions. This means you can take advantage of different compute resources without being locked into a specific VM or service.

---

Why should I go with Azure Savings Plan?

Let’s take a closer look at the key features of the Azure Savings Plan and how they can help businesses manage their cloud costs more effectively:

• Cost Savings: The Azure Savings Plan provides up to 65% off regular pay-as-you-go prices for compute resources.
• Flexibility: Unlike Azure Reservations, this plan is not tied to specific resources. It covers a wide range of compute services like Azure VMs, App Service, and container instances, allowing businesses to adapt to changing workloads.
• Choice of Term Length: You can opt for either a 1-year savings plan or a 3-year savings plan, depending on your budget and usage forecast.
• Predictable Budgeting: By committing to an hourly spend, businesses can easily predict their cloud costs and manage their budget effectively.
• Flexible Payment Options: Choose between paying upfront or monthly, with no additional cost for monthly payments.
• Global Scope: The plan can be applied across multiple Azure regions, which provides broader coverage for businesses operating in different locations.

---

What are the Benefits of Using Azure Savings Plan for Compute

Using an Azure Savings Plan offers several clear advantages:

• Cost Efficiency: The primary benefit is substantial cost reduction, with savings of up to 65%.
• Flexibility: Unlike Azure Reserved Instances, the savings plan offers more flexibility across services and regions. This flexibility is ideal for businesses with dynamic or evolving workloads.
• Predictability: Fixed hourly commitments allow for more accurate forecasting of cloud spending, helping you to plan your cloud budget effectively.
• Easy Management: The savings plan requires minimal management because it automatically applies discounts to eligible resources without manual intervention.

---

How does Azure Savings Plan Work?

The Azure Savings Plan works by allowing you to commit to spending a fixed amount per hour on Azure compute services for a one-year or three-year period. This commitment earns you a discount of up to 65% compared to the pay-as-you-go pricing model.

Once you commit, the discount is automatically applied to eligible compute usage, up to the hourly commitment you’ve chosen. If your usage goes over the committed amount, it’s billed at the regular pay-as-you-go rate. For example, if your commitment is $20 per hour, but your usage is only $18, you can still use the remaining $2 toward future hours, but it doesn’t roll over.

Whether you choose to pay upfront or go with monthly payments, the total cost stays the same. This flexibility makes it easier for businesses to plan and budget their cloud spending over time.

---

What is Azure Savings Plan Scope?

The Azure Savings Plan scope determines where the benefits of the plan apply. There are four scope options:

1. Resource Group Scope: Benefits apply to eligible resources within a specific resource group.
2. Subscription Scope: Benefits apply to eligible resources within a specific subscription.
3. Management Group Scope: Benefits apply to eligible resources across all subscriptions within a management group.
4. Shared Scope: Benefits apply across multiple subscriptions, within an Azure Enterprise Agreement (EA) or Microsoft Customer Agreement (MCA).

This flexible scope ensures that businesses can maximize their savings by applying the plan to the most relevant resources.

---

How are Savings Plan Discounts Applied to Your Resources?

The Azure Savings Plan discount is applied automatically to all eligible compute resources within the plan’s scope. Every hour, Azure checks your usage and applies the discount to the services that give you the most savings first. This continues until you reach your hourly commitment. Any usage beyond that is charged at the regular pay-as-you-go rate.

For example, if you have both Azure Reserved Instances and a compute savings plan, Azure will apply the reserved instance discount first, since it typically offers higher savings. Any remaining usage after that will be covered by the savings plan.

---

What are Azure Savings Plan Recommendations?

Azure Savings Plan recommendations offer personalized suggestions to keep your cloud spending under control. These recommendations are generated based on your organization’s needs. By analyzing usage data from the past 30 days, Azure Advisor and Azure Cost Management identify the best commitment amount for a savings plan commitment. The recommendations come with projections of potential savings for both one-year and three-year plans, making it easier for companies to choose the most cost-effective option.

These recommendations are grounded in thorough analysis, not just estimates. Azure analyze your usage patterns over the last 7, 30, and 60 days and runs simulations to figure out the best commitment level for your savings plan. The system compares multiple scenarios and offers up to 10 different suggestions, only picking the ones that guarantee actual savings. Azure also takes into account any changes, like decommissioned services, to ensure that you’re not committing to more than you need. Ultimately, these recommendations help you confidently choose a savings plan that maximizes your cost savings while keeping your cloud resources covered.

---

How do you Purchase Azure Savings Plan for Compute?

You can purchase an Azure Savings Plan for Compute through the Azure portal or by using the Azure Savings Plan API. Here’s how to purchase through the Azure portal:

1. Sign in to the Azure portal.
2. Search for “Savings Plans” and select it from the search results.
3. Click “Add” to purchase a new savings plan.
4. Complete the required fields:
   • Enter a name for the savings plan.
   • Choose the billing subscription and scope for the plan.
   • Set the term length (1 year or 3 years).
   • Enter the hourly commitment.
   • Select the billing frequency (monthly or upfront).
5. Once all fields are completed, submit your purchase.

---

Azure Savings Plan vs Reserved Instances

While Azure Savings Plans and Reserved Instances (RIs) both provide opportunities for cost savings, they are designed for different scenarios. Azure Savings Plans offer flexibility across services, while RIs are resource-specific.

Reserved Instances require upfront commitments to specific resources, such as Virtual Machines, for a set duration (one or three years). While RIs provide significant savings, they lock users into particular VM types and regions.

Feature	Azure Savings Plans	Azure Reserved Instances
Flexibility	High, across multiple services	Low, specific to resources
Savings Potential	Up to 65%	Up to 72%
Resource Binding	None, applies to general workloads	Bound to specific VM or other resources
Commitment Period	1 to 3 years	1 to 3 years

Azure Savings Plans give you much more flexibility. Instead of being tied to specific resources, you commit to a consistent hourly spend that can be used across various Azure services and regions. This makes savings plans a better fit if you need more room to adjust to your growing business demands. If you have steady, long-term needs, Reserved Instances might be the right choice for you.

---

Common Mistakes to Avoid while Using Azure Savings Plan

Even though Azure Savings Plans can offer substantial savings, there are common pitfalls that businesses should avoid:

1. Overcommitting to Usage: Without a clear understanding of your workload, committing to higher usage than necessary can lead to wasted resources and unnecessary costs.
2. Ignoring Flexibility: Savings Plans provide flexibility across services, but some organizations continue to operate in silos, missing the opportunity to maximize savings across multiple services or regions.
3. Not Utilizing Azure Hybrid Benefit: If you already have existing on-premises Windows Server or SQL Server licenses, not leveraging Azure Hybrid Benefit is a missed chance to further reduce costs.
4. Failing to Regularly Monitor Usage: It’s important to consistently review your cloud usage. Failing to monitor it may lead to underutilization of your savings plan or missing out on opportunities to adjust your commitment to match evolving needs.
5. Neglecting to Adjust Commitments: Cloud workloads and requirements often change over time. Failing to adjust your Azure Savings Plan commitments as your business evolves can result in paying for resources you no longer need.
6. Not Combining with Reserved Instances: Azure Reserved Instances can complement Savings Plans by covering predictable workloads. Not combining the two models may prevent businesses from optimizing cost reductions for stable resources.
7. Misunderstanding Plan Scope: Incorrectly scoping your savings plan—such as applying it to the wrong subscription or resource group—can reduce the effectiveness of the savings and limit the cost benefits.
8. Missing Azure Advisor Recommendations: Failing to follow Azure Advisor recommendations means you could be missing out on valuable insights to optimize your savings plan and cloud costs overall.

---

Conclusion

Azure Savings Plans present an excellent opportunity for organizations to reduce costs while enjoying flexibility across a range of services. By strategically combining Savings Plans with Reserved Instances, and utilizing third-party cloud cost optimization tools like Economize, businesses can create a more efficient and cost-effective cloud environment. 

Understanding the differences between Azure Savings Plans, Reserved Instances, and pay-as-you-go pricing models is essential to selecting the strategy that best fits your business needs. With the right approach, you can maximize your cloud investment and ensure greater financial efficiency. You can also use the Azure pricing calculator to estimate your cloud charges.

---

FAQs:

Q: How does my investment in an hourly savings plan affect my compute expenses?
A: Your hourly savings plan investment applies to select compute services globally, allowing you to benefit from reduced prices while ensuring your cloud budget stretches further. Even if your usage is below your commitment, you still pay the set hourly amount, and any excess usage is billed at standard pay-as-you-go rates.

Q: How can I assign an Azure savings plan to a specific subscription or enrollment/account level?
A: You can assign Azure savings plans at either the enrollment or subscription levels, providing flexibility based on your needs. For example, if an entire organization wants to benefit, you can assign it at the account level; for specific business units, assign it to individual subscriptions.

Q: Where can I find details about my recently purchased savings plans and their utilization?
A: To view your recently purchased savings plans, go to the Azure portal and click on “savings plan” on the left side. This will display details for each plan, and clicking on a specific plan will take you to its utilization report.

---

Troubled by Rising Cloud Expenses?

High cloud bills can be overwhelming, but they don’t have to be. Economize provides an easy way to cut your cloud costs by up to 30%. Schedule a free demo with us today and start saving money in as little as 10 minutes. Take your first step towards smarter spending.