Strategies for Reducing Cloud Costs with Azure
As businesses increasingly rely on cloud services, managing and optimizing costs becomes a critical aspect of cloud strategy. Azure offers several methods and tools to help businesses reduce their cloud expenses while maintaining performance and scalability. In this post, we’ll explore how the Azure Savings Plan for Compute works and how it can help you achieve significant cost savings.
Understanding Azure Savings Plan
The Azure Savings Plan for Compute is designed to provide cost savings on Azure compute services, including Virtual Machines, Functions, App Services, Container Apps, and Container Instances. By committing to a certain dollar amount, you can benefit from lower prices compared to the pay-as-you-go rate.
How It Works
When you sign up for the Azure Savings Plan, you agree to spend a specific dollar amount, such as $10.00 an hour, for one year. The plan offers both monthly and upfront payment options, similar to Azure Reservations. If you choose the monthly payment option, you’ll see a monthly charge for the savings plan commitment.
One of the main benefits of the Azure Savings Plan is its flexibility. Azure automatically applies cost savings broadly across multiple compute options to the resources that will receive the greatest discount. This is ideal for environments that have dynamic workloads. Lastly, if your actual usage exceeds your savings plan commitment, you’ll get the discounted rate up to your committed amount, and any additional usage will be billed at the regular hourly rate.
Simple Example
(prices are example prices taken from the Azure Price Calculator to illustrate how savings plan works, but may not reflect actual rates or discounts)
First, let’s look at the following table that has a list of my sample workloads.
| SKU | # Units | Hourly Pay-Go rate | SP – Net savings % | Discount Hourly Rate |
| Standard_A2v2 | 1 | 0.136 | 22% | 0.11 |
| Standard_B16ms | 1 | 0.858 | 21% | 0.68 |
| Standard_D2s_v3 | 1 | 0.209 | 13% | 0.18 |
| Standard_D2s_v3 | 1 | 0.217 | 13% | 0.19 |
| Standard_D2s_v4 | 1 | 0.204 | 20% | 0.16 |
| Standard_D4ds_v5 | 3 | 0.45 | 20% | 0.36 |
| Standard_D4lds_v5 | 3 | 0.424 | 41% | 0.25 |
| Standard_D4s_v3 | 1 | 0.418 | 13% | 0.36 |
| Standard_D4s_v5 | 2 | 0.408 | 20% | 0.33 |
| Standard_D8ds_v5 | 7 | 0.9 | 20% | 0.72 |
| Standard_D8lds_v5 | 2 | 0.848 | 24% | 0.64 |
| Standard_E16ds_v5 | 1 | 2.032 | 31% | 1.40 |
| Standard_E4s_v3 | 1 | 0.48 | 13% | 0.42 |
| Standard_E8ds_v5 | 1 | 1.016 | 41% | 0.60 |
For this example, I am going to start with with a $4 savings plan commitment. Azure will automatically determine where it can apply the greatest savings, which in this case is the E8ds_v5 with a 41% discount, and charge me $0.60 an hour for that VM. This leaves me with $3.40 left on my savings plan. Azure will then apply the next greatest discount, which is the D4lds_v5 which also can receive a 41% discount at $0.25 an hour. I am using three of those VMs, so I will have $2.65 left on my savings plan. Azure will continue to automatically apply the pricing discount until the savings plan is fully utilized and zeroed out by allocating the savings discount to the E16ds_v5 and D8lds_v5 VMs. After that, any remaining compute resources will be charged at their normal pay-as-you-go rate.
Ladder (Staggered) Approach
The ladder or staggered approach is my preferred strategy when it comes to utilizing Savings Plans. Instead of committing to a single large savings plan at the full recommend price suggested by the Azure Advisor, I start with a commitment that is half the recommend amount. I then wait a month or two to see what the next recommend Savings Plan commitment amount is and purchase another savings plan for half that recommendation. I continue this process until I have enough Savings Plan coverage across my environment.
This provides me with greater flexibility if my compute needs change over time and acts as a risk mitigation strategy to avoid overcommitting.
Final Thoughts
The Azure Savings Plan for Compute is a powerful tool to optimize your cloud spending without sacrificing flexibility. When it comes to Saving Plans, I always prefer to start small and scale. This means, if you’re unsure about your future compute needs, consider starting with a lower commitment level and you can always purchase additional savings plans later. I hope you found this article useful and can now take the first step towards saving on your Azure costs with Savings Plan for Compute!
Until next time!