Azure Virtual Machines – Two major cost optimizations everyone should know!


For today I’ll show you two major cost optimizations for your Azure Virtual Machines ;

  • Reserved Instances
  • Windows Licensing


As the baseline for the cost projections, I’ll be using a commonly used “D2v3”-machine (deployed in West Europe & currency set to Euro) ;

For the Cost Optimization calculations, I’ll be using VMchooser, which returns the following results ;

So what to make of this? Let’s dive into those two topics!


Reserved Instances – The Basics

The first thing is to know that “Reserved Instances” exist! In essence, by committing to one or three years (payment upfront), you get a huge discount. When looking towards the d2v3 we took, this is 36% for one year, and 56% for three years.

My general advice here, is to let the dust settle in on your new projects… This so that you know what the machines are actually going to need. Once that is know, then optimize the cost of this baseline with reserved instances.

Do note that you can exchange (convert) the reserved instance or even get a refund (minus a 12% cancellation fee) ;

Reserved Instances – When doesn’t it make sense….

See a reserved instance as a kind of capacity slot that you prepaid. Once the slot is free, another VM can take its place. Why do I mention this? Because this behaviour is kinda works against “snoozing”…. Let’s simulate two VMs, our d2v3 and the b2ms ;

As you can notice, the tipping point for both VMs differs a bit… With the d2v3, once below 465 hours per month, it’s actually more interesting to go PAYG. Where the tipping point for the b2ms comes sooner at 540 hours per month. Does this mean that you shouldn’t snooze? By god no… it’s a great pattern to do! Though know that there is a tipping point, and that before that point, you might want to see if another machine could benefit from the reserved slot or not!


Windows Licensing – Azure Hybrid Use Benefit – The Basics

As you have noticed, in the intro I used the 36% and 56% difference for the linux machines and not the difference for the windows machines. This is with due reason! From experience, we notice that (how odd it might seem!) that it’s in a lot of cases more interesting NOT to go pay-as-you-go for your windows licenses… Let’s take a look at our d2v3 again ;

So on a yearly basis the windows license for this machine will be at about 680€. So if your contract states that you can purchase Windows Standard editions (with Software Assurance) cheaper than 680€, than it’s financially more interesting to do so via that manner. Why? Because you can “bring over” the licenses via the “Azure Hybrid Use Benefit“!


Windows Licensing – Azure Hybrid Use Benefit – Datacenter vs Standard

Now the next question is… The marketplace only has datacenter images, and we have standard licenses, what do we do now? Nothing! You just use the datacenter editions. Why? Because you can… 😉

So you get the datacenter edition at the price of the standard edition!


Windows Licensing – Azure Hybrid Use Benefit – Does it always make sense?

Again, just like with the Reserved Instances… Depending on the amount of snoozing you do, it might become more interesting to go pay-as-you-go (PAYG). Aside from that, from personal experience, I’ve noticed that the B-series are more interesting to consume via PAYG. Let’s take a look at two examples ; the b8ms & the b2ms.


When I see those rates, then I’m thinking that you would need to have one kick ass contract to get a better deal than that… For the b2ms the price on a yearly basis is between 60 and 187€. Where the b8ms goes between 237 and 413€.


Closing Thoughts

I know… Pricing/Licensing is hard & sucks. Nobody likes it. Though know that you can turn it to your advantage. Here I hope this post shows you several “tweaks” that you could use to optimize your costs. With a bit of consideration/work, you can optimize your spent and redirect the funds towards other things.


(Last sidenote ; Be aware that for the windows servers that reside inside of Azure, you won’t be needing a Windows CAL!)

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