Azure offers savings by committing for one- or three-year long-term discount rates, letting you choose options that fit your workload patterns. Azure Reservations can be purchased for a wide array of products. When performing analysis to understand what should be purchased, most of it will take place within the Azure portal, especially if you are not operating a mature FinOps approach to commitment discounts.
This guide using the latest advice from the FinOps Foundation will focus on Azure Reservations but keep an eye for additional articles on other ways to optimise your cloud investments.
You will be leveraging data fields such as usage quantity, usage date, pricing unit and more to understand what infrastructure is running 24×7 and guide your purchasing decisions.
Pro Tip: Choose Azure Reservations for rate optimisation when you have workloads that run continuously and are highly stable, with no anticipated changes to the instance type, instance family, or region. When fully utilised, reservations provide the greatest savings.
Step 1: Analyse commitment discount purchase opportunities and decide what to purchase
Obtain Reservation inventory and utilisation information:
- Log into the Azure portal. If applicable, select the proper directory by clicking the gear icon in the top bar of the page.
- Use the search bar to open the Cost Management and Billing Blade.
- If necessary, select the applicable Billing Scope / Account on the page.
- Under Products and Services, select Reservations + Hybrid Benefit.
Pro Tip: If you procure your Azure subscriptions through a CSP, you may have to ask your CSP provider for access to the Cost Management and Billing blade.
Pro Tip: If you procure your Azure subscriptions through a CSP, you may have to ask your CSP provider for Reservation Reader access.
- If Reservations have been purchased, a table will be populated with key information related to the Reservation including status, quantity and utilisation: % of Reservation getting used. If desired, download this data to save it in a CSV formatted file containing the inventory information.
Pro Tip: If you subscribe to Advania’s Managed Azure service or procure Advania Cloud Insights directly as part our CSP offerings you will be able to see near real-time Reservations data for your Azure tenant.
Understand current commitment discount recommendations and utilisation
To obtain commitment discount recommendations, do the following:
- A table will populate with descriptions of recommendations, estimated savings if action is taken and the impact of the recommendations.
📑Note: If nothing populates in the table, it can be for two reasons:
- There are no recommendations for your Azure footprint.
- There is a filter set on the page. It is recommended to set all filters to be for “All” to see the full scope of recommendations.
If shown, click on any description that includes “reserved instance” in it. You can also filter to only show Reservation recommendations.
- In the table, click on any description you would like to learn more about. This will bring you to a page with additional information about the recommendation(s).
- Click on any of the links under Recommended actions you would like to know more about.
In addition to using the Azure Advisor recommendations to see what Reservations are recommended to commit to, it may be prudent to confirm that the Reservations you will commit to do not lead to overcommitment. This evaluation will depend on your organisational KPIs. If coverage is more important than utilisation, then this analysis may not be needed.
Reservation Considerations
- If a resource can be covered by multiple Reservations, Azure will first apply the most specifically-scoped Reservation:
- E.g., if a resource could be covered by a Reservation scoped to its resource group and a separate Reservation to its subscription, it will first use the Reservation scoped to the resource group since it is more specific.
📑Note: This may result in suboptimal savings if you have more specific Reservations with lower discounts than the more generalized Reservations.
Pro Tip: Maximise your chances of optimising your savings by ensuring you have reviewed the lifecycle of your workloads so you do not end up buying more Reservations than you will need.
- Keep in mind that reservations will apply to infrastructure before savings plans are.
- Virtual Machine (VM) Reservations:
- VM Reservations apply to a specific VM series and are inherently more specifically-scoped than Savings Plans.
- Azure combines VMs using Windows licenses into a single SKU when they are used on-demand (without a Reservation). If they use a Reservation, the SKU for the machine is separated in the billing data and the Windows OS license is billed separately.
Pro Tip: Standardise your choices of Azure compute series types so you can maximise utilisation when changes occur.
Step 2: Approval
The exact approval process is dependent on the policies and procedures defined by your organisation. Default to your organisation’s unique approval process.
Step 3: How to make a purchase once a decision has been reached to commit
If your Azure subscriptions are procured through a CSP provider, then contact your account manager or use the provided marketplace tooling/service to order your Reservations.
If your subscriptions are on an Enterprise Agreement or are PAYG, the following instructions will focus on using the Azure Portal specifically Azure Advisor, to purchase Reservations. Prior to performing the following steps, ensure you have proper company or business approval/review:
Adding Reservations based on Azure Advisor recommendations:
Prior to placing an order for Reservations, perform the following checks:
- Double check that the following are correct: Scope: Shared, Management Group, Single Subscription, Single Resource Group.
- Reference the Azure CSP Nuances table below to understand the pros and cons of each scope type:
| Pros | Cons |
|---|
Single RG | Ability to provide predictable discounts to an application e.g. SAP (large, predictable workloads) | Analysing, purchasing, and managing RIs at the RG level, enterprise wide is not sustainable or recommended |
Single Subscription | Ability to provide predictable discounts to a Business Unit (BU) | Higher level of analysis but manageable More purchase execution overhead but manageable Owner access required for each target sub Greater risk of under-utilisation Requires increased management and monitoring |
Shared | Easy analysis – use portal, MSFT Power BI tools or other third-party tools Most secure permission setup – only need owner access to one central sub setup to purchase all shared RIs and no resources run in it Quickest purchase option to execute Lowest risk of under-utilisation Requires less management and monitoring | Savings not predictable at a BU and or application level – maybe questions to manage |
| | | |
Table 1 Azure CSP Nuances
📑Note: The recommended quantity may change from the Azure Advisor page to the recommendation details page. We recommend considering using both sets of recommendations as guidance to inform your purchase decision.
Ordering Reservations based on an ad hoc analysis:
Ad hoc analysis could include looking at your inventory, leveraging the Azure Usage + Charges Report to see what is running 24×7, or by an application team asking for a reservation.
Pro Tip: If you subscribe to Advania’s Managed Azure service or procure Advania Cloud Insights directly as part our CSP offerings you will be able to see near real-time Reservations optimisation recommendations for your Azure tenant.
Purchasing Reservations
- Currently, there is no additional discount if you purchase a Reservation using upfront payments or if you pay monthly. It is recommended to work with your finance and procurement teams to ensure you understand the cash flow and commitment burndown implications of the billing frequency you choose.
- Optional: If reserving Virtual Machines consider enabling instance size flexibility. Instance Flexibility allows you to apply Reservations to instances that are in the same family of the Reservation commitment, even if those instances have different CPU options. This is only available for Virtual Machines.
For example, if you have a 2 CPU Reservation, it can be used by a 4 CPU VM and provide 50% compute benefit. Or, if you have a 16 CPU Reservation, it can be used by four, 4 CPU VMs and provide 100% compute benefit to all 4.
- Document the order(s) per your company’s policies.
Alerting on Underutilised Reservations
- It is a best practice to enable notifications to monitor the utilisation of Reservations. Documentation on how to create utilisation notifications can be found here.
Insights for setting these alerts:
- If you set it to 100%, you will be notified for any reservation that is not fully utilised. It is recommended that you input your organisation’s KPI for utilisation.
- If doing this at the billing scope level, it is a good practice to put the emails of FinOps team members and/or a shared FinOps mailbox. If doing this reservation-by-reservation, you can input the stakeholders who benefit from or approved the commitment.
Pro Tip: If you subscribe to Advania’s Managed Azure service or procure Advania Cloud Insights directly as part our CSP offerings you will be able to see near real-time data on all your commitments.
How to remedy poorly performing commitments
As of the time of this writing, Azure provides the flexibility for the cancellation, refund, and/or exchange of purchased Reservations. Azure has set fees and limitations on the amount that may be refunded and does not allow exchanges between service types (for example, a Virtual Machine Reservation cannot be exchanged for a Cosmos DB Reservation).
Exchanging or Cancelling a Reservation
Exchanging a Reservation allows you to change the scope, type, region, or term. Cancelling a reservation allows you to cancel the commitment and get a refund.
Pro Tip: Under CSP, there is normally an administrative charge levied to manage these cancellations and exchanges, check the terms of your contracts.
Acknowledgements: Purchasing Commitment Discounts in Azure by FinOps Foundation