This guide will focus on Azure Savings Plans, offering top tips on how to leverage the most value for your organisation and providing a step-by-step guide to obtaining and exploring Azure's saving offerings. Keep an eye out for additional articles on other ways to optimise your cloud investments!
Azure Savings Plan - what is it?
The Azure Savings Plan for Compute is designed to help organisations optimise their cloud costs by significantly reducing eligible compute usage expenses—potentially by up to 65% compared to standard pay-as-you-go rates. To take advantage of these savings, organisations commit to an hourly spend for either one or three years.
Pro Tip: Although advertised as such, 65% compute savings is unlikely using this commitment offer and is only indicative of an upper end discount achievable in some circumstances. Please be careful when planning your long-term discount commitments and do not align then with our budget forecasts until they are live, and you report on the actual savings achieved.
One of the key differentiators of Azure Savings Plans compared to Azure Reservations is its focus on dynamic and evolving workloads, rather than stable and predictable ones. It is important to note that the savings plan operates as a billing discount and does not impact the runtime state of your resources.
Pro Tip: You should opt for savings plans when your workloads are dynamic or evolving, particularly if they use various instance families or compute services, or when they are running in or shifting to different datacenter regions. Savings plans provide deep savings, flexible benefit application and automatic optimization.
Eligible compute usage is discounted each hour, up to the committed amount. After this commitment is met, any additional usage is charged at the standard pay-as-you-go rate.
Pro Tip: It is crucial to note that any unused commitment within an hour is forfeited. Careful planning is required to achieve the optimal rate optimisation and prevent over-commitment.
Azure Savings Plan supported services and recommendations
At the time of writing this, the Azure Savings Plan applies across various compute services, including certain virtual machines that support both compute and non-compute services like:
- Azure Virtual Desktop (AVD)
- Azure Spring Apps for Enterprise
- Azure Kubernetes (AKS)
- Container Instances
- Container Apps
- Azure Red Hat OpenShift
- Azure Machine Learning (ML)
- Azure App Service
- Functions Premium Plan
- Container Instances
- Container Apps
- Dedicated Hosts
- Container Apps
Pro Tip: Discounts vary not just by product but also by the commitment term (1-year or 3-year).
Pro Tip #2: For MCA/MPA customers using non-USD currencies, monthly billed amounts may fluctuate depending on the current market exchange rate.
By leveraging the Azure Savings Plan for Compute, organisations can strategically manage their cloud expenses while accommodating their fluctuating workload demands.
How to see value from the Azure Savings Plan
Step 1: Analyse commitment discount purchase opportunities & plan to purchase
- Understand historical usage for the Azure service for which you want a Commitment Discount:
- Review the SP documentation for Azure to understand if commitment discounts are available for the Azure Service, the purchase options and application methodology.
- Determine what level of coverage you want based on historical utilisation (note, this is the hardest part of the entire process and should be informed by your organisational KPIs).
- Now with access to all the cost and usage data, you can focus on the Azure service (like Virtual Machines) for which you would like to analyse a commitment discount purchase.
- You will be leveraging data fields such as usage quantity, usage date, pricing unit and more to understand what infrastructure is running 24×7.
Understand current commitment discount recommendations and utilisation:
- Log into the Azure portal. Use the search bar to open Advisor.
- From the Recommendations menu, select Cost.
- Click on any description that includes “savings plan” in it. Recommendations are generated based on the past 30 days of usage.
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 Savings Plan recommendations for your Azure tenant.
Obtain Savings Plan inventory and utilisation information
- Log into the Azure portal.
- Use the search bar to open the Cost Management and Billing Blade.
- From the Products and Services menu, select Savings Plans.
- If Savings Plans have been purchased, a table will be populated with the following:
- Savings Plan name: Created at time of purchase
- Status: Succeeded or Cancelled
- Expiration Date
- Purchase Date
- Term: One or Three Years
- Scope Details: Shared/Single Subscription/Shared Resource Group
- Product Name: Compute Savings Plan (this is the only available type of savings plan to purchase)
- Commitment/hour: The cost per hour committed to in the Savings Plan
- Last Day Utilisation: % of Savings Plan used in previous billing day
- 7-day Utilisation: % of Savings Plan used in the previous 7 billing days
- Click on the Savings Plan Name to view a graph of utilisation and set custom dates to review utilisation over time
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 Savings Plan recommendations and details related to contracts, orders, and consumption for your Azure tenant.
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, you should contact your account manager or use the provided marketplace tooling/service to order your Savings Plans.
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 Savings Plans. Prior to performing the following steps, ensure you have proper company or business approval/review:
These instructions will focus on using the Azure Portal, specifically Azure Advisor, to purchase Savings Plans. Prior to performing the following steps, ensure you have proper company or business approval/review:
- Understand current commitment discount recommendations and utilisations from Step 1.
- Adjust the recommendation as needed and fill out all required fields:
- Name – Enter a friendly name for the new Savings Plan.
- Billing subscription – Subscription used to pay for the Savings Plan.
- Scope: Shared, Management Group, Single Subscription, Single Resource Group
- Term: One Year or Three Years
- Hourly commitment – Dollar value being committed each hour for the lift of the Savings Plan.
- Billing frequency: Monthly or Upfront
- Set your commitment level based on your organisation’s coverage target. It is recommended to commit up to 60% – 80% of your target. The commitment level can be obtained based on the engineering team’s input based on their usage. It is always good to understand if you can hit the break-even point.
- Review the form and complete the purchase
Step 4: How to check performance versus goals
- Log into the Azure portal. Use the search bar to search for Cost Management + Billing and navigate to that service.
- From the Products and Services menu, select Savings Plans.
- This view will show the Savings Plans that have been previously purchased.
- Note: It may take up to 24 hours for Savings Plan utilisation to appear here after being purchased.
- It is recommended to sort the table by lowest percentage of utilisation to the highest to identify where waste may be occurring and where action may need to be taken.
- Option: you can filter for any utilisation < 95% (or your organisation’s threshold).
- To see more details about a given Savings Plan, click the Name of the Savings Plan. This will take you to a screen for that specific Savings Plan and provide much more detail including custom timeframe views.
Note: At the time of this writing, there is no ability to enable alerting for low utilisation on Savings Plans. Please check current Azure documentation for the latest 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 Savings Plan recommendations and details related to contracts, orders, and consumption for your Azure tenant.
- If Savings Plans have been purchased, a table will be populated with the following:
- Savings Plan name: Created at time of purchase
- Status: Succeeded or Cancelled
- Expiration Date
- Scope Details: Shared/Single Subscription/Shared Resource Group
- Renewal Status: Indicates if the Savings Plan is scheduled for auto renewal upon expiration.
- Hourly Commitment: The cost per hour committed to in the Savings Plan.
- Utilisation: % of Savings Plan getting used
- Sort the table by lowest utilisation to highest utilisation.
Planning advice for Azure Savings Plan commitments
Pro Tip: Azure Savings Plans do not offer the ability to exchange, cancel, or ask for a refund. If you need to act on an underutilised Savings Plan due to an accidental purchase or changes to infrastructure, reach out to your organisation’s technical account manager, your CSP Provider and/or file a support ticket with Azure.
Pro Tip #2: It is recommended to make multiple purchases throughout the year (rather than one big purchase (as this helps a FinOps team optimise the commitment portfolio as the organisation’s cloud footprint changes and evolves. There is less risk because you can adjust the commitment quantity and type regularly rather than just one time per year.
Pro Tip #3: It is highly recommended to work with your finance and procurement teams to ensure you understand the impact to cash flow and commitment burndown implications of the billing frequency you choose.
We're waiting to answer your questions on Azure Savings Plans and to tailor the opportunities open to you to your specific business needs. Get in touch with us and let's talk!
Acknowledgements:
Purchasing Commitment Discounts in Azure by FinOps Foundation