Azure Fundamentals · Lesson

Azure Savings Plans and Reservations

Compare Azure Savings Plans with Reserved VM Instances and Reserved Capacity for databases, and build a commitment purchasing strategy for a mixed workload estate.

Why Commit to Save?

Azure's pay-as-you-go pricing is flexible but expensive for long-lived workloads. If you know a workload will run for 1 or 3 years, committing to a capacity reservation unlocks significant discounts — up to 72% off pay-as-you-go rates. Microsoft offers two commitment mechanisms: Reserved VM Instances (SKU-specific) and Azure Savings Plans (more flexible). Choosing the right mechanism for each workload is a key FinOps decision.

Reserved VM Instances Explained

A Reserved VM Instance (RVI) is a billing commitment to use a specific VM SKU (e.g., Standard_D4s_v5) in a specific Azure region for 1 or 3 years. In exchange, Azure applies a discount of up to 72% compared to pay-as-you-go pricing. The discount applies automatically to any running VM that matches the reserved SKU and region — you do not need to link the reservation to a specific VM. Reservations can be exchanged or cancelled (with an early termination fee of 12% of the unused value).

# Purchase a 1-year Reserved VM Instance via CLI
az reservations reservation-order purchase \
  --sku 'Standard_D4s_v5' \
  --location eastus \
  --reserved-resource-type VirtualMachines \
  --billing-scope '/subscriptions/<subscriptionId>' \
  --term P1Y \
  --billing-plan Monthly \
  --quantity 1 \
  --display-name 'MyWebServer-Reservation'

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