A Guide to Finally Understanding Azure VM Pricing

Adam Listek

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If you have a Microsoft Azure account, chances are you probably have at least one virtual machine (VM) running. VMs are one, if not the, most popular Azure service. Azure VMs are great but there’s one thing, Azure VM pricing can be confusing!

In this article, you’re going to learn you have options. You’re going to learn how to demystify all of the complicated Azure VM pricing options to find the model that best fits your needs.

What are my options?

Your Azure VM pricing options come in five different types. Each type of option will vary not only in price but also in performance and availability.

Choose wisely as once you decide on the type of VM and provision one, it can sometimes be tricky to move to a different model.

Related: Your Options for Getting Microsoft Azure for Free: Explained

Pay as you go

If you’re looking for the simplest, most straightforward method to spin up an Azure VM, look to a pay-as-you-go model. With this type of VM, for every second a VM resource is active, Microsoft will bill you.

Considered the most flexible option, pay-as-you-go is perfect for short-lived workloads, or instances that can not be interrupted.

Reserved Virtual Machine Instances

If you need to save money and know a VM is going to be active for at least a year, you can save 72% by reserving a virtual machine instance.

Purchasing reserved instances

Reserving a VM sets it in place in a specific region for one to three years.

You can easily exchange and return reserved instances. If necessary you can cancel a reserved instance with an early termination fee, up to the yearly limit. On the flip side, you can also apply a reserved instance to other VMs like pay-as-you-go VMs within the same resource group and region.

Spot Pricing

Reserved VMs save quite a bit. But if you really need to save money but aren’t necessarily concerned about 100% uptime or have automation to handle VM availability concerns, look into Azure VM spot pricing.

Defining an Azure VM spot instance
Defining a VM as a spot instance

You can get up to a 90% discount with spot pricing. How is such a discount possible? On any given day, Azure data centers have unused capacity. To ensure data centers are being used as efficiently as possible, Azure introduced spot pricing (spot VMs).

Spot VMs access unused Azure compute capacity. The discount sounds great until you realize that spot VMs are ephemeral. Azure can shut down or evict spot VMs at a moment’s notice if the data center needs additional compute capacity or the current price is higher than an initially agreed-upon maximum price.

Spot VMs are perfect for testing, ephemeral workloads, and those services that can be quickly resumed.

Azure Hybrid Benefit

Running Windows Azure VMs are typically more expensive than Azure Linux VMs. Why? Because of operating system licensing. When you run Windows anywhere, you must have a license to do so.

Wrapped up into the cost of an Azure VM is the Windows license. If you can figure out a way to reduce or eliminate that additional cost, that’s a nice discount.

If your organization already has existing on-premise servers running Windows that you intend to move to Azure VMs, you can use your existing, on-prem Windows licenses to pay a reduced rate.

To take advantage of the Azure hybrid benefit, you’ll need to contact Microsoft and negotiate a reduced rate.

Migrating Windows Server, SQL Server 2008, or Server 2008 R2 workloads to Azure, will add three additional years of security updates for free.

As of November 2020, Linux VMs can also take advantage of Azure Hybrid Benefit!

Dev/Test Pricing

Finally, if you need Azure VMs to develop applications on or for application testing purposes, look into Azure Dev/Test VMS. Azure Dev/Test VMs have typically discounted rates and can provide monthly credits, but are subject to those users that maintain an active Visual Studio subscription.

How Azure VM Billing and Usage Works

For every second an Azure VM is running, Azure records a “unit of usage”. A full second is the smallest increment that an Azure VM can technically be used in terms of billing. When billing time comes around, these seconds are tallied up and assigned a monetary value rounded down to the nearest minute.

For example, if you had a VM running for five minutes and 30 seconds, Microsoft would bill you for only five minutes. All Azure VM billing is rounded down to the nearest minute.

When you stop an Azure VM, Microsoft will still bill you for that machine until the machine is deallocated along with any attached managed disks. Microsoft always bills for managed disks separately.

How to Pick the Best Azure VM Pricing Model

Let’s say you’re a budget-conscious consumer and are in the market for a new Azure VM. How do you pick which VM is for you?

  1. Decide what kind of performance you need. Compute? Storage? Memory?
  2. Pick the best region. It’s always best to pick the region that’s closest to the intended end-users of the VM but know that placing a VM in different regions will cost more than others.
  3. Document any existing Windows licenses you have for your on-prem (if picking a Windows VM). You may be entitled to Azure hybrid benefit pricing.
  4. Decide on a payment option. Below you’ll find a summary of your options.
    1. Azure Hybrid Benefit
      1. Pay as you go – Most expensive, but most flexible
      2. 1 year reserved – Average around ~40% savings, but locked in for 1 year
      3. 3 year reserved – Average around ~60% savings, but locked in for 3 years
      4. Spot Instances – Average around ~80% savings, but least reliable as VMs can be evicted at any time
    2. Standard Pricing
      1. Pay as you go – Most expensive, but most flexible
      2. 1 year reserved – Average around ~20% savings, but locked in for 1 year
      3. 3 year reserved – Average around ~30% savings, but locked in for 3 years
      4. Spot Instances – Average around ~70% savings, but least reliable as VMs can be evicted at any time

To save money, see if you can use Linux VMs instead of Windows. Linux does not have the same license costs except for certain OS flavors. For example, SUSE Linux Enterprise offers 24×7 support for a premium VM price.

Azure Support Pricing Options

Finally, don’t forget about any support costs when looking into Azure VM pricing! Depending on the level of support you need, support costs could increase your overall Azure VM cost quite a bit.

For support, you have four options:

  1. Basic – Microsoft includes this plan for all customers at no additional cost
  2. Developer – Basic break/fix support with limited support windows $29 per month
  3. Standard – More severe cases open and 24/7 support at $100 per month
  4. Professional Direct – The full package including 24/7 support, all severity cases and training for $1,000 per month

Conclusion

There are many options with Azure VM pricing and a variety of VM types, features, and add-ons that are available. Depending on your needs, you can create price savings by smart consideration of pricing options.

Considering Reserved Instances, Spot Instances or Azure Hybrid Benefits will net you large savings over time. Mapping your environment and VM needs to Azure VM pricing will help you to find the perfect combination!

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