logo
All blog posts

Microsoft Azure Compute Discount Plans: Types and Best Practices

Originally Published January, 2025 · Last Updated February, 2025

By:

Jenna Wright

Microsoft-Azure-Compute-Discount-Plans-Types-and-Best-Practices

Microsoft Azure provides businesses with multiple ways to structure and scale their cloud builds from the ground up. However, while Azure’s pay-as-you-go model is a common starting point for most cloud users, the default rates provided aren’t likely to be sustainable long-term.

The good news is that there are plenty of Azure discount instruments available to help businesses control rising cloud costs and get the most value out of their cloud investments.

In this article, we’ll review all the compute discount options available to Azure users and how to manage them effectively. Read on!

What Are the Types of Azure Compute Discount Plans?

Azure offers multiple pricing models to suit different use cases and business needs. While many cloud users opt for Azure’s flexible pay-as-you-go pricing option, others are willing to make longer-term usage commitments to gain significant cost savings through:

Below, we’ll touch on how each of these cost-saving opportunities works and the considerations you should address before deciding if they’re right for your business needs. 

What Are Azure Reserved Instances?

Azure Reserved Instances are a committed usage discount option that saves customers up to 72% compared to standard Azure pay-as-you-go rates in exchange for a one- or three-year commitment. By committing to a specific instance type, size, and region, organizations can benefit from predictable pricing and significant savings.

You can also choose from two different payment options when signing up for Azure Reservations: paying upfront or spreading the cost over monthly installments, without affecting the discount rate.

Benefits of Azure Reserved Instances

RIs are a great way to leverage your predictable spending into significant discounts. Below are several other benefits that these discount mechanisms provide:

  • 72% savings when compared to pay-as-you-go pricing
  • Easier to predict and manage cloud costs with fixed month-to-month costs over the commitment term
  • Exchange reservations across instance type, region, term, and payment options, providing adaptability to meet changing business needs.
  • Generous cancellation policy that allows you to cancel RIs without additional penalties (subject to eligibility requirements)

Considerations for Azure RIs

While RIs do help cloud users save money on their Azure costs, there are some important things to consider before committing to this resource allocation format.

  • It requires a trade-off between cost savings and flexibility to adjust to changing workload demands.
  • This option demands more careful planning and analysis before reserving to maximize cost benefits.

What Are Azure Savings Plans for Compute?

Azure Savings Plans (SPs) is a flexible pricing model that offers discounted rates of up to 65% on eligible compute services in exchange for making an hourly spend commitment over one or three years. 

Unlike RIs, however, businesses have more freedom on where and how they allocate spending, since they’re making an hourly commitment rather than a resource-specific commitment.

Benefits of Azure SPs

Savings Plan discounts provide businesses with a simple and flexible way to reduce their Azure pricing and save on cloud computing costs. Here’s a breakdown of their key advantages:

  • Provides substantial discounts in exchange for helping Azure make more efficient use of platform resources
  • Discounts applicable across multiple regions, instance families, and operation system types
  • Straightforward discount structure that automatically applies to monthly billing and switches to standard pay-as-you-go rates after meeting SP commitment level

Considerations for Azure SPs

Although Azure’s Advisor tool offers recommendations to help you choose the optimal SP usage amounts, it’s important to first have a good understanding of your Azure resource needs. Here are some things you should keep in mind before committing to an Azure SP:

  • You will not be able to modify or cancel your SP after purchase, and unused monthly consumption does not roll over and is forfeited.
  • If you overestimate your usage needs, you’ll pay for unused commitments. Likewise, if you underestimate, you’ll have to pay full on-demand price for any additional resources. Thus, having certainty in spending is crucial.
  • Discounts are only available for compute services and don’t cover all cloud resources, such as storage or networking solutions.

What Are Azure Spot Virtual Machines?

Azure Spot Virtual Machines (VMs) allow you to take advantage of unused Azure capacity at a discounted rate of up to 90% compared to pay-as-you-go pricing. However, their availability isn’t guaranteed and they can be interrupted if Azure reallocates resources to higher-priority workloads, making them ideal for fault-tolerant tasks like batch processing, testing, or rendering.

Benefits of Azure Spot VMs

Azure sets aside unused compute capacity month-to-month and allows businesses to reserve a wide range of VM types for significantly lower prices. These Spot VMs offer a number of benefits, including:

  • Highest discounted compute rates available
  • Easy to acquire by setting a user-defined maximum price point and waiting for available capacity based on preferred cost
  • Great solution for workloads that can tolerate interruptions, such as development/testing, batch jobs, and short-lived applications
  • Includes a wide range of Azure virtual machine sizes and configurations

Considerations for Azure Spot VMs

Even though Azure Spot VMs provide large savings opportunities for cloud users, they do come with heavy restrictions. 

  • Evictable at any time with only 30 seconds’ notice from Azure
  • Not ideal for mission-critical applications or services due to unreliable availability

What Is Azure Hybrid Benefit?

Azure Hybrid Benefit is a cloud savings opportunity available to businesses migrating their current Windows and SQL Service licenses, as well as their Linux subscriptions. By letting cloud users leverage their existing on-premise investments, Hybrid Benefit saves businesses up to 85% compared to standard pay-as-you-go prices. 

Benefits of Azure Hybrid Benefit

Azure Hybrid Benefit lets businesses get full value out of their current server and subscription investments. This provision offers numerous advantages, including:

  • Ability to significantly reduce cloud costs while leveraging existing Windows Server and SQL Service licenses
  • 180 days of dual-use rights, allowing businesses to run on-premise and cloud workloads simultaneously
  • Reduces Total Cost of Ownership (TCO) when migrating to Azure
  • Combinable with other Azure discount mechanisms to increase cloud savings

Considerations for Azure Hybrid Benefit 

Although Hybrid Benefit can provide additional savings opportunities, there are minimum requirements to take advantage of this discount tool. 

  • Smaller VMs are ineligible to use and apply Hybrid Benefit.
  • Processor licenses require a minimum of 16 core licenses.
  • Standard and Datacenter server editions require a minimum of 8 core licenses per VM instance.

Best Practices for Managing Your Discount Plans in Azure

With multiple discount options available on the Azure platform, it’s important to make sure you’re optimizing each plan to maximize your cloud cost savings. These cost optimization tips will help you get more from your Azure discount plans. 

Analyze your historical compute usage

Regular visibility on your cloud spending helps you make smarter decisions when optimizing your Azure discount plans. By evaluating your historical compute usage, you can identify seasonal patterns and peak usage periods that let you leverage the most impactful discount mechanisms available.

Azure simplifies this process with powerful features that are available through the Cost Management + Billing console. With tools like Azure Monitor, you can visualize the granular details associated with your monthly cloud spend. 

This added transparency allows you to plan your resource commitments more accurately and select the right discount plans when they’re available.

Combine discount plans

Azure lets users combine multiple discount plans to maximize their cloud savings. Instead of selecting between Savings Plans or Reserved Instances, you can leverage both and increase your savings discounts each month.

For example, combining RIs and Spot VMs is a great way to add more pricing flexibility to your cloud deployments. By breaking up your workloads into interruptible and non-interruptible categories, you can leverage both discounts effectively while avoiding resource availability constraints and minimizing costly downtime. 

Implement tagging and cost-allocation strategies 

Organizing your monthly billing by specific cloud projects and allocating budgets to each department is essential to keeping everyone accountable for cloud spending. Azure makes this process easier for businesses by enabling resource tagging and management hierarchies on the Azure portal.

With Azure tagging, you can assign custom labels and groupings to all of your monthly expenditures. Custom resource tagging lets you generate unique reporting formats, allowing you to verify the effectiveness of discount usage and identify other cost optimization areas.

Here are some tagging best practices you can start implementing now. 

Use Azure Advisor for personalized recommendations

Azure Advisor is a built-in recommendation tool that automatically monitors and evaluates your cloud configurations. When Advisor identifies areas for potential optimization, it notifies users directly through the Azure portal and provides step-by-step instructions for implementing the suggested changes.

Azure Advisor also leverages cloud cost intelligence to suggest optimal discount plans based on your usage history. Regularly evaluating these recommendations as they become available can help you continuously right-size your VM instances or savings plans so that they’re always aligned with your cloud resource consumption. 

Use an autonomous discount management tool

Although Azure offers multiple native tools to help businesses monitor their cloud spending, taking advantage of all discount mechanisms effectively requires a lot of manual effort and oversight. Autonomous discount management tools are a much more effective solution for maximizing cloud savings in real time while minimizing resource provisioning issues.

Using a FinOps automation platform like ProsperOps, Azure customers can fully optimize their portfolio of discount instruments without any manual intervention. 

Automatically Optimize Azure Costs With ProsperOps

ProsperOps delivers cloud savings-as-a-service and leverages its Autonomous Discount Management platform to optimize Microsoft Azure’s native discounts to reduce your cloud spend and place you in the 98th percentile of FinOps teams. 

Using advanced data analytics, ProsperOps can continuously analyze your company’s Azure usage patterns to identify inefficiencies and autonomously manage a portfolio of commitments. With our Adaptive Laddering approach, we safely increase coverage while minimizing commitment lock-in risk.  

By blending your discount instruments, such as Azure Savings Plans, and Azure Reserved VM Instances, we help you maximize Effective Savings Rate while lowering Commitment Lock-in Risk. We remove the effort, latency, and lock-in risk associated with manually managing rigid, long-term commitments and fully automate cloud rate optimization for you.

With ProsperOps automation, there is no impact on engineering. Our platform setup is quick, and our systems work behind the scenes to optimize your cloud costs. This allows your teams to concentrate on innovation and growth while we automate cloud cost optimization for you.

To see ProsperOps in action, book a demo today.

Get Started for Free

Latest from our blog

Request a Free Savings Analysis

3 out of 4 customers see at least a 50% increase in savings.

Get a deeper understanding of your current cloud spend and savings, and find out how much more you can save with ProsperOps!

  • Visualize your savings potential
  • Benchmark performance vs. peers
  • 10-minute setup, no strings attached

Submit the form to request your free cloud savings analysis.

prosperbot