Choosing the Best Cost-Saving Strategy for Your Cloud Investment

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by: Neal Zimmerman, Senior Cloud Architect & Owner
Published July 1, 2025

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Cost optimization is a continual priority for organizations leveraging platforms such as Microsoft Azure or AWS. Azure Savings Plans and Azure Reservations are two popular options offered by Microsoft to help businesses manage and reduce their cloud expenses. While both approaches promise substantial savings, they cater to different needs and usage scenarios.

This article delves into their differences, benefits, and how businesses can determine the best fit for their specific requirements.

Understanding Azure Savings Plans

Azure Savings Plans are a flexible, commitment-based pricing mechanism introduced to offer predictable discounts on Azure compute resources. With this plan, customers commit to a consistent hourly spend across eligible Azure services for a one- or three-year term. In return, they receive significant discounts compared to pay-as-you-go pricing.

Key Features of Azure Savings Plans

• Flexibility: Savings Plans allow customers to use their committed spend across a wide range of Azure services and regions, providing adaptability as business needs evolve.
• Predictable Costs: By committing to a predetermined hourly spend, organizations can better forecast and control their cloud budgets.
• Automatic Application: The plan automatically applies the discount wherever the customer uses the services covered under the plan, optimizing usage without manual intervention.

Benefits of Azure Savings Plans

• Broad Applicability: Savings Plans encompass a variety of Azure compute offerings, including virtual machines, App Service Environments, and container instances.
• Ease of Use: Their flexibility suits dynamic workloads, particularly for organizations with changing demands or less predictable usage patterns.
• Global Reach: Unlike reservations, Savings Plans typically extend their benefits across multiple regions, simplifying cross-region operations.

Understanding Azure Reservations

Azure Reservations, on the other hand, are designed for organizations with predictable usage patterns. By pre-paying for specific Azure resources such as virtual machines, SQL databases, or storage, organizations can lock in lower rates for a one- or three-year term.

There are also some "sticking points" to be aware of: When you get a discount with a reservation, it is for the Compute resource only (just the VM). Reserved instances do not include the costs of disks, disk transactions, nor network traffic/bandwith. So when planning on a RI, be sure to understand where the savings are realized.

Key Features of Azure Reservations

• Resource-Specific Commitments: Reservations apply to specific resources, such as a particular virtual machine type or database configuration.
• Significant Discounts: By committing to reserved instances, customers can save as much as 72% compared to pay-as-you-go pricing in some cases.
• Scope of Use: Reservations can be scoped at either the subscription or shared level, giving businesses control over how discounts are applied.

Benefits of Azure Reservations

• Highest Savings: For predictable workloads, reservations often provide the most substantial cost reductions.
• Stability: Reserved resources ensure availability, which is particularly beneficial for production workloads requiring consistent performance.
• Predictability: They are ideal for organizations that can accurately forecast their resource needs, allowing them to maximize the cost-benefit.

Comparing Azure Savings Plans and Azure Reservations

While both Savings Plans and Reservations aim to reduce costs, their differences lie in their scope, flexibility, and ideal use cases.

Scope and Flexibility

Savings Plans offer broader flexibility as they are not tied to specific resources or regions. This makes them suitable for businesses with unpredictable or fluctuating demands. In contrast, Reservations are resource-specific, focusing on organizations with stable and predictable workloads.

Discount Potential

Reservations generally deliver deeper discounts compared to Savings Plans. However, this comes at the cost of reduced flexibility. Savings Plans, while slightly less economical, compensate by allowing businesses to adapt their commitments to changing needs.

Commitment Terms

Both options offer one- and three-year term commitments. However, with Reservations, the commitment is for specific resources, whereas Savings Plans allow for a spend commitment across a wider range of services.

Ease of Management

Savings Plans automatically optimize discounts across eligible services, reducing the need for manual adjustments. Reservations require more upfront planning to ensure the correct resources are reserved, which can be a drawback for businesses with varying requirements.

Which Option is Right for Your Business?

Choosing between Azure Savings Plans and Azure Reservations depends largely on your organization’s workload patterns and cost management priorities.

When to Choose Azure Savings Plans

• Dynamic Workloads: If your business experiences variable resource usage, Savings Plans provide the flexibility needed to optimize costs.
• Unpredictable Growth: Organizations undergoing rapid or unpredictable growth can benefit from the adaptability of Savings Plans.
• Regional Independence: If your operations span multiple regions, Savings Plans allow you to leverage discounts across locations.

When to Choose Azure Reservations

• Stable Workloads: If you run consistent workloads, such as database operations or constant virtual machine usage, Reservations yield maximum savings.
• Long-Term Projects: For long-term projects or production environments, Reservations provide cost certainty and resource availability.
• High Savings Priority: If achieving the highest possible discount is your primary goal, Reservations are likely the better choice.

Conclusions

Both Azure Savings Plans and Azure Reservations are powerful tools for cutting cloud costs, each with its unique advantages. Savings Plans excel in flexibility and adaptability, making them ideal for dynamic and evolving workloads. Reservations, on the other hand, shine in scenarios where predictability and maximum savings are critical. Organizations can also consider blending the two approaches to strike a balance between flexibility and cost efficiency.

By working with an experienced partner to carefully assess workload patterns, regional requirements, and budget constraints, businesses can make an informed decision to optimize their Azure investments.

Reach out to get started with My IT Team Azure Services today!