Break down Azure VM pricing models and discounts

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Although there is a base price for the VM workload model you select, what you ultimately pay depends on a variety of options and configuration variables.

Not only do you choose between different Azure VM pricing models to reduce costs, but you can potentially take advantage of special discount opportunities. It depends on your workload types and requirements. This article details Azure pricing models and discounts, with a focus on VM-based workloads.

Azure VM pricing basics

Azure VM Hosting Service Pricing, Azure Virtual Machinesis based on three key factors:

  • The type of VM instance you choose. Azure offers hundreds of VM instance types. Each instance is configured with different memory, vCPU, and temporary storage resources, and some instance types also offer GPUs. Each instance type has a different pricing.
  • Runtime of your VM instance. In most cases, Azure charges for VMs by the minute. You only pay for the running time of a VM instance; there is no cost for instances that you configure but are not running.
  • The type of pricing model you choose. There are several pricing models for Azure VMs. The price per minute for virtual machines varies depending on the pricing model you select.

You can also pay the following additional charges for running Azure VMs:

  • Network data transfer. If data leaves the Azure cloud or moves to another Azure region, expect data egress charges.
  • Load balancing fees. Load balancers help manage traffic for Azure VMs.
  • Persistent storage. If your VMs require persistent storage, you will usually have to pay for it. Managed disks. Managed disks are billed separately from virtual machines.

These types of resources aren’t strictly necessary to run Azure VMs. You should consider additional costs on top of the base cost of your Azure VM instances.

Azure VM pricing models

A pricing model defines how long your Azure VM instance will run and the hourly cost to run it. When you select a pricing model, you agree to pay for your Azure VM instance for the associated time period.

Currently, Azure offers three pricing models for virtual machines.

Pay as you go

Pay-as-you-go is the simplest and most flexible payment model. It allows you to run virtual machines with no commitment to run them for a specified period. However, the pay-as-you-go pricing structure is higher than other pricing models.

This pattern makes the most sense for workloads with unpredictable capacity requirements, such as an application that you recently deployed to production and don’t yet know how many requests it will receive.

For example, a D2as v4 instance type would cost $70 per month, or about $0.10 per hour, if you run it with pay-as-you-go pricing.

Reserved Instances

This payment model saves money because it allows you to pay in advance for a predefined period of virtual machine execution. In most cases, you have to commit to one or three years of use.

The amount of money you save through Reserved Instances depends on the instance type you choose. Typically, you’ll save around 40% for a one-year Reserved Instance and 60% for a three-year Instance.

For example, the same D2as v4 instance described above would cost you $41.16 per month, or about $0.06 per hour, if you run it as a one-year Reserved Instance.

You can usually cancel a Reserved Instance through the Azure portal and receive a refund for unused time. In most cases, Azure deducts a cancellation fee from the refund. For this reason, choose Reserved Instances only if you’re sure you’ll need them for the duration you’ve selected.

Because Reserved Instances require an initial commitment to a fixed amount of usage, they are best suited for workloads with predictable capacity requirements, such as a line-of-business application where request rates are unlikely to fluctuate greatly.

Spot VMs

With Azure Spot Instances, customers buy a fixed amount of compute capacity, but they can’t control when their VM actually runs. Availability depends on Azure.

Spot Instances offer significant discounts of up to 90% over pay-as-you-go pricing. The D2as v4 instance described above costs about $7 per month, or about $0.01 per hour, as a Spot Instance.

Because Azure can choose to terminate them without warning, Spot Instances are only compatible with workloads that can tolerate downtime. For example, if you have a large batch of data to process and your analytics tools might stop and restart, Spot Instances might be a good choice. However, you wouldn’t want to use a Spot Instance to host a web application that needs to be always available.

Azure pricing discounts

In addition to choosing the right VM instance type and pricing model for your workloads, you may be able to lower your Azure bill with Azure discount promotions.

One option to consider is dev/test price. Azure offers discounts of up to 60% for VMs you use for dev/test, rather than production.

Another way to reduce Azure VM costs is to use Azure Hybrid Advantage. This program allows you to reuse licenses you already own for certain Microsoft products, including Windows, when running workloads in Azure. If you intend to run Windows VMs in Azure, Hybrid Benefit is worth exploring. However, Hybrid Benefit will not reduce your costs for Linux VMs.


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