Azure Savings Plans for Compute

Azure Savings Plans for Compute offer up to 65% cost reduction on eligible compute services. You commit to a fixed hourly spend for 1 or 3 years. In return, Azure applies discounted rates to your usage. Unlike Reserved Instances, savings plans are flexible and ideal for dynamic workloads. 

The maximum discount available through Azure Savings Plans is 65%, but actual discounts vary depending on the service and region. Expect savings to range between 11% and 65%. 

🔍 What Azure Services Are Covered 

Savings plans apply to: 

• Virtual Machines (most series, most regions, except BareMetal and Av1 series) 

• Azure App Services (Premium v3, Isolated v2) 

• Azure Functions Premium Plan 

• Azure Container Instances 

• Azure Container Apps 

• Azure Dedicated Host 

• Azure Spring Apps for Enterprise 

Important notes:

• Not included: Software licenses, storage, networking. 
• For an updated list of services, visit savings plan-eligible services. 
• As of writing this blog post, there is no savings plan for other Azure service.  

📍 Understanding Scope in Azure Savings Plans 

The scope of a savings plan defines where its cost-saving benefits are applied. Choosing the right scope is key to maximizing utilization. 

Scope Options 

• Resource Group Scope: Applies only to eligible resources within a specific resource group. Use for tightly scoped workloads. 

• Subscription Scope: Applies to all eligible resources in a single subscription. Useful for isolated projects or departments. 

• Management Group Scope: Applies to all eligible resources in subscriptions under a selected management group, as long as they share the same billing profile. 

• Shared Scope: Applies across all eligible resources in all subscriptions under the same billing profile or EA enrollment. Recommended for most organizations to ensure maximum coverage and flexibility. 

Scope Priority 

When Azure applies savings plan benefits, it follows this order: 

1. Resource Group 

2. Subscription 

3. Management Group 

4. Shared 

Changing Scope 

You can change the scope at any time via the Azure Portal. It doesn’t affect your term or commitment amount. 

Use Shared Scope unless you have a specific reason to isolate usage. 

🎯 How Benefits Are Applied 

Azure applies savings plan benefits automatically to eligible usage: 

1. First to matching usage in the selected scope. 

2. Then to the most expensive eligible usage first. 

3. Remaining usage is billed at pay-as-you-go rates. 

Notes on Benefit Application 

• Reservations First: If you have both VM reservations and savings plans, Azure applies reservation benefits first. Reservations are more restrictive but offer deeper discounts. 

• Multiple Savings Plans: When multiple savings plans exist: 
  • Azure applies 3-year plans before 1-year plans to maximize savings. 
  • Azure applies more restrictively scoped plans first to reduce waste. 

• Use-it-or-lose-it: Each hour’s benefit can’t be rolled over to another hour. 

🧮 How to Calculate Your Commitment 

Finding out how much to commit per hour is probably the most important decision when purchasing a savings plan. Below is an overview of the steps to calculate your commitment.  

1. Export compute usage from Azure Cost Management. 

2. Calculate average hourly spend: 
   • Average Hourly Spend = Total Compute Spend / Total Hours 
3. Adjust for growth if applicable (e.g., +10-20%). 

4. Commit to 50-80% of the adjusted average. 
5. Monitor the savings plan utilization and repeat the steps to achieve desired discounts.

Example: 

• 6-month spend = $52,560 
• Hours = 4,380 
• Average = $12/hour 
• Growth = 10% → $13.20 
• Commit = 80% → $10.56/hour 

Azure Advisor also provides savings plan commitment recommendations based on your compute resources usage. Learn more how to use Azure Advisor for calculating your commitment here.  

⚠️ Cancellation Policy 

Savings plans cannot be canceled or exchanged for Azure Reservations. All purchases are final.  

✅ Best Practices 

1. Analyze Usage 

Use Azure Cost Management to review 6-12 months of compute usage. Identify average hourly spend. 

2. Start Small 

Commit to 50-80% of your average hourly spend. Add more later if needed. 

3. Use Shared Scope 

Maximize utilization across the billing profile. Avoid idle commitments. 

4. Combine with Reserved Instances 

Use RIs for stable workloads. Use savings plans for variable workloads. 

5. Monitor Utilization 

Track how much of your commitment is used. Adjust future purchases accordingly. 

6. Use Azure Advisor 

Get personalized recommendations based on actual usage. 

💡Conclusions 

Azure Savings Plans are a smart way to cut costs without locking into specific resources. Use them strategically. Start small. Monitor. Adjust. 

Need help calculating your commitment or setting up a plan? Let’s talk. 

[The article is written by me, assisted by AI]