Three Ways to Save even if Your Azure Monetary Commit is Larger than you Need

The most obvious benefit of entering a Monetary Commit is, that it is often possible to get 3-5% discount on the commitment – meaning you get more Azure bang for the buck.

But what if you have made a commitment larger than your actual need?

For larger customers with a Microsoft EA (Enterprise Agreement) or SCE (Server Cloud Enrollment Agreement), there exists the option of agreeing to a Monetary Commitment for purchasing Azure Services.

#1: Your Azure Monetary Commit may be “True Down Eligible”

It is possible to elect for an annual commitment, that is true down eligible – meaning you can actually reduce it. If your agreement is true down eligible then just move on with that.

If not, make sure that Procurement is aware of this option next time they re-negotiate the EA or SCE.

#2: Buy Reservations for future use

If you have made a single Monetary Commitment, you’re on the hook for the whole amount.

This means that you have to pay Microsoft that amount. However just because you have to pay the full amount, it does not mean that you have to use the full amount during that period!

If you do not use the full commitment, make sure you use the remaining amount to buy reservations to cover future use. What you reserve at the end of year 3 will keep you covered for nearly 3 more years.

This doesn’t improve your cashflow, but it does improve your bottom line, as reservations can be activated and amortized over their full lifetime. This is critical for your CFO to know and understand.

#3: Continue saving

Don’t fall for the sunk cost fallacy, reduce your commitment going forward instead. I know it’s hard, but accept the fact that the commitment wasn’t well aligned with your needs and move on. Fight the tendency to give in to “well I’ve already paid, so I might as well find something to run there”.

There is no reason to just “use it up”, because in our experience, you’ll end up having those services for a lot longer than you planned – meaning you will have been throwing good money after bad, when you didn’t need to. This is most relevant for IT.

This last option will in itself not save you cashflow nor give you any bottom line effect this year – but it will certainly instill the financial prudence in the organization for long term cost efficiency.

Further Reading

You can read more about Monetary commitments in Microsoft’s thrilling 121 page Product Terms document (updated Monthly).

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New storage Elasticsearch tier in AWS

We all know the story of Goldilocks and the Three bears. One bed was too big, one bed was too small, and one was just right.

Well, until now in AWS for storage, it’s either been too big or too small (or too fast or too slow), with fast(ish) EBS and slow S3 being your choices. This has been a challenge for certain large-volume datasets that need fast performance, at least in the early phase.

An example of this has been log analytics. Something many of our customers use AWS (and specifically Elasticsearch) for.

Now, for log analytics at least, there is a “just right” option with UltraWarm storage tier for Elasticsearch. More about UltraWarm and Elasticsearch here.

Pricing wise, the UltraWarm Elasticsearch instances are about 70-120% more expensive than the non-UltraWarm PAYG instances, and can not be reserved at the moment. However, the UltraWarm managed storage is less than 1/5th the price of EBS SSD.

In other words, you can save up to 39% in some scenarios:

Is this a good business case for you? It depends, but we’ll be sure to include this savings opportunity in your Kostner SAVE analysis, if it does.

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A customer in the middle of a cloud journey to Azure asked me this question. They have not yet settled on all architectural decisions for their virtual server environment and they are not running full scale yet. A great question to ask – because one thing you do not want is to limit your flexibility and risk wasting money. After all, isn’t flexibility one of the key things cloud is all about?

Fortunately, the answer is in most cases straight forward:

"Start reserving now!"

There are four main reasons behind this:

  1. The savings on many reservations are so large that payback time is very short. Breakeven is often 5-6 months for a 1-year reservation and 9-12 months for a 3-year reservation.
  2. Most reservations can – at no cost – be changed to other reservations within a similar category of workload.
  3. Reservations for up to USD 50.000 per running 12 months may be canceled.
  4. As Azure fills up, the discount you get for reserving falls over time.

Payback Time on Reservations is Short

Most reservations offer 30-70% discount on an annual reservation.

If we take a 60% discount (typical on many virtual machines) this means that after 5 months on Pay-as-you-Go you will have paid more than the price you will pay for 12 months on a one-year reservation.

Reservations can be changed within the same category

Reservations can be changed within the same category.

This means that if you have made a reservation on ie. compute and you later find out that you will change which servers you are running, then you can change the reservation you made on one type of server to another – at no cost, as long as you are reserving for as much money or more than before.

This is true for most reservations but check this before you buy.
What this really means is that if you expect to use the same or more on ie. “Compute”, then it should not be a problem to buy your reservations now even if all architectural decisions are not made.

Frankly, we almost never experience companies reducing their spending. Most companies start using a new platform like Azure and don’t look back. They will put new things on Azure going forward and migrate relevant workload from on-premises. It is highly unlikely that your cloud spend will be smaller in 6 months than it is now. Even if whatever project you are currently working on should end up not becoming a runaway success, something else will most likely take its place.

Reservations for up to USD 50.000 may be Cancelled

Should the unlikely event happen that you end up with too many reservations this is most likely not a problem. You can cancel up to USD 50.000 per running 12 months. Microsoft reserves the right to charge you a 12% cancellation fee, a fee they are not charging at the time of writing. Why? Because they can resell the capacity at higher unit costs.

Discount levels drop over time

Microsoft has a really good pricing team. They effectively price cloud on a value-based pricing principle. Much like hotels they use advanced yield management algorithms to help drive the maximum revenue possible from the available capacity. What we have observed, is that over time, the discount offered for reserving instances drops. You can see this in FS (old) and FSv2 (current) instances, where the 3-year reservation discount for the old instances have dropped to 50.5%, and the same discount for the new is 64%.

Start reserving now!

Therefore, the answer is so straight forward. And we did not even mention the bonus benefit: you can pay your reservations monthly – it is no longer an upfront payment (although you can chose that, if you have committed spend you need to use, or just too much cash laying around)

The situations where you need to be careful is if you are considering stopping your cloud journey within a very short time frame and you are thinking of making reservations exceeding the 50.000 USD threshold. Again, think across the organization – not project or team-specific.

Actually, we would argue that the decision to start buying reservations is not the tricky one. The challenge will be to find out which reservations to buy – and to ensure that you are covering all areas where you can benefit from reservations. And not buying too many.

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You have probably heard about reservations for servers in Azure at this point. You may even be using them to some extent.

What you may not know, is that there are 17 other categories of services you can reserve in Azure right now, promising 30-70% savings compared to pay-as-you-go.

Get our 3 best tips in this blogpost.

In this blog we will share with you the three categories of reservations where our customers could be saving the most money (but are not aware of it):

  1. Linux licences,
  2. SQL Server Elastic Pools, and
  3. SQL Data Warehouse

Linux Licenses

Few customers realize that you can buy reservations for Linux license(we know, we know, not technically a license, but, in practice you have to pay to use a piece of software… so we’ll use that term) to cover SUSE and Red Hat.

An example is SUSE Linux Enterprise Server for SAP Priority. This would be in use for many different SAP use cases, and we see many customers where this saving is applicable.

So how much could you save? A lot. Around 64% actually. 64% of what? Well, for medium server sizes with 5+vCPU the annual savings are about €1200. Per license reservation.

For a typical customer with €50.000 monthly spend, the annual savings are often around €20.000-€30.000.

SQL Server Elastic Pools

A relatively new, and certainly under-utilized, reservation category is SQL Server Elastic Pools. Now not all pools are equal, you are going to need a vCore-type elastic pool. If you are using eDTU based pools today, or are still running stand-alone SQL Server databases, now is a great time to consider making that switch. It is especially relevant if you have a moderately or larger sized SQL Server environment in Azure.

Savings are around 30-35%, depending on region. In real money, even for the smallest pool that is €1500 per year.

Please note that this reservation type is also available for some stand-alone SQL Server databases.

Azure SQL Data Warehouse

A favorite among those who develop Business Intelligence or other Analytics solutions in Azure, is the use of Azure SQL Data Warehouse. I use that name here, as that is the name you will find in the Azure Portal, in marketing material and on Microsoft’s website, it is now known as Azure Synapse Analytics.

What has yet to become a favorite, but certainly should be, is using reservations to cover your Azure SQL Data Warehouse consumption.

Reservations are bought in blocks of DW100c’s – an hourly consumption metric. So, if your services use 1500 DW100c’s continuously, you would reserve 15 units of DW100c. A pitfall here is that many customers vary the size of their instances over time – and spin up additional instances in some periods. You will want to control for this when making reservations.

Learn more about Savings in Azure

Next really depends on the purpose of your efforts:

If you want to become an expert and learn all the details of how to save on Azure reservations Microsoft provides you with a thorough description. 

Or learn more ways to save on Azure by joining our free webinar.

 

… and lastly, if what you are looking for is a way to save on Azure, with limited time spent from your side then book a meeting and learn about how we might help you.

 

Remember

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