Important Changes to Azure Reservations

As we navigate the ever-evolving landscape of cloud computing, it’s crucial to stay informed about changes that could affect your organization’s financial planning and cloud strategy. A significant update is on the horizon for Microsoft Azure Reserved Virtual Machine Instances, and it’s one that demands immediate attention from business leaders in both IT and finance. In this blog post, we’ll delve into what changes are coming to Azure Virtual Machine Reservations and how Blue Mantis FinOps solutions can guide you through this transition to maximize your savings.

Understanding Azure Reservations

Before we dive into the changes, let’s briefly talk about what Azure Reservations are. Think of Azure Virtual Machine Reservations as a billing mechanism allowing your organization to commit to a certain amount of cloud resources over a one-year, three-year, or five-year period. By committing to an Azure Reservation, you can benefit from significantly reduced costs compared to pay-as-you-go pricing, making it an attractive option for long-term, consistent cloud resource usage.

Azure Reservations Help IT and Finance Leaders Alike With:

• Discounted rates: By committing to a specific term and region, an organization receives a pricing discount.
• Instance size flexibility: The reservation discount applies to all sizes within the virtual machine (VM) family and Azure region. This gives organizations the flexibility to increase and decrease virtual machine sizes as demand changes, while still realizing the reservation discount.

Additional flexibility in cloud resources can be achieved in Azure Virtual Machine Reservations through exchanges and cancellations. The ability to exchange and cancel reservations adds a layer of adaptability, crucial in the ever-changing landscape of cloud services.

The Following Table Outlines the Key Aspects of Exchanging and Cancelling Azure Reservations:

Aspect	Exchanging Azure Reservations	Terminating Azure Reservations
Service Type Flexibility	Exchanges allowed within the same type of service (e.g., VM to VM).	Not applicable as termination involves ending the reservation.
Process	Within the reservation, select the “Exchange” option. Enter the quantity to return. On the next page, enter the scope and quantity of the new reservations you wish to purchase. New reservations can have a different size, series, region, term, or payment frequency.	Within the reservation, select the “Return” option. Enter a reason for the return, then select the “Return reserved instance” button. Involves canceling the reservation and receiving a refund for any unused portion, subject to certain conditions.
Financial Considerations	New reservation must be of equal or greater value than the remaining commitment of the original reservation.	Refunds are limited to $50,000 on a rolling 12-month basis across all reservation returns.
Term Implications	The new reservation starts a fresh term from the point of exchange.	Cancelling a reservation ends its term.
Penalties and Limits	No penalty for exchanges. Unlimited exchanges allowed for reservations provisioned before January 1, 2024.	Microsoft is not charging a cancellation fee currently, however their documentation states that they reserve the right to charge a 12% early termination fee in the future.
Strategic Use	Useful for changing a virtual machine family to better match specifications to demand, or to upgrade to the latest generation virtual machine family.	Suitable when requirements change drastically and an exchange within the same service type is not feasible.

What Are the Changes to Microsoft’s Azure Reservations Policy?

In October 2022, Microsoft announced pivotal changes to its Azure Reservations policy, most notably that effective January 1, 2024, Azure Reservations will no longer be exchangeable. This marks a significant shift from the current flexibility that allows customers to adjust their reservations as their needs evolve.

Seize Your Opportunity to Save on Azure Reservations Before Time Runs Out

Here’s the positive aspect of the Microsoft policy change: if you act before January 1, 2024, you can still capitalize on the current benefits. For instance, if you have an existing reservation expiring in October 2024, you can exchange it now for a new 3-year term. This move not only locks in the 2023 price but also extends your reservation’s term, offering over two years of added pricing stability that won’t be available post-2024.

What Is the Grace Period for Existing Azure Reservation Customers?

Recognizing the impact of these changes, Microsoft is offering a grace period until July 1, 2024, for existing Azure Reservation customers. This period is a critical window for reassessing and adjusting your cloud strategy to align with the new policy.

Navigating Azure Reservation Changes with Blue Mantis FinOps Solutions

These changes, while significant, don’t have to be daunting. Blue Mantis FinOps solutions are specifically designed to help cloud customers navigate the complexities of Azure Reservations. Our expertise lies in optimizing your cloud investments, ensuring you get the most out of your Azure cloud investment.

If you’re considering new Azure Reservations or thinking about exchanging existing ones, our advice is clear: act before January 1, 2024. Post this date (even with the grace period), the flexibility to adjust or cancel reservations will no longer be as robust as it was in the past. For many businesses that rely on the Microsoft Azure cloud, these changes to Azure Reservations will adversely impact your financial planning.

The impending changes to Azure Reserved VM Instances represent a significant shift in how businesses will manage their cloud resources. By understanding these changes and acting swiftly, you can ensure that your organization continues to benefit from cost savings and optimal cloud resource management.

At Blue Mantis, our FinOps experts are ready to assist you in making informed decisions about your Azure Reservations. By partnering with us, you can potentially save up to 30% on your annual cloud costs. Don’t miss this critical opportunity to secure your savings and adapt to the upcoming changes in Azure Reservations. Contact us today to explore how the Blue Mantis FinOps team can support your journey through these changes and beyond.