What is Reserved Instance in Azure: Explained Simply

A Reserved Instance in Azure is a way to pre-pay for virtual machines or other resources for a one- or three-year term, which saves money compared to pay-as-you-go pricing. It helps you get a discount by committing to use specific resources in advance.

How It Works

Think of a Reserved Instance like booking a hotel room for a whole year instead of paying daily. You commit to using a specific Azure resource, like a virtual machine, for a set time (one or three years). In return, Azure gives you a big discount compared to paying each hour as you go.

This works because Azure can plan its capacity better when customers commit ahead. You pay upfront or monthly, and the reserved pricing applies automatically to matching resources in your subscription. If you stop using the resource, you still pay for the reservation, just like a prepaid hotel room.

Example

This example shows how to purchase a Reserved Instance for a virtual machine using Azure CLI. It reserves a VM for one year to save costs.

bash

az reservations reservation-order create --reserved-resource-type VirtualMachines --sku Standard_D2s_v3 --term P1Y --billing-scope /subscriptions/{subscription-id} --quantity 1

Output

Reservation order created successfully with ID: xxxxxxxx-xxxx-xxxx-xxxx-xxxxxxxxxxxx

When to Use

Use Reserved Instances when you know you will run certain Azure resources continuously for a long time, like production servers or databases. This helps reduce costs significantly.

For example, if you have a web app that needs a virtual machine running 24/7, buying a Reserved Instance saves money compared to paying hourly rates. It is less useful for short-term or unpredictable workloads.

Key Points

• Reserved Instances require a 1- or 3-year commitment.
• They offer up to 72% savings compared to pay-as-you-go prices.
• Applicable to virtual machines, SQL databases, and other Azure services.
• Reservations apply automatically to matching resources in your subscription.
• You still pay even if you stop using the resource during the term.

Key Takeaways

Reserved Instances in Azure save money by pre-paying for resources over 1 or 3 years.

They are best for steady, predictable workloads running continuously.

You commit to a resource type and size, and the discount applies automatically.

Stopping usage does not stop the payment for the reserved term.

Use Azure CLI or portal to purchase and manage Reserved Instances.