Azure - Changes to Reserved Instances

Updated 7th November 2023

An Azure Reserved Instance is a pricing plan that offers discounts for committing to use Azure compute capacity for a specific VM instance in a specified geographic region. The discount offered varies by VM instance depending on the age of the VM chosen and the term of 1 or 3 years. Typically savings for a 3 year term can be around 70%.

Microsoft allows for a Reserved Instance to be cancelled or moved to another VM instance. When a Reserved Instance is cancelled a percentage of the remaining term is refunded with an early cancellation fee of approximately 12%. The total cancelled commitment can’t exceed 50,000 USD in a 12-month rolling window for a billing profile or single enrolment.

The current cancellation policy for Reserved Instances isn’t changing.

However, from 1st January 2024 exchanges will be unavailable for all compute reservations: Azure Reserved Virtual Machine Instances, Azure Dedicated Host reservations, and Azure App Services reservations. Compute reservations purchased prior to January 1, 2024 will reserve the right to exchange one more time after the policy change comes into effect.

Microsoft announced an extended grace period to 1^st July 2024 to exchange existing Azure compute reservations. The policy start date for new reservations from 1^st January 2024 remains unchanged where new reservations can’t be cancelled until the expiry date. Further information can be found here

For information on exchanges see Self-service exchanges and refunds for Azure Reservations – Microsoft Cost Management | Microsoft Learn

Note: An alternative option to Reserved Instances is Savings Plans which was launched in October 2022. Please see our blog on Savings Plans to understand more.

Now is the ideal time to start reviewing your Azure usage and Reservations Instances to determine your best options going forward..

For more information on Azure Reserved Instances go to What are Azure Reservations? – Microsoft Cost Management | Microsoft Learn