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Guide · Rate optimization

Reserved Instances or savings plans on Azure: which one to choose?

Both cut the bill sharply in exchange for a 1- or 3-year commitment. But they don't cover the same needs. The right answer is rarely one or the other: it is a combination.

By Aymeric Boucher · 20 October 2026 · 3 min read

Two ways to commit

  • Reserved Instance (RI): you commit to a specific resource, for example a VM family in a region, for 1 or 3 years. It is the biggest discount: according to Microsoft, up to 72% on some VMs over 3 years. In practice, about 50% on a prod VM.
  • Azure savings plan for compute: you commit to an hourly spend, for 1 or 3 years. The savings plan applies automatically, whatever the SKU and region, to eligible compute services (VMs, and some App Service, Functions, Container Instances offers…). The discount is slightly lower.

The comparison

Reserved InstanceSavings plan for compute
CommitmentA resource (SKU, region)An amount per hour
DiscountThe biggestSlightly lower
FlexibilityLow, except size flexibility within a VM seriesHigh: SKUs, regions, compute services
Services coveredVMs, and also databases, storage, data capacities…Compute only
ChangesExchanges and refunds possible, within limitsNo cancellation, no exchange
Best forStable, known workloadsChanging estates, migrations, modernization

Exchange and refund rules change regularly: always check the current terms before buying.

The order of application

When both coexist, Azure first applies reservations to the matching resources, then the savings plan to the rest of the eligible consumption. That lets you combine them without double counting. Azure Hybrid Benefit, which removes the cost of the Windows Server or SQL Server license, stacks with both.

When to choose a Reserved Instance

  • Very stable prod applications: ERP, databases, infrastructure foundations.
  • Services the savings plan doesn't cover: managed databases, storage (reserved capacity), data capacities such as Synapse or Fabric.
  • When no migration or decommissioning is planned over the commitment period.

When to choose a savings plan

  • A changing estate: new VM generations, frequent size changes.
  • An ongoing migration or modernization, for example from VMs to App Service.
  • Consumption spread across several regions.

The strategy that combines both

  1. Clean up before you commit: rightsizing, cleaning, auto Stop + Start on demand in non-prod. See our guide on Stop/Start.
  2. Measure the baseline: what runs all the time, by VM family and region.
  3. Cover the very stable baseline with RIs, the changing core with a savings plan, and leave the variable part on pay-as-you-go.
  4. Aim for 80%+ coverage of the baseline, with utilization close to 100%.
  5. Manage it over time: alerts before expiry, review of commitments at every architecture change.

The details that matter

  • Scope: a reservation can be shared across subscriptions or limited to one subscription, resource group or management group. Shared scope maximizes utilization.
  • Payment: monthly or upfront, for the same total cost.
  • Renewal: plan it ahead, so you don't fall back to pay-as-you-go without noticing.
  • Carbon footprint: a reservation lowers the bill, not physical consumption. See our GreenOps page.

FAQ

Can you combine Reserved Instances and savings plans?

Yes. Azure first applies reservations, then the savings plan to the rest of the eligible consumption. It is actually the most effective strategy for an estate with a stable part and a changing part.

Does Azure Hybrid Benefit stack with a reservation?

Yes. Azure Hybrid Benefit removes the cost of the Windows Server or SQL Server license, and stacks with a Reserved Instance as well as with a savings plan.

1-year or 3-year commitment?

Three years gives the biggest discount for very stable workloads. One year is more cautious when a migration, a modernization or a decommissioning is being considered.

Does monthly payment cost more?

No. On Azure, paying for a reservation or a savings plan monthly or upfront comes to the same total cost.

Aymeric Boucher has been a FinOps consultant for 8 years and is the founder of FinOps Pilote. He works with large international enterprises and SMEs on Azure and AWS, and has delivered more than €20M in cloud savings.

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