Traditionally, Azure VMs have been purchased on a monthly basis. A few years ago, Microsoft introduced Azure Reserved VM Instances (RIs) as a way to let an organization buy a VM at a reduced cost in exchange for an upfront payment of a one- or three-year term.
Azure Reserved VM Instances (RIs), are billing plans under which Azure customers may purchase VMs on a monthly basis or on prepaid one- or three-year terms. RIs are not tied to a specific VM, but to VMs of a specific size*; therefore, RIs can be reapplied to a VM that replaces a VM that was billed under an RI, which reduces the risk of having to cancel an RI and suffer a financial penalty.
Unlike cancellations, an exchange of one RI for another, which one might want to do if scaling a VM a larger size*, can be done with no financial penalty.
Recently, Microsoft added monthly payment options to their RIs. Try as I might, now that the monthly payment option is available, I’ve been unable to find a reason to buy VMs on a long-term RI; there are no additional cost savings in their long-term agreements, and if you commit to a one- or three-year plan and desire to cancel, you will be refunded the prorated amount of your unused financial commitment, minus an early termination fee of 12 percent.
However, if you choose to pay monthly and desire to cancel your RI, Microsoft might apply a cancellation fee to the future committed payments that are canceled. Or maybe they won’t?
My recommendation is to buy all VMs on billed-monthly RIs.
* “Size” is shorthand for the hardware resources assigned to a VM – the amount of RAM, disk, processing power, etc.