Commitment-based discounts are among the most impactful cost optimisation levers available in Azure. Both Azure Savings Plans and Azure Reservations offer significant discounts over pay-as-you-go pricing, but they serve different scenarios and the distinction is not always obvious.
This post outlines what each commitment type offers, their key differences, and a practical framework for deciding which to use.
An Azure Reservation is a commitment to a specific resource type, size, and region for one or three years. In exchange, Azure offers discounts of up to 72% compared to pay-as-you-go.
Reservations are available for a wide range of services including:
The key characteristic of a reservation is its specificity. A reservation for a Standard_D4s_v5 in Australia East applies only to that VM size in that region. It does not apply to a Standard_D8s_v5 or a VM in Southeast Asia.
Azure Savings Plans, introduced in 2022, offer a more flexible commitment model. Rather than committing to a specific resource, you commit to a fixed hourly spend (for example, $5/hour) across eligible compute services for one or three years.
The savings plan discount applies automatically to any eligible compute usage across VM sizes, regions, and even across Azure services such as AKS, Azure Functions, and App Service.
Savings Plan discounts are slightly lower than equivalent reservation discounts (typically 15–65% depending on the term and service), in exchange for the flexibility.
| Dimension | Reservation | Savings Plan |
|---|---|---|
| Commitment | Specific resource, size, region | Hourly spend amount |
| Flexibility | Fixed to a specific resource and region | Applies across VM sizes, regions, and services |
| Discount | Up to 72% | Up to 65% |
| Best for | Stable, predictable workloads | Dynamic or diverse compute workloads |
| Exchange/Refund | Allowed with limits | Not exchangeable |
Use a Reservation when:
Use a Savings Plan when:
Azure Advisor provides reservation and savings plan recommendations based on your actual usage history. I recommend reviewing these before making any commitment.
Navigate to Azure Advisor > Cost to see recommendations including estimated annual savings, recommended term, and utilisation confidence based on the past 30 days of usage.
Reservations deliver the highest discount for stable, well-understood workloads. Savings Plans offer flexibility for environments that change frequently. In practice, a combination of both often yields the best outcome: reservations for core infrastructure and savings plans for dynamic compute. Azure Advisor removes much of the guesswork by surfacing recommendations backed by actual usage data.
