How does Azure VM pricing work?

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Hosting workloads in the public cloud offers far greater flexibility than on-premises hardware. Azure virtual machines allow you to take advantage of the elasticity of cloud computing to save money while optimizing performance and availability.

But it takes some effort to achieve those savings.

Azure VM pricing varies dramatically according to multiple factors, some more obvious than others. There's a surprising amount of layers and variables involved in understanding exactly what you should be paying for a virtual machine that suits your requirements.

One you've gone over the following steps, you'll have a good understanding of how Azure VM pricing works and what you'll need to consider when it comes time to purchase.

Choose the right VM series for your needs

Microsoft offers a variety of virtual machine sizes in Azure, which are grouped into 'series', to accommodate for a broad range of use cases.

They fall into five main categories:

  • General purpose
  • Compute optimized
  • Memory optimized
  • Storage optimized
  • GPU optimized (for graphics-heavy workloads such as rendering and video editing)

Here's a chart comparing the major VM series and their starting prices. Take the time to familiarize yourself with the different options; it might be a dry read, but it could save you a ton of money down the line.

Read how the cloud team at ShareGate took advantage of B-series burstable VMs to save a ton of money

Azure VM series comparison chart

VM seriesTypeTypical use casesPrice starting at
A-seriesGeneral purposeDev and test environments$14.96 per month
B-seriesGeneral purposeWorkloads with typically low usage and occasional spikes
DC-series General purposeWorkloads with high data security requirements$62.61 /per month
E-seriesMemory optimizedRelational database servers, in-memory analytics, caching$117.74 /per month
F-series Compute optimizedAnalytics, web servers, batch processing, gaming servers$45.79 /per month
H-seriesCompute optimizedLarge-scale modelling and simulations (e.g. weather modelling, quantum simulations)$743.79 /per month
Lsv2-seriesStorage optimizedData warehousing, transactional databases, NoSQL databases (e.g. Redis)$583.07 /per month
M-seriesCompute optimizedLarge in-memory workloads (SAP certified for SAP HANA and OLAP)$1,435.71 /per month
N-seriesGPU optimizedAI, deep learning, video editing, simulations$840.96 /per month

For a complete list of available VM sizes and prices (there are dozens of options in some series), see documentation for Linux VM pricing and Windows VM pricing.

Pick the most cost-effective pricing plan

In line with the flexibility you get from virtualization, Microsoft offers two main ways to pay for Azure VMs:

  • Pay-as-you-go
  • Reservations


Pay-as-you-go VM pricing can be likened to a taxi meter: you pay only for the time and resources you actually use. In PAYG scenarios, Microsoft will compute the capacity that you use by the second. If you decide to stop using the service, you can easily do so at any time. There are no long term contracts to sign and there are no upfront costs.

You can also add more capacity as you need it, or stop paying for capacity that you don't use.

When to choose PAYG pricing for your VMs

  • Applications and workloads with unpredictable utilization patterns that can't be shut down
  • Proof of concepts for apps running on Azure for the first time
  • Small environments and one-off projects with minimal services

Reserved instances

If pay-as-you-go is like riding a cab with the meter on, purchasing a virtual machine reserved instance is like renting a car for an entire week. In a nutshell, you commit to leasing a virtual machine (or set of virtual machines) for a set amount of time—1 or 3 years—and pay for it upfront.

If you already know that you'll be needing your VM for a longer period of time, it's almost always a good idea to pay upfront. Judicious use of reservations could save you up to 72% compared to PAYG pricing.

Judicious use of Azure virtual machine reservations could save you up to 72% compared to pay-as-you-go pricing

When to use reserved VM instances

  • For workloads with predictable utilization patterns
  • For permanent and long-term applications and services

Things to know about Azure VM reservations

  • Reservations can be applied to both Windows and Linux VMs, but the way the discount applies varies slightly in either case.
  • Reservations apply to your VMs' compute costs. Network and storage costs will be charged at the standard rate.
  • In most cases, reservations cover the infrastructure portion of a VM's cost.
  • Reservations don't just apply to the VM deployment itself, but also to certain services running on the VM. When purchasing a VM, the services affected by the discount will be determined by the instance size flexibility setting you select.

Leverage available discounts

In addition to the different VM series and pricing plans available, you can also apply discounts to further optimize the price you end up paying for your Azure virtual machines.

  • The Azure Hybrid Benefit is an additional discount offered for those who have on-premises SQL Server or Windows Server licenses. You will pay a lower rate when migrating to Azure virtual machines, Azure SQL Database, or SQL Server on Azure.
  • Another option you should be taking advantage of as much as possible is Azure's DevTest pricing. Combine that discount with your A-series dev/test VMs for ultra cost-effective non-production environments.

Here's a price comparison for a general-purpose Azure VM with two virtual CPUs and 8GB of RAM. As you can see, reservations and discounts can really make a difference.

Standard priceDiscounted price
Pay-as-you-go$0.188 per hour$0.037 per hour
1-year reserved instance$0.1468 per hour$0.055 per hour
3-year reserved instance$0.1289 per hour$0.096 per hour

Apply the Azure DevTest discount to A-series virtual machines for ultra cost-effective non-production environments.

In addition to the above, keep in mind that Azure virtual machine pricing isn't just about the VM. You're also paying for storage, disaster recovery and backup options, replication, IP addresses, and other related services and resources.

Let's take a closer look at some common VM add-ons that'll impact pricing:

  • Virtual hard disks. The cost of virtual hard disks is not included in your Azure virtual machine fees. This is one of the more significant add-on costs when you get an Azure VM.
  • Networking. Every appliance that you put on your virtual machine will need an IP address, and that will cost you. Things like VPN gateways, web application gateways, and a load balancer will have its own IP address.
  • Backup. On Azure, there are two charges for backup. The first is for blob storage where your backups are to be stored. Then you also have the instance charge that will roughly cost around $10 per instance (which amounts to 50 GB to 500 GB of backup). If you have less than that range, you are charged for half an instance. If you consume more than 500 GB, then you will be charged for multiple instances. For example, if you have 1,000 GB of disks, then you will be paying for two instances.
  • Disaster recovery. You will also need to add disaster recovery. You have to pay for Azure to replicate your VMs and store the copy in another region. You pay for the virtual machine disk storage cost and the processing fee. Azure's Site Recovery service also charges for every replicated machine.
  • Administration and management. Azure will charge you if you use Azure Monitor, Network Watcher, Log Analytics, and Security Center. Each of these modules can be used to manage your VMs.

Understand service pricing to maximize your Azure spend

When it comes to choosing the right Azure VM, familiarizing yourself with the complexities of service pricing can pay off. To get the best price for your VMs, make sure you:

  • Choose the right VM series for your use case
  • Pay up-front for a reserved instance whenever possible
  • Take advantage of available discounts such as Azure Hybrid Benefit and DevTest pricing
  • Account for all related services that will be incurring costs on your VM

Optimize your Azure environment for big savings

Looking for ways to save money on Azure? The Ultimate Azure cost optimization checklist for cloud teams will help you thoroughly audit your environment for sources of wasted spend.

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