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Microsoft Delivers Reserved Instances For Azure

Azure customers for the first time can enter one- and three-year contracts for spending discounts. AWS and Google have long offered such sustained usage plans.

Microsoft made generally available reserved instances for its Azure cloud on Thursday, allowing its Infrastructure-as-a-Service customers to save on their virtual machine spending through one- and three-year contracts.

Those sustained usage discounts for pre-booked capacity yield savings for customers of 72 percent compared to pay-as-you-go prices, wrote Takeshi Numoto, corporate vice president for cloud and enterprise, on a Microsoft blog.

Hyperscale competitors Google Cloud Platform and Amazon Web Services have long offered long-term cloud usage contracts as a payment option to their customers, whereas Microsoft's primary discounting vehicle in the past has been Enterprise Agreements.

[Related: New Offering Helps Microsoft Partners Bundle Services Directly Into Azure Marketplace]

"Azure RIs give you price predictability and help improve your budgeting and forecasting. Azure RIs also provide unprecedented flexibility should your business needs change," Numoto said.

That flexibility involves allowing customers to exchange reserved instances, to change regions or instance family types, or to cancel instances at any point during the contract for a refund, he said.

Azure reserved instances were introduced in a preview program in September at the Microsoft Ignite conference.

"Our customer base has a fairly diverse set of financial stakeholders, and this latest offering caters to a specific niche that we’ve heard from loudly," said Reed Wiedower, CTO at New Signature, a Microsoft partner based in Washington, D.C.

While many customers are looking to shift from capital to operating expenses, just as many have formed budgets around yearly, or even multi-year, spends, and want to pay in advance for extended Azure consumption.

Reserved instances deliver to those companies a solution that allows them to lock in virtual machines at a lower price and be confident their costs won’t shift over time.

"Of course, you have to pay upfront, rather than by usage," Wiedower told CRN. "But these organizations are already used to large cash expenditures on a fixed pattern, so it allows us to map to their needs more efficiently."

New Signature believes as cloud resources increasingly become commoditized, the industry will continue a shift to a billing model that's much like a utility, where customers are metered and pay for consumption.

But that shift could take years to complete, especially for large enterprises, Weidower said. Reserved instances bridge the gap between that model and the legacy purchase motion.

"If that’s the sticking point to getting a customer to adopt the use of the public cloud, I’d rather have them pay the money up front, shift workloads, and then revisit the Capex/Opex story at a future date," Wiedower told CRN.

Availability of reserved instances for compute will make Azure more attractive to customers, some with existing Enterprise Agreements, looking to leverage more-advanced services up the stack, said Eric Stoltze, director of cloud infrastructure services at Neudesic, a partner based in Irvine, Calif.

As Microsoft continues to focus on Platform-as-a-Service and edge computing, the predictable cost structure for infrastructure will ’enable enterprises to take advantage of the new and emerging cloud technologies,’ Stoltze told CRN.

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