Tips: Azure Reserve Instance Calculation

Navigating the Azure calculator can be quite perplexing, especially when it comes to understanding the terms related to costing. Unfortunately, Microsoft’s documentation on this topic isn’t as clear as it could be, which can lead to misunderstandings and potentially costly mistakes for users.

For instance, I encountered confusion around the “Upfront Cost” and “Monthly Cost” options when selecting a 1-year reserved instance and choosing “Upfront” from the “compute payment options.” Despite the selection, the average monthly payment remains unchanged, while only the Upfront Cost and Monthly Cost at the bottom of the calculator adjust, as illustrated in Picture 1. This lack of clarity can easily lead to misinterpretations and poor decision-making, which could have serious implications for a company.

Picture 1: A screenshot from the Azure Calculator specifically on the Reservation section.

As you can see from Picture 1, I selected 1 year reserve instance. The total Upfront cost (whatever that means) is $44,985.93 and the monthly cost (consumption cost) is $4,298.24. I have been kind of confused with the separation of the 2 costs and aren't we good by just paying only monthly consumption cost?

The actual calculation for the monthly cost is per below:

Reserve Instance Cost (1 year subscription): $44,985.93/12 = $3,748.83

Consumption Cost (monthly recurring and may fluctuate): $4,298.24

Total Cost per month: $3,748.83 + $4,298.24 = $8,047.07

If anyone thought that you only have to pay for the "Monthly Cost" only will fall into the trap of surprise by the end of the month when Microsoft issues the invoice.