From February 1st, 2027 – Azure Reservations will no longer be eligible* to be exchanged if the service also has a Savings Plan available. This applies to:
- Azure Virtual Machines
- Azure App Service
- Azure SQL Database
- and “similar services”.
*Reservations purchased before February 1, 2027, keep the right to one final exchange.
Equally, from that date any additional compute or database services that also become available for a Savings Plan will be subject to this change. Instance Size Flexibility isn’t impacted by this change.
The following are excluded from the change:
- Reservations for products or services that are deprecated and approaching end of life.
- Reservations for products and services that aren’t covered by savings plans, such as Azure VMware Solution. If you have a reservation for Azure VMware Solution, this policy change doesn’t affect it.
- Cloud environments that don’t currently support savings plans.
Microsoft initially announced this change in October 2022 with a date of Jan 1, 2024. That was then pushed back to July 1, 2024 and then postponed indefinitely – with a promise of 6 months notice before it would be implemented again…and that’s what Microsoft have given. Could we see another postponement? Perhaps, but it seems unlikley tbh.
It’s clear that Microsoft want Savings Plans to be the primary option for organisations so here’s a quick overview if you’re not familiar:
| Feature | Azure Reserved Instances | Azure Savings Plans |
|---|---|---|
| Commitment | Commit to a specific Azure resource (e.g. VM family, SQL Database, App Service) | Commit to an hourly spend amount on eligible compute & database services |
| Term | 1 or 3 years | 1 or 3 years |
| Discount | Typically offers the highest discount when usage is stable | Lower maximum discount, but greater flexibility |
| Flexibility | Low – tied to the purchased resource | High – discounts automatically apply across eligible compute resources |
| Changing VM Size | Allowed within instance size flexibility rules for some services | No action required |
| Changing VM Family | Previously possible through Reservation exchanges (being phased out) | No action required |
| Changing Region | May require a Reservation exchange (being phased out) | No action required |
| Workload Changes | Best suited to stable, predictable workloads | Designed for dynamic, changing cloud environments |
| Administration | Requires ongoing monitoring and optimisation to ensure Reservations still match usage | Much lower administrative overhead once purchased |
| Best For | Long-running production workloads with predictable resource requirements | Organisations with frequently changing compute usage, autoscaling or modern cloud architectures |
| Risk | Higher risk of underutilisation if workloads change | Lower risk, as discounts follow eligible usage automatically |
FinOps impact
The ability to exchange Reserved Instances has been part of mature Azure commitment strategies for quite some time but this is bringing much of that to an end. Strategies will need to be reviewed and a decision made on whether Savings Plans are now a better option, even with the potential loss of discount.
Make sure you communicate this change internally and work to update your governance and strategy asap.
You can see the Microsoft Learn page, with examples, here – Changes to the Azure reservation exchange policy – Microsoft Cost Management | Microsoft Learn
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