Optimizing Cloud Pricing on AWS vs Azure

If you are willing to adopt a cloud solution but are unsure whether to choose AWS vs Azure, you are in good company. There are several components to take into account when seeing which cloud service provider is right for you including, compliance, security, architecture, manageability, support, and cost.

Although all these factors are important, making sense of and comparing cloud pricing can be highly complex. Many cloud vendors provide different pricing plans and change them frequently. If you are currently weighing-up AWS backup vs Azure backup, it is essential to be in the know regarding pricing strategies.

The Complexity of Cloud Pricing

Gartner research suggests that 95% of IT leaders and business find cloud billing the most confusing aspect of public cloud services. 

In truth, cloud computing is a melting pot of elements. This melting pot is characterized by various applications on various clouds with various service agreements. Also, these applications, clouds, and agreements, offer, for example, different storage capacities, over different input and output ratings on diverse data memory ranking. Making sense of these elements is difficult, and it was always going to be challenging to create a fixed cloud service price list.

Different Types of Cloud Pricing Schemes

Generally speaking, there are three types of pricing models:

  • Pure subscription-based models—services are charged based on cloud catalog and users are charged per mailbox, per month or per app license ordered. Users are billed for all the resources they signed up for, regardless of whether they are used or not.
  • Pay-as-you-go—users begin with a cost amount set at 0. This amount increases according to the services and resources they use.
  • Enterprise billing—calculated according to the number of active users assigned to a specific cloud subscription.

Most cloud providers offer combinations of these three models, with discount options included.

A Brief Overview of AWS vs Azure’s Pricing Discounts

Azure pricing includes:

  • Reserved instances—can reduce costs on a one to three-year contract.
  • Hybrid implementation—can save you up to 40% if you are using software on-premise and via cloud services.
  • Developer pricing for testing or DevOps—can reduce costs even further, especially if your organization is using Visual Studio.
  • Microsoft Enterprise Agreements—for large organizations that can arrange large discounts.  

AWS pricing includes:

  • On-demand pricing—a standard cost structure that provides no discounts.
  • Spot pricing—can be applied if it doesn’t matter where your processing is taking place. And, if you have data that needs processing without a set deadline. Amazon will run it whenever and where ever it chooses.
  • Reserved instances—provide discounts for contracts.
  • Dedicated hosts—applied if you have already paid licensing fees. You can reduce costs occasionally when you use something other than an on-demand server.

Ways to Manage Pricing and Save on Cloud Costs: AWS vs Azure

Microsoft Azure Discount Strategy


Used for short-term volatile workloads that can’t afford interruptions. Users are charged for the compute capacity (calculated in accordance with the size of the Azure virtual machine). This option tends to be the most expensive, as users do not have to provide up-front commitment. Azure bills per-second, the total is rounded down to the last minute.

Reserved VM Instances

As with AWS users need to commit for a 1 or 3-year period, towards the use of a given amount of compute capacity. Once an Azure RI is in use, it is dedicated and there won’t be a break in the process.

There only payment option for Azure RIs is single up-front payment. However, users can exchange RIs at their convenience and a prorated refund based on unused RI amount can be used to buy a new RI.

If users commit to too many Reserved Instances they can cancel and Microsoft will refund the RIs. Users will get a prorated refund calculated according to the unused amount minus an early termination fee of 12%.

Azure Hybrid Use Benefit (AHUB)

With all public cloud providers, when calculating the cost of compute capacity, you should consider the cost of the virtual machine and the cost of the operating system license. For example, a virtual machine running a free Linux distribution is going to be more affordable than one running the Windows operating system.

The AHUB is relevant for Windows Server licenses protected with software assurance. It lets organizations use their on-premises Windows licenses with Azure. This lets Azure Windows VM run at the cost of an Azure Linux VM.

The Azure Hybrid Benefit for Standard Edition licenses can be applied only once, either in Azure or on-premises. Datacenter Edition benefits let users simultaneously use both on-premises and in Azure, making it easier to move from on-premises to Azure.

You can use the Azure Hybrid Benefits Savings Calculator to see how to leverage your Windows licenses that are under software assurance.

Microsoft Enterprise Agreement (EA)

Microsoft provides special discounting to their enterprise customers. Microsoft offers some creative EA deal, particularly at renewal time.

AWS Discount Strategy


Users pay for compute capacity per second on per hours, according to which instances are running. Users do not need to pay up-front costs or make long-term commitments. They can increase or decrease compute capacity depending on the application and workload demands and pay the hourly rates for the instances they use.

Spot Instances

Useful for batch workloads that don’t demand a deadline, users can ask that they are run on spare capacity and gain a 90% discount on the list price.

Reserved instances

For applications that have predictable usage or steady state. Customers that can commit to using EC2 for a one- or three-year contract, may be entitled to a discount of up to 75% of the on-demand cost.

Dedicated hosts

A physical server for dedicated use. Companies can save money by making use of existing server-bound licenses, such as SQL Server, Windows Server, and SUSE Linux Enterprise Server (subject to the licensing terms). Users can purchase this as a reservation or on-demand for a cost saving of up to 70%.


The cost of both AWS and Azure varies according to the capacity, performance and data transfer need, and if an advance feature like load balancing and auto-scaling is required. The frequency of cloud instances is key when considering the pricing of Azure and AWS. While Microsoft charges for usage by rounding up to the nearest minute, Amazon rounds up to the closest hour. 

Ultimately, you will select a cloud service provider that meets the unique pricing needs and expectations of your business or enterprise. One way to choose is to start a free trial with both providers and see what each platform looks like.

Tao is a passionate software engineer who works in a leading big data analysis company in Silicon Valley. Previously Tao has worked in big IT companies such as IBM and Cisco. Tao has a MS degree in Computer Science from University of McGill and many years of experience as a teaching assistant for various computer science classes.

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