What is Azure Hybrid Benefit and How Much Can You Save?

But back to this scenario: you’ve already bought a Windows Server licence for your on-premises setup, so it doesn’t make sense to pay again for the same licence in the cloud.

When creating your virtual machine in Azure, select the Hybrid Benefit option that allows you to apply your existing licence to the Azure VM. This removes the licence costs as you only pay for compute power (Linux rate with Windows VMs).

Azure Hybrid Benefit can lead to significant savings, especially when running multiple VMs or large workloads in Azure.

Azure Hybrid Benefit for Linux Virtual Machine

If you didn’t apply Azure Hybrid Benefit for Linux, you can apply it to your existing Linux virtual machines, waiving the OS rental fees. Thus, you’ll only need to concern yourself with the expenses coming with VM compute. This also benefits you when you're migrating an existing workload that is already licensed on-premise.

You bring your existing subscription (pre-existing Red Hat or SUSE licenses) into Azure rather than going with a PAYG model where you're paying for the subscription while maintaining your existing on-premise subscription, sweating the assets instead of paying double.

• Azure Hybrid Benefit can save you up to 56% on the latest Linux VMs.
• If combined with 3-year Azure Reserved Instances, you can save up to 76%.

Besides, Azure is the only cloud provider that allows you to convert or apply existing Linux VMs.

Azure Hybrid Benefit for Windows Server

If you have a Windows Server licence with Software Assurance, you can move the same number of cores from on-premises to the cloud on a one-to-one basis. This can be for either your new or preexisting virtual machines in Azure. There’s no complex conversion – you just match your on-premises cores to your Azure virtual machine cores.

For Windows Server, you can save up to 50% on virtual machine costs.

Now, Microsoft is flexible, giving you 180 days to step over to their cloud fully. Meaning, you can run the same Windows Server licence in your on-prem environment and Azure simultaneously. If you are mid-migration with your on-prem application and need more time, this is a great way to take advantage of this flexible term.

However, it’s important to note that this dual-use flexibility only applies if you’re using a Windows Server DataCenter licence with active Software Assurance. For Standard Edition licences, simultaneous use on both deployments is not allowed, meaning you must choose between on-premises or Azure, but not both.

To deploy or update existing VMs with Azure Hybrid Benefit, follow Microsoft’s documentation: https://learn.microsoft.com/en-gb/azure/virtual-machines/windows/hybrid-use-benefit-licensing

Check out the Azure Hybrid Benefit Savings Calculator if you want to get a sense of the cost savings for using Azure Hybrid Benefit for Windows Servers.

Azure Hybrid Benefit for Azure SQL Server

With SQL Server, the licensing rules differ depending on whether you’re using vCore-based/ PaaS services (e.g., Azure SQL Database, SQL Managed Instance) or running SQL Server on an Azure Virtual Machine (VM).

SQL in Azure Virtual Machines

So, let’s assume you were to take your SQL server and Windows workload to a VM in Azure. Without leveraging Azure Hybrid Benefit, you’d be paying the SQL Server Licence, the Windows Licence, and also for the base compute. But why pay for these two licences if you don’t have to? With hybrid benefits, you only pay for the VM’s base compute costs. 

The image below illustrates a SQL Enterprise Savings Example:

A key advantage of Azure Hybrid Benefit is the 1-to-4 vCPU exchange. For every 1 core of SQL Server Enterprise Edition, you get 4 vCPUs in SQL Managed Instance or Azure SQL Database (General Purpose), or 4 vCPUs of SQL Server Standard Edition on Azure virtual machines. 

Microsoft offers a 180-day migration window, allowing you to run SQL Server on-premises and in the cloud simultaneously. This six-month overlap ensures a smooth migration with minimal service disruption.

Azure SQL Database

For Azure SQL Database, Standard Edition maps 1-to-1 to General Purpose, and Enterprise Edition maps 1-to-1 to Business Critical. You can also use the 1-to-4 exchange, converting 1 Enterprise core into 4 General Purpose cores if you need more capacity but not high performance. This is a smart way to get more capacity without increasing costs.

Azure SQL Managed Instance

In General Purpose (Standard Edition), 1 on-premises core with Software Assurance covers 1 core in Azure, with the auto-failover group offering double capacity for passive failover without extra costs.

For example: 8 SQL Standard cores provide 16 cores – 8 for the main instance and 8 for failover (i.e., only active during disaster recovery).

For Business Critical (Enterprise Edition), licensing is also 1-to-1, including a primary node and a read-only node without extra licences. The auto-failover group ensures high availability while keeping licence costs low. If you need more capacity, you can use the 1-to-4 exchange, converting 1 Enterprise core to 4 general-purpose cores, helping you scale efficiently. 

Suggested read: Choosing between Azure SQL, SQL Managed instance or SQL Server

How much can you save with Azure Hybrid Benefit?

How much you can save depends on where you want to apply Azure hybrid benefit, which workloads, the region and other specific attributes (instance size, hours, amount of VMs, etc.). 

The table below shows examples of compute rates for Windows Server VMs, SQL Server VMs, Azure SQL Managed Instance, and Azure SQL Database. For this example, The region for deploying a D2 v3 serie is Central US.

Now, let’s compare the price of a Virtual Machine without Azure Hybrid Benefit versus a plan with the hybrid benefit.

Taking the region Central US and choosing Windows as our operating system (OS), and selecting the D2 v3 as a service instance 5 times, we get the following price: $686.20 (US dollars). 

See the image below:

When we decide to leverage Azure Hybrid Benefit the price changes; see the image below:

Instead of paying almost 700 US dollars, we’ve got a price of $350.40. In other words, we can save almost 50% by leveraging Azure Hybrid Benefit. Let that sink in...

What is the Azure Hybrid Benefit Calculator?

The Azure Hybrid Benefit Calculator is a Microsoft tool that helps you estimate the potential cost savings when leveraging Azure Hybrid Benefit when migrating to Azure. 

By filling in the details about your existing licences (e.g., Windows Server, SQL Server, Red Hat, or SUSE), your intended Azure workloads (VMs, SQL Database, Managed Instances, etc.), region, etc, the calculator shows you:

• Potential savings: It shows how reusing your existing licences can cut costs, instead of paying for new licences in Azure.
• Cost comparisons: You can see the difference in pricing between Hybrid Benefit and standard pay-as-you-go (PAYG) rate

It’s useful for budgeting and planning migrations, giving you a clear view of how it can reduce cloud costs.

You can try out the calculator here.

Merging Azure Hybrid Benefit with Reserved Instances

Combining the hybrid use benefit with Azure reservations will significantly reduce the cost of your Azure environments. 

Azure Reserved Instances (RIs) is an cloud computing cost model that allows customers to make advance purchases for cloud resources at a reduced price by committing to use compute capacity for a region and duration, usually 1 or 3 years.

Reserved instances are ideal for consistent workloads that need to be running continuously, say, a data centre use case or long-running apps, 24/7 on, all year round.

Now, if you combine reserved instances with Azure Hybrid Benefit you can save up to 80%.

Go (temporarily) Hybrid with Azure Hybrid Benefit

Not ready to move fully to Azure? That’s not an issue as Azure Hybrid Benefits and Software Assurance enable you to keep a copy of your database on a VM as a DR secondary.

Rather than maintaining a full DR data centre, you can let Microsoft handle it. Leave SQL Server on-premises as your primary and set up asynchronous replication to Azure. You can fail over to Azure for DR when needed.

Closing thoughts

All in all, Azure Hybrid Benefit offers a great way to save quickly on your cloud expenses and can a convenient way of migrating on-prem applications to the cloud. Alongside that, you get to be the one to decide the pace of your migration to either a hybrid cloud or 100% cloud-based.

Finally, it is worth checking out your inventory of licences that you already have. Perhaps you can reduce the cost of your Azure environment already. Who knows?