Solved: VPN Gateway Pricing Explained: Why the Basic Tier is So Cheap

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🚀 Executive Summary

TL;DR: The significant price difference between Azure’s Basic VPN Gateway and higher SKUs is justified by enhanced throughput, built-in redundancy, BGP support, and a critical Service Level Agreement (SLA) for production workloads. For complex or large-scale connectivity needs, Azure Virtual WAN offers a scalable and automated alternative, while third-party Network Virtual Appliances (NVAs) provide specialized features at the cost of increased management overhead.

🎯 Key Takeaways

The price disparity in Azure VPN Gateways is primarily driven by aggregate throughput, built-in redundancy (active-standby, Zone-Redundant for AZ SKUs), BGP support, and the presence of an SLA, all of which are absent or limited in the Basic SKU.
Azure Virtual WAN provides a scalable, automated, and global connectivity solution for organizations with numerous branch offices or complex hybrid cloud scenarios, often leading to a lower total cost of ownership compared to managing many individual VPN Gateways.
Third-party Network Virtual Appliances (NVAs) like pfSense offer advanced routing, firewall features, and niche cost optimization for specific use cases, but require increased management overhead and a deeper understanding of network configuration.

Navigating Azure’s VPN Gateway SKUs can be perplexing, especially when confronted with the vast price disparity between the Basic tier and its more robust siblings like VpnGw1, VpnGw2, and beyond. This post demystifies these differences, explaining why the cost gap exists and exploring alternative solutions you might not have considered for your cloud connectivity needs.

Symptoms: The Azure VPN Gateway Price Conundrum

Many IT professionals encounter a significant sticker shock when comparing Azure’s VPN Gateway pricing. The Basic SKU often appears to be orders of magnitude cheaper than VpnGw1, VpnGw2, and higher tiers. This seemingly arbitrary jump in cost can lead to several questions:

Why such a massive price difference? What hidden features or performance metrics justify this exponential increase in cost?
Am I overpaying? Is the Basic SKU sufficient for my needs, or am I missing critical functionalities by choosing it?
Are there other, more cost-effective solutions? For my specific use case (e.g., connecting a branch office, hybrid cloud, developer VPN), could another Azure service or even a third-party solution provide better value?

The core of the problem lies in understanding the nuanced capabilities, performance guarantees, and redundancy features that differentiate each VPN Gateway SKU, as well as recognizing scenarios where native Azure VPN Gateways might not be the optimal fit.

Solution 1: Deciphering Azure VPN Gateway SKUs – Capabilities and Cost Drivers

The price gap primarily stems from significant differences in throughput, features, redundancy, and service level agreements (SLAs). The Basic SKU is an entry-level option, designed for non-production workloads, development/testing environments, or very low-bandwidth production needs.

Key Differentiators Explaining the Price Gap:

Aggregate Throughput: This is the most significant factor. Higher SKUs offer substantially greater aggregate bandwidth for all VPN connections (Site-to-Site, Point-to-Site).
Redundancy and Reliability: Basic SKUs lack built-in redundancy within Azure’s fabric. Higher SKUs are deployed in an active-standby configuration, providing high availability. VpnGw* SKUs also support Zone-Redundant deployments for even greater resilience.
IP-based Gateway: Basic is policy-based only, whereas VpnGw1 and above are route-based, enabling more flexible routing (e.g., BGP).
Number of Site-to-Site Tunnels: Basic supports only 10 tunnels, while higher SKUs support many more.
Number of Point-to-Site Clients: Basic supports only 128 P2S clients, significantly less than higher tiers.
BGP Support: Essential for complex routing scenarios and dynamic route exchange. Basic does not support BGP.
ExpressRoute/VPN Coexistence: Only available on specific higher SKUs.
SLA: Basic SKU does not have an SLA. VpnGw1 and higher typically offer 99.95% SLA for availability.

Azure VPN Gateway SKU Comparison: Basic vs. VpnGw1

To illustrate the value proposition, let’s compare the Basic SKU with VpnGw1, which is often the next step up for production workloads.


Feature/Metric	Basic SKU	VpnGw1 SKU
Aggregate Throughput	~100 Mbps	~650 Mbps
Active-Standby Redundancy	No	Yes
Zone-Redundant Deployment	No	No (VpnGw1AZ/VpnGw2AZ and higher do)
SLA	None	99.95%
IP-based Routing (Route-based)	No (Policy-based only)	Yes
BGP Support	No	Yes
Max Site-to-Site Tunnels	10	30
Max Point-to-Site Clients	128	250
ExpressRoute/VPN Coexistence	No	No (VpnGw2 and higher do)

Example: Deploying Different VPN Gateway SKUs with Azure PowerShell

The SKU selection is a critical parameter during deployment. Here’s how you’d specify it:

# Define variables
$ResourceGroupName = "my-resource-group"
$VNetName = "my-vnet"
$GatewaySubnetName = "GatewaySubnet" # Must be named GatewaySubnet
$PublicIPNameBasic = "my-vpn-gw-pip-basic"
$PublicIPNameVpnGw1 = "my-vpn-gw-pip-vpngw1"
$Location = "eastus"

# Get VNet
$vnet = Get-AzVirtualNetwork -Name $VNetName -ResourceGroupName $ResourceGroupName

# Create a Public IP for Basic SKU
$pipBasic = New-AzPublicIpAddress -Name $PublicIPNameBasic -ResourceGroupName $ResourceGroupName -Location $Location -AllocationMethod Dynamic

# Create a Public IP for VpnGw1 SKU
$pipVpnGw1 = New-AzPublicIpAddress -Name $PublicIPNameVpnGw1 -ResourceGroupName $ResourceGroupName -Location $Location -AllocationMethod Dynamic

# Create IP configuration for Basic Gateway
$gwIpConfigBasic = New-AzVirtualNetworkGatewayIpConfig -Name "vnetGatewayIpConfigBasic" -SubnetId (Get-AzVirtualNetworkSubnetConfig -Name $GatewaySubnetName -VirtualNetwork $vnet).Id -PublicIpAddressId $pipBasic.Id

# Create IP configuration for VpnGw1 Gateway
$gwIpConfigVpnGw1 = New-AzVirtualNetworkGatewayIpConfig -Name "vnetGatewayIpConfigVpnGw1" -SubnetId (Get-AzVirtualNetworkSubnetConfig -Name $GatewaySubnetName -VirtualNetwork $vnet).Id -PublicIpAddressId $pipVpnGw1.Id

# Deploy a Basic VPN Gateway
Write-Host "Deploying Basic VPN Gateway..."
New-AzVirtualNetworkGateway -Name "myVpnGatewayBasic" -ResourceGroupName $ResourceGroupName -Location $Location `
    -IpConfigurations $gwIpConfigBasic -GatewayType Vpn -VpnType RouteBased -GatewaySku Basic `
    -Asn 65515 # ASN is required for RouteBased, even if BGP is not used

# Deploy a VpnGw1 VPN Gateway
Write-Host "Deploying VpnGw1 VPN Gateway..."
New-AzVirtualNetworkGateway -Name "myVpnGatewayVpnGw1" -ResourceGroupName $ResourceGroupName -Location $Location `
    -IpConfigurations $gwIpConfigVpnGw1 -GatewayType Vpn -VpnType RouteBased -GatewaySku VpnGw1 `
    -Asn 65515 -EnableBgp $true # BGP is supported and can be enabled

As you can see, the -GatewaySku parameter is the primary control point for selecting your desired performance and feature set.

Solution 2: Considering Azure Virtual WAN for Large-Scale or Complex Deployments

For organizations with a growing number of branch offices, hybrid cloud scenarios involving many VPN sites, or a need for global network transit, managing individual Azure VPN Gateways can become cumbersome and expensive. This is where Azure Virtual WAN comes into play as a highly scalable and cost-optimized alternative.

What is Azure Virtual WAN?

Virtual WAN is a networking service that provides optimized, automated, and global connectivity. It allows you to create a hub-and-spoke architecture easily, where the Azure hub acts as a central point for connectivity from on-premises branches (via VPN, ExpressRoute, or SD-WAN partners), Point-to-Site users, and other VNets.

When to Consider Virtual WAN:

Many Branch Offices: If you have dozens or hundreds of branch offices needing VPN connectivity to Azure.
Global Connectivity: For multi-region deployments requiring inter-hub connectivity and global transit.
Simplified Management: Virtual WAN automates routing and simplifies the setup of complex topologies, reducing operational overhead.
SD-WAN Integration: Seamless integration with leading SD-WAN providers.
Cost Optimization: While the base cost of a Virtual WAN hub exists, the ability to centralize and automate connectivity for numerous sites often results in lower total cost of ownership compared to deploying and managing individual VpnGw* gateways for each site.

Example: Virtual WAN Hub and VPN Site Creation (Conceptual Steps)

Instead of deploying individual VPN Gateways per VNet, you deploy a Virtual WAN, create a hub in a region, and then connect multiple “VPN Sites” (representing your on-premises locations) to that hub. All VPN Sites can communicate with each other and all connected VNets through the hub.

# PowerShell Snippets for Virtual WAN (simplified)

# 1. Create a Virtual WAN resource
New-AzVirtualWan -ResourceGroupName "my-vwan-rg" -Name "myGlobalVWAN" -Location "eastus" -AllowBranchToBranchTraffic -Type Standard

# 2. Create a Virtual Hub within the Virtual WAN
# This creates the central point for connectivity.
# The `VirtualWan` parameter links it to your VNet.
$vwan = Get-AzVirtualWan -Name "myGlobalVWAN" -ResourceGroupName "my-vwan-rg"
New-AzVirtualWanHub -ResourceGroupName "my-vwan-rg" -Name "myVWANHub-EastUS" -Location "eastus" `
    -VirtualWan $vwan -AddressPrefix "10.100.0.0/23"

# 3. Create a VPN Gateway within the Virtual Hub (managed by Virtual WAN)
# This is not a standalone VPN Gateway resource, but a component of the Hub.
# Virtual WAN handles the provisioning and scaling of this gateway.
$hub = Get-AzVirtualWanHub -Name "myVWANHub-EastUS" -ResourceGroupName "my-vwan-rg"
New-AzVpnGateway -ResourceGroupName "my-vwan-rg" -Name "myHubVPNGateway" -VirtualHubId $hub.Id `
    -VpnGatewayScaleUnit 1 # Specifies throughput capacity for the VPN Gateway in the hub

# 4. Create VPN Sites (representing on-premises locations)
# Define an on-premises site, including public IP of your on-prem VPN device and local network prefixes.
New-AzVpnSite -ResourceGroupName "my-vwan-rg" -Name "OnPremBranchOffice1" -VirtualWan $vwan `
    -IpAddress "203.0.113.1" -AddressSpace @("192.168.1.0/24") -DeviceModel "Cisco ISR" -LinkSpeedInMbps 100

# 5. Connect the VPN Site to the Virtual Hub
# This establishes the VPN tunnel.
$vpnSite = Get-AzVpnSite -Name "OnPremBranchOffice1" -ResourceGroupName "my-vwan-rg"
$vpnGateway = Get-AzVpnGateway -Name "myHubVPNGateway" -ResourceGroupName "my-vwan-rg"
New-AzVpnSiteLinkConnection -ResourceGroupName "my-vwan-rg" -Name "Branch1-to-HubConnection" `
    -VpnSiteId $vpnSite.Id -VpnGatewayId $vpnGateway.Id -ConnectionMode Default `
    -IpsecCustomPolicy -EnableBgp -UsePolicyBasedTrafficSelectors $false

Virtual WAN consolidates many networking functions, offering a potentially more scalable and cost-effective solution for complex network topologies than managing numerous discrete VPN Gateways.

Solution 3: Exploring Third-Party NVA-based VPN Solutions

While Azure’s native VPN Gateways and Virtual WAN cover a broad range of use cases, there are situations where a Network Virtual Appliance (NVA) might be a better fit. This often applies when you require specific advanced networking features, need to integrate with existing infrastructure or expertise, or are looking for highly specialized cost optimizations.

When to Consider Third-Party NVAs:

Advanced Routing or Firewall Features: If you need deep packet inspection, intrusion detection/prevention, granular application-level policies, or highly customized routing logic that Azure VPN Gateway doesn’t offer.
Vendor Specificity: Your organization standardizes on a particular vendor (e.g., Fortinet, Palo Alto Networks, Cisco) for network security and wants to extend that into Azure.
Niche Cost Optimization: For very low-throughput, non-critical connections where a free/open-source NVA (like pfSense or OpenVPN Access Server) can provide a basic VPN at minimal cost, albeit with increased management overhead.
Complex Multi-Cloud or Hybrid Scenarios: Where a common NVA platform can simplify connectivity across disparate environments.

Example: Deploying pfSense as a Site-to-Site VPN Endpoint in Azure

pfSense is a popular open-source firewall and router that can be deployed as an NVA in Azure. It’s an excellent example for scenarios requiring a highly customizable and potentially low-cost VPN solution for specific use cases (e.g., a small development environment or a single, low-traffic branch office).

Deployment Steps (High-Level):

Create an Azure VM: Deploy a Linux or Windows VM (depending on the pfSense distribution you choose, though most use a custom image) in your target Azure VNet. You can use a custom image or a marketplace image if available. Ensure the VM has at least two network interfaces: one for public internet access (with a public IP) and one for internal VNet routing.
Configure Network Security Groups (NSGs): Allow necessary VPN traffic (e.g., UDP 500, UDP 4500 for IPsec) to the public interface of the pfSense VM.
Install and Configure pfSense: Once the VM is running, install pfSense (if using a generic OS image) or configure the pre-installed version.
Set up IPsec VPN on pfSense: Configure the Site-to-Site IPsec tunnel on the pfSense appliance, matching the parameters of your on-premises VPN device (or another Azure VPN Gateway if connecting two Azure VNets via NVA).
Configure User-Defined Routes (UDRs): In Azure, create a Route Table and associate it with the subnets that need to communicate through the pfSense NVA. Create UDRs to direct traffic destined for your on-premises network (or other remote networks) to the internal IP address of the pfSense VM as the next hop.

pfSense IPsec Configuration Snippet (Illustrative)

This is a simplified representation of IPsec Phase 1 (IKE) and Phase 2 (IPsec) settings you might configure in pfSense’s web UI:

# --- IPsec Phase 1 (IKE) Configuration (Conceptual) ---
# General Information
# Interface: WAN (or the public-facing NIC)
# Description: Azure-OnPrem-VPN

# Phase 1 Proposal (Authentication)
# Key Exchange Version: IKEv2
# Internet Protocol: IPv4
# Mode: Main
# Authentication Method: Mutual PSK
# Pre-Shared Key: YourSecretPSK
# Peer Identifier: IP Address (e.g., your on-prem public IP)

# Phase 1 Proposal (Encryption Algorithm)
# Encryption Algorithm: AES256-GCM (16)
# Hash Algorithm: SHA256
# DH Group: 14 (or higher like 24 for better security)
# Lifetime: 28800 seconds

# DPD (Dead Peer Detection)
# Enable DPD: Yes
# Delay: 10 seconds
# Max Failures: 5

# --- IPsec Phase 2 (ESP) Configuration (Conceptual) ---
# General Information
# Mode: Tunnel IPv4
# Local Network: LAN Subnet (e.g., 10.0.1.0/24 - the Azure VNet subnet connected to pfSense)
# Remote Network: Network (e.g., 192.168.0.0/24 - your on-premises subnet)

# Phase 2 Proposal (Encryption Algorithm)
# Protocol: ESP
# Encryption Algorithms: AES256-GCM (16)
# Hash Algorithms: SHA256
# PFS Key Group: 14 (should match Phase 1 if using PFS)
# Lifetime: 3600 seconds

Deploying NVAs adds management overhead and requires a deeper understanding of network routing and firewall rules. However, for specialized requirements, it can offer unparalleled flexibility and control.

Conclusion: Choosing the Right VPN Gateway for Your Needs

The “massive price gap” between Azure’s Basic VPN Gateway and its higher SKUs is not arbitrary; it directly correlates to significantly enhanced throughput, reliability, features, and an SLA suitable for production workloads. Your decision should be guided by a clear understanding of your requirements:

For simple dev/test, non-critical, or very low-bandwidth production needs: Basic SKU might suffice. Be aware of its limitations and lack of SLA.
For production workloads requiring high availability, BGP, or higher throughput: VpnGw1 or higher SKUs are necessary. Consider Zone-Redundant (VpnGw*AZ) for maximum resilience.
For large-scale, complex, or global hybrid networks: Azure Virtual WAN offers a more scalable, automated, and potentially cost-effective solution.
For highly specialized security requirements, specific vendor lock-in, or extreme cost optimization for niche cases: Third-party NVAs like pfSense or commercial firewalls might be the answer, but come with increased management complexity.

Always start by defining your throughput needs, redundancy requirements, desired feature set, and long-term scaling strategy before selecting your Azure VPN Gateway SKU or alternative connectivity solution.