We continue to find ways to make Azure a better value for our customers. Azure Managed Disks, a new disk service launched in Feb '17, simplifies the management and scaling of Virtual Machines (VM). You can choose to create an empty Managed Disk, or create a Managed Disk from a VHD in a storage account, or from an Image as part of VM creation.

The pricing of Managed Disks, both Premium and Standard, is based on the provisioned disk size, which is different from the pricing of Standard Unmanaged Disks. To keep the cost lower, we created lower disk pricing options with smaller 32GB and 64GB Standard Managed Disk sizes. Building on that foundation, we have also added a second set of Windows Server offerings with 30GB OS disks for Windows Server 2008R2, Windows Server 2012, Windows Server 2012R2 and Windows Server 2016 in Azure Marketplace. These smaller images are prepended with  “[smalldisk]” in the image title on Azure Portal. For Powershell, CLI and ARM Templates, the image SKU is appended with “-smalldisk”. If your application do not require large amount of OS disk space, you would observe savings of $2.18 per VM if you choose to deploy with 32GB Standard Managed OS disk vs. 127GB. For large scale deployments, the benefit would accumulate and may represent significant cost savings. 

You can also have the flexiblity to expand the OS disk by following the existing guide for expanding OS Disk:

• How to expand the OS drive of a Virtual Machine in an Azure Resource Group

If you have expanded the OS Disk, log into your Windows VM and use Disk Management Tool to extend the OS partition to match the OS disk size.