Azure Cost Optimization: The Definitive Guide

A stack of coins in a measuring device next to budget papers and a calculator

Azure cost optimization is a massive concern for businesses, especially if they have recently migrated to Azure. Managing Azure costs is very different from managing the cost of on-premises infrastructure. Cloud infrastructure can be deployed on-demand, often outside of a traditional IT department’s control, introducing unpredictability into cloud spending.

Nevertheless, with the right approach to cost management, Azure can fulfill its potential as a cost-effective cloud platform, generating savings that would be impossible on traditional infrastructure platforms.

In this article, we look at some of the ways your business can reduce cloud spending while making the most of Microsoft Azure.

How Much Does Azure Cost?

Azure costs reflect the amount of compute, storage, and network resources an organization provisions. The more you use, the more you pay. A virtual machine with a powerful processor and larger storage devices costs more than a VM with a low-power processor and less storage.

If that sounds obvious, that’s because it is — all infrastructure hosting platforms expect you to pay for the resources you use. However, because Azure is a cloud platform, users can adjust their provisioned infrastructure more easily and precisely than on-premises or colocated physical infrastructure.

In addition to resource use, several other factors affect how much your organization pays for Azure infrastructure and services:

  • Location: Azure uses over 160 datacenters across the world. The cost of deploying infrastructure into these data centers varies.
  • Service Tiers: Many Azure services are available in several tiers, which often relate to guaranteed availability or the service’s complexity. For example, locally redundant storage is the least expensive, whereas the more reliable geographically redundant storage costs more.
  • Alternative deployment models: Infrastructure may be available in several deployment models, which affects the cost. As we discuss in more detail later, VMs are available with on-demand, reserved, and spot instance pricing structures. Each offers different trade-offs between cost, availability, and flexibility.

Additionally, Azure offers several pricing models that affect how much you pay:

  • Free: New Azure users can use popular services for 12 months for free and are given $200 in credit to explore other services. Additionally, some services are always free, such as Azure Advisor.
  • Pay as you go: The classic cloud model, but not always the most cost-effective. You pay only for the resources you use, with no commitments, and you can cancel at any time.
  • Enterprise Agreement: Businesses can reduce costs by making up-front spending commitments.

What is Azure Cost Optimization?

Azure cost optimization—also known as Azure cost management—is the process of minimizing cloud spending by matching infrastructure use, and therefore cost, to real-world requirements. As a simple example, a business might notice that the Azure VMs hosting a web application are underutilized. They could downsize the VMs so that they don’t pay unnecessarily for idle capacity.

Because Azure is a cloud platform, its services are built on infrastructure virtualization and Microsoft’s global network. Businesses have fine-grained control over the resources they deploy. Unlike non-cloud hosting platforms, they are not obligated to predict resource use in advance or to deploy idle infrastructure to support peak utilization. Azure also provides an enormous number of services, each tailored to a specific use case, making it immensely flexible compared to traditional server hosting.

However, there are drawbacks to this degree of flexibility and complexity. Resource consumption has to be managed to ensure that it does, in fact, reflect the business’s needs. Doing so can be challenging without a deep understanding of the platform and its pricing structures, comprehensive utilization and performance monitoring, and organizational changes that support optimization.

Without a cost optimization strategy, cloud costs quickly spiral out of control. Azure cost optimization is VIAcode clients’ number one concern. In the remainder of this article, we will focus on some of the techniques your business can use to get cloud spending under control.

How To Reduce Azure Cloud Costs

Microsoft understands that its customers want to maximize the value of their cloud infrastructure. Azure offers many cost optimization features to help businesses manage costs and optimize efficiency.

Understand Your Cloud Hosting Needs

The first step in any optimization process is information gathering. The goal is to understand:

  • The problem you are trying to solve with Azure infrastructure.
  • The resources and budget that you expect to solve the problem.
  • The resources you currently have deployed on Azure.

Optimization is the process of bringing actual resource utilization in line with optimal resource utilization. Once you have understood the problem you are trying to solve, you can develop an infrastructure deployment plan, estimate how much it should cost, and measure how much you are spending.

Take Advantage of Azure Cost Data Analysis

Azure offers comprehensive cost and spending data to help users understand where their budget is being spent. To find the cost data for an Azure subscription, select the subscription in the Azure Portal and then select Cost analysis from the menu.

Here you will find data about the costs for this billing period, spending forecasts, and tools to build custom views that help you to gain an accurate insight into the spending metrics your business cares about most.

Rightsize VMs and Storage

As we mentioned earlier, Azure is an elastic infrastructure platform; it is straightforward to adjust resource utilization to match day-to-day requirements. But that only matters if the user takes the time to assess infrastructure utilization and make the necessary adjustments.

It is all too common for a business to deploy virtual machines and storage far larger than is necessary. The solution is twofold: i) utilization monitoring and ii) ensuring that someone at the organization is responsible for rightsizing or shutting down underutilized infrastructure.

Azure Advisor is a useful tool in this regard. It monitors Azure services and provides best practice recommendations, including cost-optimization recommendations focused on infrastructure utilization.

Choose The Right Azure Infrastructure For Your Needs

Azure often gives users several possible solutions to the same problem. There will be differences in guaranteed availability, management burden, and flexibility for each solution. And there will be differences in price, even for solutions with similar resource consumption.

Let’s consider two examples: Azure VMs and SQL databases.

Cost Optimization for Azure VMs

Azure Virtual Machines have perhaps the most complex pricing structure on the platform. There are over a dozen virtual machine types and several instance pricing and deployment models. Selecting the most suitable instance can make a significant difference in cloud costs.

Azure VM instances are categorized into twelve series, and each series is performance and cost-optimized for its workload. The A-Series is composed of inexpensive low-power machines suitable for development and testing. The D-series are more powerful servers suited to general-purpose computing. The F-series is optimized for workloads that require a higher CPU-to-memory ratio, whereas the G-Series is memory and storage optimized.

If your primary concern is VM cost optimization, it is worth considering the Bs-Series of burstable VMs. These are ideal for the many business workloads that demand moderate CPU utilization most of the time, but occasionally need a “burst” of extra processing power during peak load. Bs-Series VMs are significantly less expensive than an equivalent D-Series instance.

Once again, choosing the best series for your workload requires understanding your business’s infrastructure needs and matching them to the platform’s solutions. Making the wrong choice can significantly increase costs while decreasing performance and availability.

In addition to multiple instance types, Azure also offers several payment options:

  • Pay as you go: Deploy on-demand infrastructure with no contract or commitment. This is the most flexible option, but also the most expensive.
  • Reserved Instances: Intended for predictable long-term workloads, Azure Reserved Instances require an up-front commitment of 1 to 3 years. In exchange, businesses benefit from cost savings of up to 70 percent on pay as you go prices.
  • Spot Instances: Spot instances are Azure’s way of increasing the utilization of its physical infrastructure. Users buy Azure’s unused compute capacity with deep price reductions of up to 90 percent. Workloads on spot instances can be suspended at any time if the capacity is needed elsewhere, but they offer massive cost-savings for workloads that aren’t time-sensitive.

Hosting SQL Databases on Azure

When first moving an application to Azure, it’s natural to deploy it on Azure VMs, Azure’s Infrastructure-as-a-Service platform. Virtual machines are most similar to traditional on-premises server hosting, and migration is relatively straightforward. But is it the most cost-effective option?

It may be, but in the case of SQL Server databases, for example, it may not be. There are two ways to host an SQL Server database on Azure: SQL Server on Azure VM and Azure SQL Database, a managed Database-as-a-Service platform. On a like-for-like comparison of cost and resource consumption, Azure SQL Database can be less expensive than running the database in a VM, although for the largest and most compute-intensive databases, the VM can be the cheaper option.

The pricing structure of specific services can also make a difference to the cost, as you can see from Azure SQL database pricing. The cost of some services can also be significantly reduced by license transfers and promotional pricing, as we’ll discuss next.

Take Advantage of Azure Price Promotions

Microsoft wants to encourage businesses to adopt its cloud platform and offers several money-saving price promotions. One of the most significant is Azure Hybrid Benefit, which includes deep discounts for businesses that move their Windows Server and SQL Server installations to Azure Virtual Machines, Azure SQL Database, and Azure Dedicated Host services.

Azure Hybrid Benefit offers savings of up to 40 percent on virtual machines and up to 55 percent on Azure SQL Database and SQL Server on Azure VM. It also allows eligible customers to transfer on-premises licenses to Azure, further cutting the cost of migration.

Azure Cost Calculator

At the beginning of this article, we stressed the importance of information and planning to cloud cost optimization. To conclude, we’d like to suggest two tools that will help you understand Azure costs and gather optimization recommendations.

Azure Pricing Calculator is an essential cost optimization tool. With it, you can try out various combinations of Azure infrastructure and generate an accurate estimate of expected spending. The Pricing Calculator is most useful for determining costs before you provision Azure services, but what about your current Azure infrastructure?

Azure Snapshot from VIAcode is a powerful free Azure assessment and recommendation tool that will analyze your business’s Azure infrastructure and recommend potential cost savings, security improvements, and monitoring enhancements.

To learn more about reducing your Azure spending, contact a VIAcode Azure specialist for a free initial consultation.

VIAcode provides services for migration, optimization and management for Azure.