Azure Cost Optimization - 10 Best Practices to Optimize Your Cloud Costs on Azure

In our previous blog, we evaluated the key aspects of optimizing cloud spend of AWS, its key drivers, the various pricing models, as well as best practices to follow. In this blog, we will examine the second-most popular public cloud service provider - Microsoft Azure, understand Azure cost optimization in detail, explore the key elements and tools, a run-down on the built-in pricing models, and the ways to maximize those benefits on your Azure portal.

Getting Started With Optimizing Costs for Azure Cloud

Whether public, private or hybrid, cloud consumption continues to expand and disrupt the older, traditional models of on-premises IT management and functioning. Especially after the post-pandemic, new trends are beginning to take shape in cloud migration, usage, app development, etc., thus accelerating cloud adoption and increasing cloud costs, necessitating businesses to choose between major public cloud providers and the plethora of options.​

“Microsoft Azure usage surpasses that of AWS.”

~ 2022 Flexera State of the Cloud Report

Enterprise public cloud adoption rates

Azure

AWS

47%
33%
11%
4%
47%
30%
10%
6%
 

 

Running significant workloads

 

Experimenting

 

Running some workloads

 

Plan to use

In the 2021 State of the Cloud Report, Flexera hinted at Microsoft Cloud rapidly closing its gap with AWS. Within just a year, Microsoft, making all the speculations true, surpassed the market leader in multiple instances. Microsoft's revenue grew 50% year-over-year in 2021 Q2, contributing to an increase of 26% in server products and cloud services revenue.

One of the key reasons behind this massive growth and becoming the cloud partner for millions of companies is the flexibility that the Microsoft platform brings to the table, as well as its packaged pricing models to meet various business needs. In addition, the cloud provider comes with in-built tools, simplifying cost management in Azure.

There is no doubt that cost-optimized cloud infrastructure offers multiple benefits, including identifying mismanaged capital, implementing right-sized resources, and deep discounts. However, it is accompanied by the potential risk of loss in return on investment (ROI) post-migration since the deployment and cost management aspects are beyond the control of the in-house IT department. Fortunately, Microsoft's platform comes equipped with a good architecture framework that offers several ways for businesses to optimize their cloud costs and find ways for cloud cost management. One of the key principles of Azure cost management is that it makes it easy for enterprises to select cost-optimized resources, Azure products, database instances, and various built-in pricing models to achieve cost-effectiveness through optimized Azure costs.

How to Optimize Azure Costs?

How do businesses begin the process? Azure has developed cost management techniques to help businesses create and maintain an optimized Azure environment. Let's look at the checklist to understand them better.

Azure Costs
  • Azure advocates using compute-optimized and memory-optimized resources to get the best value for your budget.
  • Be flexible with the budget since fixed budgets cannot cope with workloads that run for long durations.
  • Plan your scaling well before time. Dynamic allocation will ensure flexible monthly billing since users will only have to spend more during high workloads, enabling significant cost savings.
  • Terminate zombie resources to avoid increasing the Azure bill. Additionally, reconfiguring underutilized resources can also help save costs.
  • Undertake constant real-time monitoring and frequent cost checks to keep a tab on cloud spending. Leverage built-in real-time Azure monitor to set alerts about Azure cost spikes.
  • Capture clear and detailed requirements about business workflow, availability and regulatory security in advance.
  • Assess the business areas where shared resources can be used. Accordingly, check the billing meters and build chargeback reports for every user to determine metered costs for shared cloud services.

Understanding the Azure Pricing Models

While reducing the overall Azure cost depends majorly on the actual workloads, end goal, and resources deployed, having a clear picture of the pricing model would further help in estimating the Azure cost reduction potential. This is true in all scenarios, whether shifting from a major cloud service provider or deploying a multi-cloud environment or the all-in-one Microsoft cloud platform. Getting familiar with the pricing structure and understanding your cloud spend is the best way to save costs.

The packages provided by Microsoft are ideal for enterprises looking to use the compute service for remote access and virtual machines (VMs), data storage, or something a little more complex.

The 3 Azure pricing packages include:

  1. Pay-as-you-go: One of the most flexible and simplest payment models. There is no pre-specified time duration for running VMs as users are billed per second of use. Since there is no upfront or long-term payment commitment, it is extremely popular with enterprises.

    This model is best for workloads with unpredictable capacity requirements since businesses can use it per their dynamic needs.

    In a bid to unify its cost dimensions for these customers, the cloud leader also added Azure marketplace charges within the cost analysis tool in 2019.

  2. Spot pricing: This model might seem a bit complicated at first, but the benefits manifest once we break it down.

    Azure spot VM instances let customers purchase a fixed amount of compute capacity at a very high discount - almost 90% compared to the pay-per-go pricing model.

    For workloads that can tolerate multiple interruptions, the spot Azure virtual machines are ideal for those. They enable scalability while minimizing costs simultaneously.

    Workload running on spot instances

    Workload running on spot instances

    Azure Azure Spots Vms

    Azure Spot VMs

    Elastigroup predicts interruption

    Elastigroup predicts interruption

    Azure Azure Spots Vms

    Azure Spot VMs

    Spins up new spot VM(or Pay-as-you-go if needed)

    Spins up new spot VM(or Pay-as-you-go if needed)

    Azure Azure Spots Vms

    Azure Spot VMs

    Drains old spot VM ofits workload

    Drains old spot VM ofits workload

    Azure Azure Spots Vms

    Azure Spot VMs

    Workload running on spot instances

    If PAYG was used,Elastigroup reverts to spot VMas soon as possible

    Azure Azure Spots Vms

    Azure Spot VMs

  3. Reserved instances: By forecasting resource needs and committing for one- and three years, users can unlock great offers with the Azure reserved instances model. This upfront commitment model offers high flexibility with the option of exchanging or canceling anytime as per user needs. Plus, users can also enjoy monthly payment options at no additional cost.

    A multi-year deal unlocks discounts as high as 72%, making it ideal for enterprises with a fixed budget or limited capacity for scaling.

    Moreover, users who own the SQL Server licenses along with Software Assurance are allowed to run the VMs at Linux VMs-based pricing.

Azure chart

The Azure Free Tier

Apart from the three primary pricing packages, there is also a ‘free tier’ option which lets users avail of significant discounts. Moreover, it also contains multiple services that can be used free of cost for a limited time of 12 months with limited data and usage allowance. Once the limit is over, users will be charged on a pay-per-use basis. The free tier includes the following services.

  • Linux and Windows virtual machine access
  • Blob storage
  • Managed disk space
  • Bandwidth (data transfer)
  • Microsoft SQL Server database access
  • and others

Another way to reduce cost is to consider the dev test/pricing. Users can get discounts up to 60% for virtual machines used for dev/test purposes compared to production.

Additionally, the Azure Hybrid Benefit is another way to save costs. This program allows users to reuse the licenses they already own for specific Microsoft products, including Windows Server and SQL Server. Users with one or three-year subscription to Windows Server or SQL server can avail this Azure Hybrid benefit of bringing eligible licenses to the Microsoft environment. For Linux VMs, however, this will not work.

Azure Pricing Model

 

Models

Features

Pay-as-you-go

Spot instances

Reserved instances

Dev/test

Saving plans

Commitment

Zero

Zero

1-3 years

Zero

1-3 years

Flexibility

High

Zero

High

Moderate

Moderate/high

Upfront Payment

Zero

Zero

Optional

Zero

Optional

Manageability

Easy

Most difficult

Moderate

Moderate

Easy

Expensive

Highest

Lowest

Low

Moderate

Low

Azure infrastructure is built to be deployed on-demand, thus it requires a well-structured plan which must have clear cost visibility to manage the return on investment (ROI). Therefore, leaders must focus on two critical things - optimizing spends and reducing the total cost of ownership (TCO) to maximize efficiency.

Popular Tools for Azure Cost Management and Optimization​

Azure offers a host of tools and services to support businesses to make the cost management journey easier for its massive customer base. Here is a list of the top Azure optimization tools to manage costs:

Azure Cost Calculators​

The Azure pricing calculator is helpful since it helps estimate the hourly and monthly costs for using specific services. Depending on your budget and requirements, you can mix and match various products on offer to understand the cost change and decide accordingly.

To get an estimate of the overall cost of ownership of a data center in Azure, make use of the report generated by the Total Cost of Ownership calculator. You can add current server workloads, storage, databases, and networking data and adjust the assumptions to calculate the overall cost.

Azure Migrate

Now perform a preliminary assessment for successful migration and operation of resources with the Azure migrate tool. It is an end-to-end tool that assesses the on-premises VMs and software, thus checking migration feasibility and estimating the overall cost for the built- solution.

Azure Advisor

The Advisor is a free tool that saves time during cloud operation optimization. It has a metric called cloud score or advisor score that assesses how well architected the workloads are. Moreover, it also provides several Azure cost management best practices to boost performance capabilities, enhance security, improve reliability, and reduce cost. In addition, it provides recommendations for resizing, right-sizing, or removing some resources and purchasing reserved instances that help minimize the costs of resources needed for the long-term.

Azure Cost Management

The Azure cost management tool is designed to help you analyze and manage all costs related to your Azure consumption, set a budget, and download billing statements. You can maximize cost insights and enhance accountability by organizing resources by hierarchy and grouping them. The tool also allows one to perform in-depth analysis and make cost-conscious decisions.

Azure Cost Management + Billing

This tool offers a unified view to monitor and analyze costs and usage patterns across all your cloud systems. It also identifies different cost options and helps access operational and financial insights to minimize expenditures and cloud spending. In addition, this tool works in conjunction with Power BI and helps optimize cloud efficiency.

With the help of these tools, you can efficiently and expertly manage and optimize your Azure cost.

Microsoft Azure Well-Architected Framework

Microsoft Azure Well-Architected Framework is a set of guidelines and rules created to assist businesses in enhancing the quality of their workloads on cloud. It is crucial for organizations to assess whether the architecture they have designed can withstand the failure of critical components.

While this doesn’t directly examine the cloud spending, it evaluates where the user is in terms of reliability, security, performance, cost management, and operational excellence and accordingly makes recommendations for Azure cost analysis and improvement.

The Azure Well-Architected Framework helps businesses ensure that their architecture meets customer needs at any given point in time. Cloud4C helps you validate and verify cloud resources against well-architected best practicese so that you can run robust workloads. Here are the five pillars of the framework that enable organizations to design, develop, and continuously improve applications' efficiency, reliability, and provide security updates.

Cost Optimization

Cost Optimization

Security

Security

Reliability

Reliability

Performance Efficiency

Performance Efficiency

Operational Excellence

Operational Excellence

Microsoft Azure Well-Architected Framework
  • Reliability

    Reliability

  • Cost Optimization

    Cost Optimization

  • Operational Excellence

    Operational Excellence

  • Performance Efficiency

    Performance Efficiency

  • Security

    Security

Microsoft Azure Well-Architected Framework
  • Design Principles

  • Azure
    well-Architected Review

  • Azure Advisor

  • Reference Architectures

  • Partner’s Support & Services Offers

  • Documentation

  • Azure
    Well-Architected Framework

Cost Optimization: This primary architectural cost optimization pillar helps users ensure that their price optimization choices don’t negatively impact performance. It is designed to prevent possible cost spikes and high billing to control overall cloud computing costs.

Additionally, the company ensures that customers pay for what they use by leveraging a pay-as-per-use mechanism. To that end, it offers pricing calculators, budgeting, and reporting tools to help identify and manage cloud spending and help towards cost management.

4 Approaches for optimizing costs:

  • Choosing right resources
  • Optimizing workloads
  • Keeping flexible budgets and using dynamic allocation
  • Real-time monitoring

Security: Businesses can get a complete picture of applications’ functionality with this pillar and ensure their users enjoy the best experience after migration. By providing operational excellence, companies can shorten their development and release cycles significantly.

4 Approaches for ensuring operational excellence:

  • Design high-quality modernized architecture
  • Increase alerts, enable proactive mitigation of issues, and implement better infrastructure
  • Undertake chaos engineering and disaster recovery practices
  • Perform continuous assessments and development

Reliability: To improve the reliability of the architecture framework, users need to build high availability into individual application components to eliminate a single point of failure. Thorough scrutinization of potential high availability capabilities should be performed in relation to service level agreements while simultaneously ensuring adequate coverage and identifying key areas for improvement.

3 Approaches for ensuring reliability:

  • Design user-friendly interfaces
  • Enable self-healing of applications
  • Use vertical and horizontal scaling

Performance Efficiency: This pillar guides users to adjust workloads to meet user needs effectively. Businesses match the client demand with resources that are available to an application. To achieve optimum performance, implement resource scaling, potential bottleneck optimization, and correct different systems.

4 Approaches for ensuring performance efficiency:

  • Build responsive web applications
  • Ensure the compatibility of desktop applications on multiple browsers
  • Evaluate performance against set performance metrics
  • Employ monitoring tools to improve performance

Operational Excellence: Businesses can get a complete picture of applications’ functionality with this pillar and ensure their users enjoy the best experience after migration. By providing operational excellence, companies can shorten their development and release cycles significantly.

4 Best practices for ensuring operational excellence:

  • Design high-quality modernized architecture
  • Increase alerts, enable proactive mitigation of issues, and implement better infrastructure
  • Undertake chaos engineering and disaster recovery practices
  • Perform continuous assessment and development

10 Best Practices to Optimize your Cloud Spending on Azure​

The time has come to finally explore some of the Azure cost management best practices to optimize your Azure services and minimize the overall cost budget. From resource tagging to leveraging active managed virtual disks, companies utilize a number of tactics to bring the spend down.

1. Identify unused resources and virtual disks

A bill for cloud services will include charges for all the resources purchased, even if some of them are no longer used actively. In such cases, the cost is incurred from unused storage and virtual disks, which can be easily eliminated. Constant monitoring is required to check for unused resources and identify ones that can be removed. In this instance, Azure well-architected review assessment is helpful in identifying such resources and ensuring optimum cost management.

2. Optimize workload depending on Azure Virtual Machine (VM) type

An Azure cost management best practice to follow to minimize expenses on Azure is to keep a tab on the resources that have been provisioned. Additionally, understanding the ideal Azure Virtual Machine type for the workload will add to cost savings. Azure VMs are divided into different types according to their function. Like AWS EC2 instance types, Azure VM types and their series include - General Purpose, Compute Optimized, Memory Optimized, Storage Optimized, and GPU.

3. Rightsize VMs for cost savings

Rightsizing VMs means ensuring that the storage provision you have made is adequate for your business needs. Overprovisioning results in paying far more than you need for VMs or other additional Azure resources, while underprovisioned VMs will leave you with minimal options, running the risk of not being able to meet demand.

Azure offers multiple options for ensuring suitable storage capacity and computing power for your VMs. Furthermore, since the Azure platform is flexible, users can easily adjust utilization depending on the requirement.

4. Autoscale and combine idle resources

Resources running at a CPU optimization level of 1-5% are considered idle. During billing, it is considered another instance of wasteful expenditure. By consolidating such idle resources into groups, businesses can lower cost and leverage the power of on-demand scaling to optimize their Azure costs.

Use the autoscaling feature and set predefined rules for your database VMs, compute, and storage resources to scale automatically when they go beyond or below a specified threshold.

5. Shift to containers

While VMs are an excellent option, the vendor also provides the option of containers. This helps optimize Azure costs by merging different tasks into fewer servers. This option also offers other benefits such as - a lower digital footprint, faster operation power, built-in monitoring systems, etc.

6. Reduce dependency on the hot storage

Depending on the frequency of your access to the data stored on the Azure Blob storage, you can modify the duration of use accordingly. For example, if the data stored is infrequently accessed, but you still host it on the ''hot'' Azure storage tier, it would incur significant expenditure. While hot storage data offers easy access options and is quite affordable, storing archival data there is still a costly affair. Consider moving to a lower cost tier like cool storage, or archive storage tiers to reduce Azure storage costs and achieve optimization for Azure cloud costs.

7. Plan and manage Azure budgets with tools, reports, and alerts

The cloud vendor offers several cloud billing management tools that help with cost estimation, reporting, and alerts to reduce Azure spending and stay within set budgets.

8. Go serverless

For infrastructure that only runs multiple times a day and not continuously, consider moving to serverless infrastructure since it lets you pay-as-you-use, ensuring lower cost.

9. Move data to another region

Azure costs vary region-wise. So, it is wise to consider your resources' geographic area when estimating the costs. If possible, move your workload to a less expensive region.

10. Use B-series virtual machines

The B-Series VMs offered are designed primarily for idle applications with sudden bursts of usage. Since these usually require a low baseline CPU power, it allows the user to accumulate credits. Moreover, these B-Series VMs offer 15-55% discounts compared to other equivalent VMs enabling Azure cloud cost management.

While that's all for now, modern enterprises are also increasingly leveraging automation to keep a tab on the rising spends. Azure Automation Runbooks is one such tool that allows organizations to automate manual tasks, eliminating time required to customize solutions.

And that's a wrap for now. If you are looking for more information on how to optimize costs for Azure, read Cloud4C's Complete Guide to Azure Cost Optimization.

Author
Team Cloud4C
Author
Team Cloud4C

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