Azure Cost Factors and 4 Ways to Cut Your Costs

What Is Azure Cost?

The Microsoft Azure cloud is increasing in popularity, with a market share estimated at over 20%. This makes Azure cloud costs a major component of the IT budget for many organizations.

There are several Azure pricing models you can use to optimize costs for different workloads. Microsoft also provides tools, some of them offered free of charge, to help you optimize your budget. However, keep in mind that cloud cost optimization is complex, requires time and expertise, and must be aided by automated tools due to the complexity of cloud environments.

In this article you will learn:

Factors Affecting Azure Costs

As with your on-premise equipment costs, there are many factors that will influence your monthly bills when you use Azure services. Let’s consider the key elements, including service, resource types, billing zone, and the user’s location.  

Pricing Models

Azure provides several pricing models, which allow you to select the optimal pricing based on each workload’s characteristics:

  • Pay-per-use pricing – resources on Azure can be billed by the second, allowing you to pay only for the time you actually use. This is the most flexible model, but also the most expensive.
  • Azure Spot Instances (also called Spot VMs) – allows you to buy spare capacity in the Azure cloud at a discount of up to 90%. However, spot VMs can be interrupted with advanced notice of only 30 seconds. 
  • Azure Reserved Instances – allows you to commit to Azure resources for a period of 1 or 3 years, and receive discounts of up to 72%.
  • Azure Hybrid Benefit – allows you to bring your own license (BYOL) from on-premise Microsoft deployments, and get substantial discounts on Windows-based resources in Azure.

Resource Type

Costs are resource-specific, thus the usage tracked by the meter (as well as the number of meters connected to a resource) varies according to the resource type.  

Note that every meter tracks a specific type of usage. For instance, a meter could track bandwidth usage (egress or ingress network traffic as bits-per-second), size (storage capacity as bytes), the number of operations or related items. 

The usage tracked by each meter corresponds to an amount of billable units. These are billed to your account at every billing period, where the rate per chargeable unit varies according to the resource type being used. 

Services

Azure usage billing periods and rates can vary between Web Direct, Cloud Solution Provider 

Enterprise (CSP) and Enterprise customers. Certain subscription types also have usage allowances, which influences costs.  

The Azure team offers and develops first-party services and products, and you can find third-party services and products in the Azure Marketplace. Various billing structures are used for each category.  

Location

Azure has data centers across the globe. Usage costs differ according to the location offering particular Azure services, products and resources—these costs factor in demand, popularity and local infrastructure costs. 

For instance, to build a Azure solution, you could provision a certain amount of resources in the least expensive locations. However, you would need to transfer data between locations, when dependent resources are situated in various areas of the world, apart from their users. 

Provided there are meters to track the amount of data being transferred between the resources provisioned, the added cost of moving data between those resources could potentially offset any savings you could make, even if you select the cheapest locations.  

Azure Billing Zones

Bandwidth is the data that moves in or out of Azure data centers. Generally, inbound data transfers don’t cost. For outbound data transfers, pricing is calculated according to the Billing Zones. 

A Zone is a geographical group of Azure Regions, created for billing. Here are the zones and the listed countries (areas): 

  • Zone 1—USA, Canada, Europe, UK
  • DE Zone 1—Germany
  • Zone 2—Japan,  Korea, Australia, India
  • Zone 3—Brazil

In many zones, the initial outbound 5 GB per month doesn’t incur a cost. Following this, you are charged a fixed price per GB. 

Billing zones do not equal Availability Zones. In Azure, the word “zone” is used for billing only, and the full phrase Availability Zone is used for the failure protection mechanism that Azure offers for data centers.

How Can You Reduce Azure Costs?

We’ll present four ways to reduce costs for your organization on Azure:

  1. Using Azure Cost Management, Azure’s free cost optimization suite
  2. Using additional tools like Azure Migrate and Azure Advisor
  3. Advanced cost analysis with Microsoft PowerBI
  4. Managed cost optimization with Spot by NetApp

We’ll explain each of these options in the sections below.

1. Optimizing Costs Using Azure Cost Management?

Azure Cost Management is an Azure tool that uses advanced analytics to present usage and organizational cost patterns, with reports showing the usage-based costs for Azure and Marketplace services. 

In Azure Cost Management, costs are calculated based on your custom, negotiated prices, and take into account Azure Hybrid Benefit discounts. You can view your internal and external usage costs and Azure Marketplace charges (although the reports don’t show other charges like reservation purchases or taxes). 

You can use Cost Management reports to understand your usage and costs and identify spending anomalies and leverage predictive analytics. You can organize costs according to management groups and compare expenses to the budgets and recommendations, allowing you to reduce costs.

You can automate exports and integrate your data with third-party systems using the Azure portal or different APIs.

Planning and controlling expenses with budgets

Cost Management helps you plan and control costs with features such as budgets, recommendations and cost analysis. Budgets allow you to plan your costs and set spending limits. Recommendations help you optimize your usage patterns and improve cost efficiency by identifying underutilized or unutilized resources, or by revealing cheaper options. 

Cost analysis

Cost analysis allows you to understand spending patterns and overall organizational costs, which can be compared against budgets and recommendations. You can also export your cost management data to an external system, for example through scheduled CSV exports. Data files can be stored in Azure storage.

Working with alerts

Azure Cost Management lets you configure alerts according to your forecasted cost or actual cost. This can help you ensure that your actual spend falls within a predefined organizational spend limit. 

Once a pre-configured budget threshold is exceeded, the system triggers notifications. This has no effect on your resources – consumption continues as usual. To compare and track your spend, you can use budgets. This information can help you analyze and optimize your costs.

Related content: Read our guide to Azure Cost Management

2. Additional Azure Cost Optimization Tools

There are other Azure tools that are not part of the features of Azure Cost Management, which can be helpful when managing costs. These include:

  • Azure Cost Calculator—estimates the up-front cost of cloud services. Learn more in our detailed guide to Azure cost calculator (coming soon)
  • Azure Migrate—used to assess your existing database to prepare for replacement with an Azure solution.
  • Azure Advisor—provides recommendations for purchasing reserved instance purchases.
  • Azure Hybrid Benefit—allows you to save money by using Azure VMS with your existing SQL Server or Windows Server licenses.

Related content: Read our guide to Azure cost optimization

3. Advanced Cost Data Analysis in Azure

You may use Cost Management automation to establish a custom series of solutions for managing and retrieving cost data. 

You might have to download the Azure cost data to combine it with different datasets. Or you could be required to incorporate cost data into your personal system. There are various ways to do this, depending on the quantity of data involved.  

Power BI

Power BI handles and ingests great volumes of data. If you are an Enterprise Agreement customer, you might utilize the Power BI template application to examine costs for your payment account. The report includes key views employed by customers.

Power BI Data Connector

If you wish to study your data every day, you can make use of the Power BI data connector for retrieving data for in-depth analysis. The connector keeps all reports that you develop up-to-date by the connector while more costs are incurred. 

Cost Management exports

If you don’t want to study the data daily, think about using Cost Management’s Exports function to schedule data exports to the Azure Storage account. You can then load the data in Power BI, or study it via Excel providing the file is not too big. Exports are accessible in the Azure portal. Alternatively, you are able to configure exports using the Exports API. 

Usage Details API

Think about using the Usage Details API when you are holding a small set of cost data. If you hold a large volume of cost data, you need to request the smallest possible volume of usage data over a given period. 

To do this, use a filter when you carry out your request or specify a small time frame. For instance, in an instance where you require three years worth of cost data, the API works more effectively when you instigate multiple calls for various time ranges, as opposed to with one call. Then, you can load your data into Excel and analyze further.

Automate Retrieval with Usage Details API

The Usage Details API offers a convenient means to get raw cost, unaggregated data that matches your Azure bill. The API is helpful when your company requires a programmatic data retrieval alternative. Think about using the API if you want to analyze smaller sets of cost data.   

Note that if you hold larger datasets, you should use other, previously identified options. The data in Usage Details is offered on a per-day, per-meter basis. It is utilized to calculate your monthly costs. The general availability (GA) version of the APIs is 2019-10-01. Make use of 2019-04-01-preview to retrieve the preview version for Azure Marketplace reservation and purchases with the APIs.

4. Managed Azure Cost Optimization with Spot by NetApp

While Azure spot virtual machines for reducing cost, these have inherent challenges that must be handled. Spot VMs can be significantly less expensive than pay-as-you-go instances, however, as spare capacity, Azure can reclaim those instances with little warning, making them less than ideal for production and mission-critical workloads. 

Key features of Spot by NetApp’s cloud financial management suite include:

Predictive rebalancing—identifies spot instance interruptions up to an hour in advance, allowing for graceful draining and workload placement on new instances, whether spot, reserved or on-demand.  

Advanced auto scaling—simplifies the process of defining scaling policies, identifying peak times, automatically scaling to ensure the right capacity in advance.

Optimized cost and performance—keeps your cluster running at the best possible performance while using the optimal mix of on-demand, spot and reserved instances. 

Enterprise-grade SLAs—constantly monitors and predicts spot instance behavior, capacity trends, pricing, and interruption rates. Acts in advance to add capacity whenever there is a risk of interruption.

Serverless containers—allows you to run your Kubernetes and container workloads on fully utilized and highly available compute infrastructure while leveraging spot instances, Savings Plans and RIs for extreme cost savings.

Visibility and recommendations—lets you visualize all your cloud spend with the ability to drill-down based on the broadest range of criteria from tags, accounts, services to namespaces, annotations, labels, and more for containerized workloads as well as receive cost reduction recommendations that can be implemented in a few clicks. 

Learn more about Spot by NetApp’s cloud financial management solutions.