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Best Practices for Cost Optimization in Microsoft Azure

What are the best practices for managing and monitoring your costs? Explore the available tools and strategies your organization can use to achieve these goals in Microsoft Azure.

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Author: Joseph Romani


The cloud offers organizations a host of services that can dramatically improve their business and remove the need for acquiring and maintaining expensive on-premises infrastructure. However, if your cloud resources are not carefully managed, these savings will swiftly be eroded.  

There are three essential questions your organization needs to answer when assessing your cloud budget. 

  • How do I balance cost optimization while still empowering my teams to be innovative and agile?
  • Does my organization have tools in place to analyze our spending and identify areas for improvement? 
  • What factors should I be considering when choosing compute instances or storage tiers? 

It is important for your business to periodically review their cloud to ensure that they are balancing performance and cost, while reducing waste. In the past, we have taken a deep dive into cost management in AWS (Amazon Web Services) and here we will introduce essential tools and strategies used in Microsoft Azure that can help guide you in getting the most value from your cloud.  


Cost Management, Budgets, Policies, & Resource Tagging

Azure Cost Management and Billing is a great way to monitor your organization’s spending, set budgets, and analyze costs. This service provides detailed insights into your Azure usage. You can also use the tagging function in Azure to allocate the cost for resources to specific projects or departments, which further enhances your ability to understand your spending patterns. 

Another best practice is to create hierarchies in Azure Management Groups and Cost Centers for cost allocation, making it easier to track spending by project or business unit. You can set up Azure budgets and alerts to monitor spending and receive notifications when you approach or exceed budget limits and to flag anomalous costs with Azure Anomaly Detection. This will allow your organization to investigate the root cause of the costs and make needed adjustments. Be aware that many services in Azure have a free usage tier, but once those limits for that tier are exceeded the costs will start accruing.  

Finally, enforce governance policies and cost control using Azure Policy to ensure that provisioned resources are being configured according to your organization’s cost management policies. You can assign policies at the subscription or resource group level, then begin an audit to determine the impact of implementing that policy in your existing subscription prior to making those changes. 


Reserved vs. Spot Virtual Machines (VMs)

Which compute should you pick? Choosing the right compute for your workloads can lead to significant cost savings. Pay-as-you-go is the default pricing tier, though it is typically more expensive than the alternatives. However, for short term, non-fault-tolerant, or inflexible workloads, it may be a necessary choice. 

For long-term workloads with predictable usage, such as batch processing, scheduled reporting and analytics workloads, or Enterprise Resource Planning (ERP) Systems, consider Reserved Virtual Machines. In exchange for a one- or three-year term commitment you get a significantly discounted rate for the compute compared to pay-as-you-go rates. 

If you have workloads that are fault-tolerant and flexible, such as web applications that use auto-scaling to manage variations in site traffic or machine learning workflows, consider using Azure Spot VMs to take advantage of low-cost surplus capacity. Effectively, you are buying unused Azure compute capacity at a steep discount to run interruptible workloads. This can be a source of significant savings but only if your workloads can handle interruptions. 



Auto-Scaling in Microsoft Azure

There are many applications in Azure that support auto-scaling such as Azure Functions, Azure Kubernetes Service, Azure Data Factory and Azure Synapse Analytics. Auto-scaling automatically adjusts the resources used by these services and others based on the demand, so you don’t spend more than you need to. 


Storage Tiers & Lifecycle Management Policies

Just like you don’t want to pay more for compute than you need to, you also don’t want to pay more for storage than necessary. One way to manage this is by moving blob data between storage tiers to reduce the cost of storage. You can also implement lifecycle management policies to move your data between the Hot, Cool, Cold, Archive tiers as appropriate. This will allow for the best balance between costs and performance when accessing data.  


Azure Advisor

Azure provides several tools to analyze your cloud usage. Azure Advisor analyzes your existing Azure infrastructure and provides recommendations not only for cost savings, but also for security and improved performance. You can also configure alerts to stay up to date with new recommendations as you update your environment or if changes occur to Azure’s services. 

Azure Recommendation Digest offers best practices based on your Azure usage.
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Using these tools and best practices in your Azure environment will help you balance cost and performance while eliminating waste. In practice, optimizing cost can require a variety of approaches and ways of thinking, and RevGen can give you guidance in this process. We have overseen many examples where reducing cost more than pays for the time, effort, and support required to achieve the end result. 

To learn more about controlling your costs in Azure, contact our Azure experts or visit our Technology Services page for more information.  


Headshot of Joseph Romani, RevGen Partners ArchitectJoseph Romani is a Data Scientist Architect at RevGen, Microsoft Certified: Azure Data Engineer Associate, and Microsoft Certified: Azure Data Scientist Associate, with over seven years of experience in data science. 

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