Stop Overpaying: 12 Simple Tips for Azure Cost Optimisation

Like many cloud providers, Azure charges for what you use, so anything you don’t need is wasted. Cloud resources are limitless (as far as you can see) but can become expensive if they are not managed properly.

(You don’t want to end up paying for stuff you’re not using).

Plus, you need to implement Azure Cost Optimisation practices for compliance and governance so that your Azure services comply with your company policies and industry regulations and standards.

Now that you know the “why,” let’s get to what your Azure bill is costing you.

What costs money in Azure?

Before you can cut costs in the Microsoft Cloud, you should understand where the costs are coming from. The bill you receive at the end of the month depends on:

• The way you use resources
• Your subscription type
• Pricing from third-party vendors 

In Azure, costs come from several sources:

• Services and tiers: Cloud services like virtual machines (VMs), databases, and app services often account for the largest portion of Azure expenses. However, the total costs depend on the chosen specifications.
• Storage: Storaging data can also quickly add to your cloud bill. However, the cost depends on the amount of data, the type of data, and the region where it's stored. Additional features like redundancy or premium performance will also increase the cost of storage.
• Network traffic: Network traffic also impacts your Azure spending. Data ingress (into Azure) is usually free but egress (data moving across regions) can be expensive. For example, moving data across regions adds to costs.
• Licensing fees: Using VMs with pre-installed software like Windows Server includes licensing costs, which can quickly add up.

12 Best Practices for Azure Cost Optimisation

1. Azure Saving Plans for Compute

Azure Saving Plans for Compute is an easy and flexible way to save tremendously on compute services (up to 65%). 

In this saving plan, you can buy specific capacity for compute resources for lower prices while committing to spending a fixed hourly amount for 1 or 3 years. 

This makes it one of the most cost-effective cost-saving strategies in Azure. 

Here's how it works: When you have an application running on VMs but plan to modernise it by shifting to an app service, Azure Functions, or Kubernetes. Then, you can secure compute capacity at a discounted rate in advance. The discount will still apply even if you transition your application to a different service.

And what happens when you exceed your hourly commitment? If you overperform on that commitment, you will pay the list price. But if your usage falls below the threshold, you lose the discount.

2. Azure Reserved Instances

You can benefit from a discount of up to 72% with Azure Reserved Instances, which will save you big chunks in the monthly Azure bill.

But you must prepay for a committed period of 1 or 3 years when getting RI's.

It is a great fit for you when your workload requirements are stable and predictable, as this ensures matching actual usage to maximise cost savings.

For example: when you have an app you know that it will be running on the same type of compute in the same region for a minimum of one or three years.

Whereas Azure Savings Plans are limited to compute, Azure Reservations can also be applied to:

• Applications
• Storage
• Third-party services (such as Azure Databricks)

And with fixed costs for the whole reservation term, you can also improve budgeting and forecasting, making calculating your investment easier.

You can save even more when combined with Azure Hybrid Benefit (up to 80%). We’ll get to that later, so keep reading.

3. Leverage Azure Discounts

Azure offers discounts in lots of forms. As discussed earlier, you may opt for Azure Reserved Instances or Azure Saving plans to cut costs. But there is much more, such as Azure Spot VM (which we’ll discuss later).

A great way to save money in Azure is by using MSPs (Managed Service Providers) like Intercept.

We (as Microsoft Partner) can help you manage and optimise your Azure environment so you can focus on your core business activities: delivering more value to your end customers.

And to sweeten the deal: MSPs can offer significant discounts on your Azure cloud bill, leading to immediate cost savings.

When you use the Microsoft CSP instead of Microsoft's direct model (credit card), you'll save significantly. Check out the different purchase models from Microsoft.

There are also more discounts, such as Azure benefits for developers with a Visual Studio subscription. They can receive a $150 monthly credit for Azure services. This is a great way to lower expenses, as all developers can test out with this budget.

4. Right-size your Azure resources

Another easy cost-saving strategy is to right-size resources. When a resource has been underused for longer than 30 days, consider downsizing it. Evaluate and adjust the size of your resources to match your workload requirements so you won’t over-provision.

It's all about right-sizing. You can use Azure Advisor’s recommendations for which ones to resize.

Cross-check whether the selected resources are the most cost-effective for your use case. 

For example: consider moving development environments to lower-cost VM families or switching databases to more efficient instance types.

5. Shut down unused or idle resources

Idle resources are those that are running without being used. These don’t give you any value but take up a chunk of the monthly cloud costs. They are often one of the reasons Azure bills are too high.

For a more hands-on approach, you can write scripts to find underused resources. Larger organisations may find it more helpful to assign a dedicated expert to review all of it.

We’d also recommend adding items to development sprints every few cycles and reviewing all Azure resources. 

Identify what’s in use, shut down idle instances, and right-size any over-provisioned ones. This routine clean-up keeps your Azure bill in check and ensures you only pay for what you use. 

6. Delete forgotten resources

Another quick win for significant savings is cleaning up those unforgotten and orphaned resources. While VMs used temporarily for testing often get deleted, sometimes associated resources are left behind. And they're just spinning the needle right on your Azure consumption. 

Old dev and testing resources can also rack up unnecessary expenditures. Regular clean-up ensures good resource cleaning and helps prevent wasted spending.

7. Use Azure Budgets and Alerts

Azure Budgets Alerts are great for managing cloud costs. Azure Budgets allows you to create multiple budgets and set filters to manage costs effectively. 

With Azure Alerts, you receive immediate alerts when your spending is approaching or exceeding budget so you can act timely by expanding the budget or adjusting usage.

You better catch issues earlier rather than later to prevent unwanted and unexpected costs from stacking further up your Azure receipt.

You can also specify whether the budget is quarterly or monthly and receive forecasts to set appropriate limits. You can also use tags to identify specific cost categories (resources, resource groups, subscriptions, etc.). More on tags later.

8. Leverage Azure Spot VMs

Azure Spot Virtual Machines (VMs) offer a great opportunity to save costs for specific workloads you can afford to be interrupted at any time.

(Think batch processing, large compute workloads, dev/test environments, etc.). 

It lets you leverage unused Azure capacity for a lower price. The exact available capacity varies by:

• Size
• Time
• Region & more

Azure can reclaim the capacity with only a 30-second notice whenever it needs to be returned or when prices exceed the set limit.

This can occur when the spot instance's pricing exceeds the set amount or when they need it for other pay-as-you-go workloads.

9. Azure Hybrid Benefit: Bring your licences

When you migrate your workloads to Azure, you can bring your “own” licences. Azure Hybrid Benefit is a cost-saving provision model that lets you use existing on-premising software licences in Azure. (This can be existing licences for Windows Server, SQL Server, etc). 

It offers a great opportunity to reduce your Azure expenses further as you eliminate the costs of running workloads in Azure by not having to buy licences you already own.

Example: Let’s say you run a VM on a Windows Server in your on-premise data centre, and you’ve already purchased a Windows Server licence for it. 

When you move this workload to Azure, creating a Windows VM means your cost will include both the compute power and a new Windows Server licence.

You already own the licence so paying for it again doesn’t make sense.

Azure Hybrid Benefit removes the extra licensing cost so your VM cost will only include the compute power, not the OS licence.

So, before migrating to Azure, think twice about this when you have existing licences for SQL Server or Windows Server.

You save up to 55% on Azure SQL Databases (PaaS) and up to 40% on Azure VMs (IaaS) by leveraging Azure Hybrid Benefit with your licence(s).

But consider that you’d need to be covered with active Software Assurance or Windows Server Subscriptions.

Enterprises with substantial on-premises infrastructures and established licences that want to migrate to Azure can benefit from this model and reduce costs.

10. Implement VM Auto-Scaling

Virtual Machines (VMs) are Azure's most expensive resource. If not managed properly, they can blow up your bill, especially if overprovisioned or left running during low-demand periods.

Instead of running oversized VMs 24/7, let auto-scaling handle resource allocation when needed and deallocate them when they’re not. This way, you’re only paying for what you use

For example: scale up during peak times to maintain performance and scale down during off-peak hours to save money.

11. Tag Azure resources and create policies

Another quick win for reducing costs in Azure is using tags. Tagging all of your resources is critical to cloud cost governance and automation in Azure.

Tags give every resource a clear owner, purpose, or project association. 

You can assign tags at different levels:

• Subscriptions
• Resource groups
• Individual resources

You can categorise resources based on:

• Departments (development and marketing)
• Projects (for better tracking).
• Environments (Separate development, staging, and production)

With Azure Policy, you easily enforce tagging when deploying new instances. They make it easy with many pre-built policies that help you get on your way by tagging basically anything. 

When defining a policy in Azure, you can assign it to a subscription so only those subscripted can use it. 

1. This is a great method for cutting unnecessary spending by preventing developers from scaling up services or instances that won’t benefit your business.
2. Creating policies also strengthens governance and ensures compliance across your cloud environment.

Maybe you’ve had once someone's spinning up too big of a VM or too much SQL which wasn’t necessary. Then you know how these cloud expenditures can get out of control easily.

To toss in more, you can create cost-saving policies in Azure by defining roles and scopes. 

For example: Allowing only a certain amount of VM sizes in certain regions to be provisioned or preventing the creation of costly resources in dev-test environments.

It’s easy to implement and can save you lots of money.

12. Manage storage costs

Last but not least, you should manage your stored data efficiently to prevent paying for data stored too expensively without valid reasons.

In Azure, you get the luxury to choose from various storage options and access tiers for blob storage. These tiers include:

• Hot tier: Being immediately accessible, this tier allows you to store any data you wish to access or modify frequently. That’s why access costs are the lowest in this tier. You probably guessed it – costs for storage are the highest.
• Cool tier: This tier suits infrequently accessed or modified data. With a minimum storage requirement of 30 days, this one has lower storage costs than a hot tier, but accessing costs more.
• Cold tier: This online tier is great for storing data you don’t need to access or modify as often but still have fast retrieval. Here, data must be stored for at least 180 days.This tier has lower storage costs but higher access costs than the cool tier.
• Archive tier: This is an offline tier that stores data that you rarely need to modify or access. It has flexible latency requirements, and the data should be stored for at least 180 days.

You can save massively by aligning these storage types with your actual usage requirements.

Azure Cost Optimisation Tools

Azure Cost Management

Azure Cost Management is a valuable cost tool within the Azure portal at no additional cost. It helps you monitor, manage and optimise your cloud spending. It has tools and insights which allow you to comprehend and control costs in your Azure environment.

Azure Advisor

Azure Advisor is your best friend for finding cost-saving opportunities in your Azure environment. It is the best place to start, as you can pinpoint “low-hanging fruit” here, such as removing unused resources.

Azure Advisor is a service that helps you optimise Azure costs by providing cost recommendations based on usage and configurations. It can give you tips to lower expenses and improve application performance, security, and reliability.

Azure Pricing Calculator

The Azure Pricing Calculator lets you estimate the pricing of Azure services before deployment, helping you plan budgets and avoid surprises. 

The calculator enables you to select services like VMs, Storage, or Databases and adjust variables such as instance size, region, and usage hours. It then provides a detailed view of costs, including compute charges, licence fees, and additional features.

Azure Monitor

Azure Monitor is a tool which can help you with getting more insights of performances of apps, infrastructure, network etc. It tracks the performance and usage of your resources, giving you insights to optimise them. Therefore, make sure to use Azure Monitor to identify underutilised services and scale them down. 

Azure TCO Calculator

The Azure TCO calculator helps you estimate the cost savings of moving your workloads to Azure. It generates a detailed overviewr outlining the potential reductions, but it’s up to you to adjust the variables to reflect your setup accurately. This includes factors like the number of VMs, the pricing tier for web apps, and other relevant details.

Common pitfalls to avoid when optimising Azure Costs

Focusing only on reducing costs

When thinking about cost in Azure, it’s easy to just focus on reducing your Azure bill. While reducing the bill is important, you should also think about total cost of ownership (TCO). That’s not just Azure costs but also personnel, other tools and technologies and potential costs from missed uptime commitments that affect customer-facing applications. 

Optimising TCO often means looking beyond cost. In some cases, spending more (like investing in performance improvements) can save you more in the long run. 

Over-optimising everything

Over-optimising, like shrinking virtual machine (VM) sizes too much, can backfire and harm performance and user experience. It’s all about right-sizing for cost and performance.

Going too fast

An iterative approach works best for cloud cost management. Then, build and improve incrementally. Don’t wait for a perfect setup before you get to Azure. Start small, focus on what matters most and refine over time.

Closing thoughts

Make sure to review your usage, as cost optimisation is an ongoing process that starts from the beginning, not when the application is deployed. Analyse workloads, monitor usage patterns, and continually improve efficiency. 

Take advantage of significant discounts Microsoft Azure offers and leverage quick cost optimisation tips, such as removing unused resources.

Using these practices will help you to regain control and save on Azure. And to add a cherry on top, it'll also help you with financial planning. 

In the end, you’re left with more money to invest in other important business areas.