A guide to use Cost Management tools and services to optimize your cloud spending and efficiency.

Introduction

Are you spending more than you need to in the cloud? Do you want to learn how to monitor, analyze, and optimize your Azure costs? If so, this document is for you. In this document, we will introduce you to some of the key features and capabilities of Azure Cost Management, Azure Advisor, and the Cost Optimization workbook, and show you how to use them to find and implement cost optimization opportunities. You will learn how to use Cost analysis to understand your cost drivers and trends, and how to investigate the root causes of cost changes or spikes. You will also learn how to use Azure Advisor to implement cost optimization best practices and recommendations, and how to use the Cost Optimization workbook to analyze and optimize your usage and costs across your environment. Additionally, you will learn how to perform an architectural review to align your solutions with the Well-Architected Framework, and how to stay updated with the latest cost optimization news and resources. By using these tools and services, you can reduce your cloud spending and improve your cost efficiency, while aligning your costs with your business needs and goals.

Identify your cost drivers and trends with Cost analysis

The first step to optimize your Azure costs is to understand where and how you spend your money in the cloud. Cost analysis, part of Microsoft Cost Management, is a powerful tool that shows you a detailed breakdown of your costs by various dimensions, such as service, resource, resource group, subscription, location, tag, and more[1]. You can use Cost analysis to view your costs in different levels of detail, such as daily, monthly, or custom, and in different chart types, such as bar, line, pie, or table. You can also use filters, grouping, and sorting to customize your view and focus on the data that is relevant to you. Cost analysis also provides you with a forecast of your costs based on your current usage, and allows you to export your data to Excel or CSV for further analysis or reporting[2].

Figure 1 Cost analysis Accumulated costs view

To use Cost analysis, you need to select a scope that defines the level of detail you want to see. The scope can be an entire billing account, a management group, a subscription, or a resource group. Depending on your organizational structure and access level, you can choose the scope that best suits your needs. For example, if you are a cloud administrator or a finance manager, you might want to see the costs across the entire billing account or management group. If you are a product owner or a developer, you might want to see the costs for a specific subscription or resource group. You can also switch between scopes easily to compare costs across different levels, and use filtering to refine the scope to resources which have a particular tag name and tag value.

Walk through a cost analysis scenario

Let’s assume you are a cloud administrator who is responsible for managing the costs of your assets in Azure. You have successfully migrated several applications to the cloud, and you are seeing an increase in costs from month to month due to the popularity and ease of deployment of your services. However, you are also facing some challenges in evaluating why the costs for certain services are increasing, and if they are running cost-optimized. You want to use Cost analysis to gain some insights into your cost drivers and trends, and to identify potential savings opportunities. Here are the steps you can follow:

Select the entire billing account as your scope, to see the overall view of your costs across all your subscriptions.
Choose the Accumulated costs view to see the total costs for the current month, and the forecast for the next month. You see that your forecast is higher than your budget, and you want to find out why.
Switch to the Daily costs view to see the costs per day and notice a spike in costs on a certain date. You want to drill down to find the root cause of the spike.
Group by service name to see the breakdown of your costs by service. You see that the service that caused the spike is virtual machines.
Click on the virtual machines bar to filter by that service. You see that the costs for virtual machines are still high after the spike, and you want to find out which resources are contributing to the high costs.
Group by resource to see the breakdown of your costs by resource. You see that there are several virtual machines that have high costs, and you want to find out more details about them.
Click on one of the virtual machines to filter by that resource. You see that the virtual machine has a high cost due to a reserved instance purchase. You realize that someone purchased a reserved instance for a year and paid monthly, which resulted in a spike in costs. You also see that the virtual machine is running on a premium SKU, which might not be necessary for your workload. You decide to investigate further and see if you can optimize the costs of this virtual machine and other similar ones.

The following table shows an example of how you can use Cost analysis to drill down to the root cause of a cost spike:

View

Scope

Filter

Group by

Chart type

Insight

Accumulated costs

Billing account

None

Bar

Forecast is higher than budget

Daily costs

Billing account

None

Line

Spike in costs on a certain date

Daily costs

Billing account

None

Service name

Bar

Virtual Machines is the service that caused the spike

Daily costs

Billing account

Service name: Virtual machines

Resource

Bar

Several virtual machines have high costs

Daily costs

Billing account

Service name: Virtual machines, Resource: vm1

None

Line

vm1 has a high cost due to a reserved instance purchase and a premium SKU

Implement cost optimization best practices with Azure Advisor

The next step to optimize your Azure costs is to implement best practices and recommendations that can help you reduce unnecessary spending and improve your efficiency. Azure Advisor is a free service that provides personalized and actionable guidance across five well-architected pillars: Cost, Security, Reliability, Operational Excellence, and Performance[3]. Each pillar is important and influences the others[4]. For example, choosing the right service level and availability options can affect your costs and reliability. Enabling security features and monitoring can affect your performance and operational excellence. Azure Advisor analyzes your usage and configuration data, and provides you with recommendations that can help you optimize your resources and services based on Microsoft best practices.

To use Azure Advisor, you need to select a scope that defines the level of detail you want to see. The scope can be an entire subscription or a resource group. You can also apply filters to see recommendations for specific categories, impacts, or resources. Azure Advisor also provides you with an Advisor score, which is an aggregate across all five pillars and shows your progression over time[5]. By implementing the recommendations, you can increase your score and improve your alignment with the well-architected framework. You can also download or share your recommendations, or create tasks and alerts to track your progress and follow up on the actions.

Figure 2 Azure Advisor Score

Cost recommendations

One of the pillars that Azure Advisor covers is Cost. The Cost pillar provides insights on where you can save money and improve your cost efficiency[6]. Some of the cost recommendations that Azure Advisor provides are:

Recommendation

Description

Potential savings

Right-size or shut down underutilized virtual machines

Azure Advisor identifies virtual machines that have low CPU or network utilization, and suggests resizing or deallocating them to save costs.

Up to 40% per virtual machine

Buy reserved instances or savings plans for compute

Azure Advisor identifies virtual machines that are running on pay-as-you-go pricing, and suggests buying reserved instances or savings plans to save up to 72% on your compute costs.

Up to 72% per virtual machine

Delete or reconfigure idle virtual network gateways

Azure Advisor identifies virtual network gateways that have low or no traffic, and suggests deleting or reconfiguring them to save costs.

Up to 100% per virtual network gateway

Remove unused or unattached disk storage

Azure Advisor identifies disk storage that is not attached to any virtual machine, or that has not been accessed for a long time, and suggests deleting it to save costs.

Up to 100% per disk

Remove orphaned resources

Azure Advisor identifies resources that are not associated with any resource group, such as public IP addresses, load balancers, or network security groups, and suggests deleting them to save costs.

Up to 100% per resource

These are some of the cost recommendations that Azure Advisor provides, but not all. You can find an ever-expanding list of currently covered services and recommendations here: Cost recommendations – Azure Advisor | Microsoft Learn. However, most likely you will already find useful information and savings opportunities right away by using Azure Advisor. You can also easily introduce the service to other people who might only care about a single solution instead of your entire cloud landscape. Based on the level of their role-based access, they will only be able to see the subscriptions or resource groups that they have access. You also do not need to deploy any kind of tools or agents, because Azure Advisor is a built-in service that is available for free.

Analyze and optimize your usage and costs with the Cost Optimization workbook

The final step to optimize your Azure costs is to analyze and optimize your usage and costs across your environment, and to identify and implement savings opportunities. The Cost Optimization workbook, part of Azure Advisor Workbooks, is a comprehensive tool that provides a holistic view of your usage and costs, and helps you find and address inefficiencies and waste[7]. The workbook integrates with Azure Advisor to provide you with recommendations and actions to optimize your costs.

Figure 3 Cost Optimization Workbook

To use the Cost Optimization workbook, you need to select a scope that defines the level of detail you want to see. The scope can be an entire billing account, a management group, a subscription, or a resource group. You can also apply filters to see the data for specific time periods, services, locations, tags, or resource types. The workbook provides you with several tabs that show different aspects of your usage and costs, such as:

Overview: This tab shows a summary of your usage and costs, your cost optimization score, your top cost drivers, your cost trends and forecasts, and your cost optimization opportunities.
Rate optimization: This tab shows how you can optimize your costs by choosing the right pricing options, such as reserved instances, savings plans, spot instances, Azure Hybrid Benefit, and pay-as-you-go.
Usage optimization: This tab shows how you can optimize your costs by reducing or eliminating unused or underutilized resources, such as idle virtual machines, unattached disks, orphaned resources, and overprovisioned resources.

The Cost Optimization workbook should be your primary tool for having detailed insights and actions for rate optimization and usage optimization across your landscape. The workbook covers many services and scenarios that are not part of Azure Advisor recommendations, such as upgrading storage accounts to benefit from lifecycle management, optimizing SQL databases and elastic pools, optimizing App Service plans and functions, and more. You can also customize the workbook to suit your needs, by adding or removing tabs, charts, tables, filters, and parameters. The workbook is also a free service that is available for all Azure customers.

Perform an architectural review to align with the well-architected framework

The final step to identify your savings potential in Azure is to review your architecture and design choices. Architecture and design choices are the decisions that you make when you plan, build, and deploy your solutions in Azure. They include aspects such as the service selection, the configuration, the scalability, the availability, the performance, the security, and the governance of your solutions[8]. These choices have a significant impact on your costs, as they determine how you use and consume the resources and services in Azure. For example, if you choose a service that has a higher SLA or a more advanced feature set than what you need, you might be paying more than necessary. Or if you choose a service that does not fit your requirements or expectations, you might end up with poor performance, reliability, or security issues, which can also increase your costs. Therefore, it is essential that you review your architecture and design choices regularly and align them with the best practices and the latest offerings in Azure. To review your architecture and design choices, you can use the Well-Architected Framework in Azure[9]. The Well-Architected Framework is a set of principles, guidance, and tools that help you design and implement high-quality solutions in Azure. It is based on the five well-architected pillars that we mentioned before: Cost, Security, Reliability, Operational Excellence, and Performance. For each pillar, the framework provides a set of best practices, questions, and considerations that help you evaluate your current state, identify gaps and risks, and plan improvements.

Figure 4 Azure Well-Architected Framework

You can also use the Well-Architected Review tool in Azure to assess your solutions against the best practices and get a score and a report with recommended actions. The tool also helps you track your progress and compare your results over time. The Well-Architected Review is a workload-driven tool, which means that you can focus on a specific solution or application instead of the entire environment. This allows you to prioritize your efforts and resources based on the importance and impact of each solution. The Well-Architected Review is also a cross-functional tool, which means that you can involve different stakeholders and roles in the assessment process, such as the product owner, the developer, the architect, or the administrator. This helps you get a holistic and comprehensive view of your solutions and align your objectives and expectations. The Well-Architected Review does not aim to replace a human-driven architecture review session, but rather to complement and enhance it. You can use the tool as a starting point, a reference, or a validation for your architecture and design choices. You can find more information on how to get started with the Well-Architected Framework and the Well-Architected Review here: Assessments | Azure Well-Architected Review (microsoft.com).

The Well-Architected Framework and the Well-Architected Review are not the only resources that you can use to review your architecture and design choices. Microsoft also offers a wide range of workshops, assessments, and services to help you with your cloud journey. You can leverage the expertise and experience of Microsoft certified partners and Microsoft itself to get guidance, support, and feedback on your solutions. You can also get in touch with your Microsoft representative to learn more about the offerings and opportunities that are available for you. You do not have to walk this road alone. Microsoft is here to help you succeed in the cloud.

Stay updated with the latest cost optimization news and resources

The final tip to optimize your Azure costs is to stay updated with the latest cost optimization news and resources. Azure provides a variety of channels and sources that can help you keep up with the latest developments and best practices in cost optimization. Some of the channels and sources are:

Microsoft Cost Management blog: This is the official blog for Microsoft Cost Management, where you can find announcements, updates, tips, and tricks on how to optimize your Microsoft Cloud costs. You can subscribe to the blog to receive notifications when new posts are published[10].
Microsoft Cost Management YouTube channel: This is the official YouTube channel for Microsoft Cost Management, where you can find videos, demos, and webinars on how to use the cost management tools and services. You can subscribe to the channel to receive notifications when new videos are uploaded.
Microsoft Cost Management documentation: This is the official documentation for Microsoft Cost Management, where you can find detailed information and guidance on how to use the cost management tools and services[11]. You can also provide feedback and suggestions on the documentation.
FinOps blog: This is the official blog for Microsoft’s FinOps news and advice.

By staying updated with the latest cost optimization news and resources, you can learn new ways and best practices to optimize your Azure costs, and also get support and feedback from the Microsoft Cost Management team and the community.

Summary

In this document, we have shown you how to optimize your Azure costs with cost management tools and services. We have explained how to use Cost Analysis to identify your cost drivers and trends, and how to drill down to find the root causes of cost fluctuations or spikes. We have also explained how to use Azure Advisor to implement cost optimization best practices and recommendations, and how to use the Cost Optimization workbook to analyze and optimize your usage and costs across your environment. Additionally, we have explained how to perform an architectural review to align your solutions with the well-architected framework, and how to stay updated with the latest cost optimization news and resources. By using these tools and services, you can benefit from:

Reducing your cloud spending and improving your cost efficiency
Aligning your costs with your business goals and requirements
Implementing Microsoft best practices and well-architected principles
Monitoring and managing your costs across your complex and dynamic environment
Identifying and addressing inefficiencies and waste
Improving your operational processes and practices

We hope you find this document useful and informative, and we encourage you to try out these tools and services to optimize your Azure costs. If you have any suggestions or feedback, please let us know in the comments. Happy cloud computing!