Azure Cloud Cost Explained: Pricing Models & Savings

Cloud computing has revolutionised the way businesses operate, especially in terms of application management and infrastructure utilisation. As a predominant player, Microsoft Azure offers a flexible pay-as-you-go pricing model that supports scalability and a wide range of usage options. However, this flexibility comes with the caveat of understanding Azure cloud costs. Many organisations fail to grasp how fast expenses can accumulate, as cheaper cloud options may lead to lower performance, misconfigurations, or the absence of a robust governance strategy for cost management.

In this article, we’ll outline Azure’s pricing structure and evaluate the key factors that influence costs. This comprehensive guide will provide you with effective strategies for optimising Azure costs and enhancing your savings.

Understanding Azure Pricing Structure

Microsoft’s approach to cloud pricing focuses on three primary areas:

• Pay-As-You-Go: Ideal for fluctuating workloads, this model requires no upfront commitment.
• Reserved Instances (RIs): By committing to a one- or three-year term, you can enjoy discounts of up to 72%. RIs can be swapped or terminated for a fee.
• Spot Pricing: Purchase unused computing capacity at discounts up to 90%, with the understanding that these resources may be reclaimed when demand increases.

How Azure Cloud Pricing Operates

Azure Cloud pricing varies and is not a fixed monthly rate. Each service features its own billing criteria, from virtual machines to databases and storage accounts. For instance, virtual machine (VM) costs accrue per second, while storage is charged by gigabyte each month and outbound network transfer fees apply on a per-gigabyte basis.

The pay-as-you-go model is the most straightforward and flexible, making it perfect for development tasks or periodic workloads. However, using this model for continuous operations can become costly, especially for systems running 24/7.

To mitigate long-term costs, Azure offers Reserved Instances (RIs). Committing to a resource or VM for a year or three can yield substantial savings of up to 72% compared to the pay-as-you-go model. Alternatively, Spot Virtual Machines can present considerable discounts — as much as 90% — but may be discontinued if Azure needs those resources.

For predictable workloads, utilising RIs along with the Azure Hybrid Benefit — which allows the use of existing Windows Server or SQL Server licences — can maximise savings. Furthermore, Azure has recently introduced Savings Plans, offering even more flexibility across various services without the need to tie yourself to a specific VM type.

Key Factors Influencing Azure Cloud Costs

Azure pricing encompasses several categories, including compute, storage, and networking, as well as additional services like monitoring and databases. Notably, compute services represent the most significant portion of a company’s cloud budget.

Compute Costs

Virtual Machines (VMs) serve as the core of Azure compute services. Costs fluctuate based on vCPU counts, memory size, and geographic region. Windows VMs often incur higher charges due to licensing. However, the Hybrid Benefit allows businesses to leverage on-premises licenses to reduce their Azure expenses.

Application Services and Kubernetes clusters (AKS) are also part of the compute pricing landscape. It’s worth noting that while the Kubernetes control plane is free, the associated worker nodes are billed as VMs. For less demanding environments, serverless options like Azure Functions can be far more economical, as you’re charged only for actual executions rather than idle time.

Storage Costs

Storage pricing is tiered and varies based on redundancy options (LRS/ZRS/GRS) and data operations.

For enterprises handling vast amounts of outdated or infrequently accessed data, migrating less-critical information to Cool or Archive tiers can result in savings of 50-70%. Additionally, SSD (Premium) storage is significantly more costly than HDD (Standard), so opt for HDD only if read/write performance is paramount.

Networking Costs

Many organisations overlook networking costs when budgeting for Azure. All incoming traffic to Azure is free; however, outbound data transfers incur charges. The first 5 GB are complimentary, but anything beyond that starts at over $0.087 per GB for an additional 5 TB. Companies planning to transmit large data volumes globally should budget accordingly.

Consider implementing Azure CDN or ExpressRoute to optimise networking expenses. For instance, ExpressRoute provides a private, dedicated line to Azure, enhancing performance and offering predictable pricing for extensive data movement.

Other Influential Pricing Factors

Utilising advanced features or additional tools can lead to extra fees for databases, security, and monitoring. For example, the Azure SQL Database has a basic tier starting at roughly $0.008 per hour, but costs can ramp up significantly for higher-performance tiers. Similarly, Azure Monitor and Application Insights carry charges of approximately $2.76 per GB of ingested data, which can accumulate rapidly across multiple services.

Managing Azure Costs with Azure Cost Management + Billing

Azure Cost Management + Billing is a vital tool for enterprises seeking to monitor and comprehend their expenditures. This service helps identify cost sources, broken down by subscription, resource group, and tagging, allowing for thorough financial oversight.

You can set budgets and alerts to notify you when you’re approaching your limit. For example, if a project is budgeted at £1,000 per month, you could create a notification for when you reach 80% of that limit.
Azure Cost Management works in tandem with Azure Advisor to analyse your ecosystem and provide suggestions for cost savings. For instance, it may discover that a particular VM is operating at just 10% CPU utilisation and recommend a downgrade to a more economical instance.

Best Practices for Azure Cost Savings

Reducing Azure costs requires a multi-faceted strategy that includes monitoring, automation, and strategic planning for resource utilisation.

One of the simplest ways to cut costs is to right-size your VMs. Many organisations purchase unnecessarily large VMs, wasting valuable resources. Using Azure Monitor can help highlight CPU and memory usage; if these metrics remain consistently low, it might be beneficial to downgrade to a smaller instance type.

Moreover, you can decrease compute expenses by enabling auto-scaling, which automatically adjusts compute resources based on demand. For example, you may need extra VMs during peak hours but none overnight, allowing you to save significantly.

For development and testing environments, consider implementing automatic shutdowns. This ensures that non-essential VMs aren’t operational overnight or on weekends, potentially saving up to 60% in unnecessary running costs.

Storage costs can also be minimised using lifecycle management policies to transition infrequently accessed files to lower-cost options. For instance, storing less accessed data in Cool or Archive tiers is more economical than primary storage, and it’s wise to delete unused managed disks, snapshots, or backups.

Transitioning to a serverless architecture, such as Azure Functions or Logic Apps, allows you to incur costs only when your functions are active, avoiding fees during downtime.

Cut Your Azure Cloud Costs with Turbo360

Turbo360’s Cost Analyzer is an all-in-one solution engineered to address limitations found in native tools. It provides a comprehensive Azure cost analysis across subscriptions, environments, and teams, facilitating enhanced spending optimisation and waste reduction. This tool offers advantages such as scheduled cost optimisation, in-depth cost analysis reports, and intelligent alerts for timely interventions. By presenting a holistic view of expenses across numerous Azure subscriptions, Turbo360 offers a more efficient solution for enterprise users compared to Azure’s more limited subscription-specific tracking.

Turbo360 is an outstanding FinOps tool that simplifies Azure cost analysis and optimisation. – James Reed, West Coast Cloud

Conclusion

In conclusion, while Azure offers tremendous adaptability, managing cloud costs effectively relies on the right mix of tools, insight, and proactive solutions. Understanding pricing components, utilising the Azure Pricing Calculator as well as Cost Management + Billing tools, and balancing your expenditure with strategies such as right-sizing, reserved instances, and lifecycle storage policies will help you conserve funds without sacrificing performance.

Whether you’re a startup refining your ideas or an established enterprise with critical operations, cost management should be integral to your cloud strategy from the outset. Azure can cater to any project and budget, but without proper visibility and controls, expenses can quickly spiral out of control.

FAQs

1) What is the Azure free tier?

• Azure offers a free tier that allows organisations to explore a variety of services without cost.
• 12 Months Free Services with Usage Limits (e.g. 750 hours of a Windows VM).
• $200 Credit for Azure Services within the First 30 Days.
• Many Services Free Forever with Usage Limits (e.g. 1M Free Requests on Azure Functions).

2) Which services are free for 12 months?

Azure provides various services that are complimentary for the first 12 months, including:

Compute: Linux VMs, Windows VMs.

• Storage: Azure Managed Disks, Azure Blob Storage, Azure Files.
• Databases: Azure SQL Database, Cosmos DB.
• AI & Analytics: Computer Vision, Text Analytics, Translator, Personaliser, Language Understanding.

3) What happens after the Azure free trial?

After your 12-month period ends or once the $200 credit is depleted, any further usage will be charged to your credit card in a pay-as-you-go structure. Only services explicitly labelled as “always free” will remain free post-trial.

4) Which Azure services are free forever?

These Azure services feature free tiers that are available indefinitely:

• Serverless & Containers: Azure Functions (up to 1M requests/month), Azure Kubernetes Service (AKS), Azure Container Instances.
• Networking: Virtual Networks (VNets), unlimited inbound data transfer, outbound data transfer (up to 15GB).
• Development Tools: App Service, DevTest Labs, Azure DevOps.
• Other: Azure Advisor, Active Directory B2C, Event Grid, Load Balancer, Azure Automation.
• NOTE: Dependent resources (like AKS VMs) may still incur charges even if the core service is free.

5) What is the Azure Hybrid Benefit?

The Azure Hybrid Benefit allows users to apply their existing Windows Server or SQL Server licenses to Azure workloads, saving up to 85% when combined with Reserved Instances.

6) How is Azure cloud cost calculated?

Azure cloud costs depend on usage patterns and resource consumption. For instance, VMs are billed by the second, while storage is billed by the gigabyte per month. Additional charges apply for outbound traffic, database transactions, and monitoring. It’s advisable to regularly consult the Azure Pricing Calculator to gain insights before deployment, albeit it may not provide a complete cost overview.

7) What is the most cost-effective way to run Azure virtual machines?

The most economical way to operate Azure VMs is by utilising the Azure Hybrid Benefit alongside Reserved Instances. By prepaying for Azure services for a one- or three-year term, users can save up to 72% compared to pay-as-you-go rates. For non-essential workloads, Spot VMs can offer discounts of up to 90%, but they may be withdrawn by Azure at any moment for other needs.

8) How can I trim down my Azure cloud expenses?

To minimise your Azure cloud costs, ensure that your virtual machines are correctly sized and enable auto-scaling. Additionally, turn off non-essential resources overnight or during low-traffic periods. Leverage Cool and Archive tiers for less frequently accessed data and incorporate serverless services like Azure Functions whenever feasible. Lastly, utilize available cost management tools and regularly review your spending.

9) Is Azure more economical than AWS or Google Cloud?

Azure often proves cheaper than its competitors for Windows-based workloads due to the ability to use existing Windows Server and SQL Server licences with the Azure Hybrid Benefit.

10) What is the Azure Pricing Calculator, and why should I use it?

The Azure Pricing Calculator is Microsoft’s official estimation tool that helps assess monthly expenses based on required Azure services. You can select latency, region, necessary resources, and products like VMs or storage needs to obtain an estimated cost. Using this tool beforehand helps with effective budgeting and avoids unexpected financial surprises.