Azure Cloud Cost Explained: Pricing Models & Savings

Cloud computing has transformed how businesses run their applications and leverage infrastructure. Microsoft Azure is a cloud computing market leader and its pay-as-you-go pricing structure fosters flexibility, scalability and vast options for consumption. Yet with such flexibility comes a warning understanding Azure cloud cost. Many businesses don’t realize how quickly costs can spiral, cheap cloud usually means low performance, misconfiguration or just basing no governance plan for expense control.

Therefore, lets will pinpoint the pricing structure Azure offers, assess it against major factors affecting the Azure cost. Here is a detailed go-to guide in Azure cost optimization strategies and ways to save your money.

Azure Pricing Structure

Microsoft focuses on three areas when it comes to cloud pricing:

• Pay-As-You-Go: By the second billing with no upfront commitment deal for unpredictable workloads.
• Reserved Instances (RI): Commit for 1-3 years to receive a discount of up to 72%. RIs can be exchanged or terminated (for a fee).
• Spot Pricing: Buy unused compute at 90% discount with the caveat that workloads may be evicted when resources are needed.

How Azure Cloud Pricing Works

Azure Cloud pricing is not a flat fee per month. Each service has its own unique billing metric from virtual machines to databases to storage accounts. For example, compute International Pricing for virtual machines (VM) is charged per second while storage is charged per gigabyte per month and outbound network transfer is charged per gigabyte.

The most straightforward and most versatile pricing structure is pay-as-you-go. You only pay for what you use, excellent for any workload still in development or if it runs intermittently. However, using pay-as-you-go for production can become expensive in no time, especially with systems that run 24/7.

To combat long-term expenditures, Azure boasts Reserved Instances (RIs); should someone commit to a resource/VM for one or three years, they can receive massive discounts up to 72% compared to pay-as-you-go pricing. Alternatively, Spot Virtual Machines can render steep discounts at times 90% but there is the potential for eviction should Azure need those resources.

For predictable workloads, using Azure RI in conjunction with the Azure Hybrid Benefit where companies/enterprises can use existing Windows Server or SQL Server licenses would be an excellent way to save money. In addition, Azure recently rolled out Savings Plans, which are more flexible than RIs and apply to a broader range of services, making them advantageous for companies who do not wish to commit to one specific VM type.

Major Factors that Affect Azure Cloud Cost

There are general categories under Azure Pricing that encompass all pricing compute, storage, and networking and then ancillary services like monitoring or databases. Of everything, compute services are the priciest and take up the highest percentage of the company’s cloud budget.

Compute Costs

Virtual Machines (VMs) are the primary vehicle for Azure compute. Costs change based on vCPU and memory as well as region. Windows VMs tend to be pricier because of licensing; however, the Hybrid Benefit allows for on-prem licensing to be used at Azure to offset prices for already paying customers.

Application Services and Kubernetes clusters (AKS) are also part of compute pricing. Where to note that the control plane for Kubernetes within Azure is free, the actual worker nodes are charged as if they were VMs. On the other hand, for lighter environments there are serverless options like Azure Functions that can save a ton because you’re only charged for executions and time running not elapsed periods where the service is sitting idle.

Storage Costs

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

For enterprises with tremendous amounts of data that are antiquated or infrequently accessed, moving less-critical data to Cool or Archive tiers can minimize storage costs by 50-70%. Also note that SSD (Premium) storage is multiple times more expensive than HDD (Standard). Only select HDD if read/write performance is a must.

Networking Costs

One pricing element that many organizations don’t expect with Azure is networking. All inbound traffic to Azure is free. Outbound (egress) is charged by the gigabyte. The first 5 GB in a month are free, and thereafter it starts at over $0.087 per GB for the next 5 TB. Organizations that need to bring a lot of data out to users worldwide should plan accordingly.

Azure CDN or ExpressRoute to save on networking expenses. For instance, ExpressRoute provides a private, dedicated line into Azure which not only improves performance but also offers predictable pricing if you need to move large amounts of data in and out of Azure.

Other Pricing Factors

If you begin utilizing more advanced features or discover you need certain extra tools, there are other services for which you’ll pay additional fees including databases and security and monitoring. For instance, Azure SQL Database has a starting basic pricing tier of about $0.008 an hour but for higher tiers with better performance, the price increases exponentially. In addition, if you’re using Azure Monitor and Application Insights, there’s a charge of about $2.76 per GB of data ingested which is expensive if you’re ingesting detailed telemetry across many different services.

Azure Cost Management + Billing

Azure includes Azure Cost Management + Billing which is an essential service for any enterprise that wants to monitor and understand their bill. This service allows you to see where costs are coming from even per subscription, resource group and resource tagging which allows you to understand where your money is going.

You can establish budgets and alerts which let you know when you’re getting close to your budget. For instance, if I have a project budgeted for $1,000 a month, I can create a notification alert to tell me when I’ve reached 80% of that budget allowance.
Azure Cost Management works with Azure Advisor to analyze your environment and provide recommendations on where you could save money. For instance, it might analyze your virtual machine (VM) usage and determine that a particular VM is running at 10% CPU utilization. It’s recommended that you downsize to a lower-cost instance size.

Azure Cost Saving Best Practices

There isn’t one way to reduce Azure costs. There needs to be a multifaceted approach incorporating monitoring, automation, and strategic planning for anticipated resource use.

For example, one of the simplest ways to save money is to right size your VMs. So many companies create much larger VMs than required and waste excess capacity. With Azure Monitor, you can determine what’s going on with CPU and memory utilization; if CPU or memory is consistently low over time, you may want to downgrade to a smaller instance type.

In addition, you can reduce compute costs with auto-scaling features, which allow Azure to automatically add or subtract compute resources when you don’t need them. For example, you might need more VMs for processing during peak traffic, but overnight or on the weekends you might not need any; thus, they could spin down.

For dev/test scenarios, the best option is to enable automatic shutdowns. This means that VMs not in production don’t run overnight or over the weekend when they’re not being used. This ensures nothing unnecessary runs 24/7, saving you potentially 60%.

You can also reduce costs for storage with lifecycle management policies to automatically move less aged or less accessed files elsewhere. For example, Cool or Archive tiers are less expensive than primary storage, and you can apply policies to move assets there over time. In addition, managed disks, snapshots, and backups should be deleted if they’re not used.

Ultimately, switching to a more economical serverless architecture like Azure Functions or Logic Apps means you’re only billed for processing when your function operates and doesn’t involve fees for idle runtime downtime.

Reduce Your Azure Cloud Costs With Turbo360

Turbo360’s Cost Analyzer is an integrated solution designed to address gaps that native tools cannot cover. It offers deep Azure cost analysis across subscriptions, environments, and teams, allowing for better spending optimization and waste elimination. The tool provides benefits such as cost optimization schedules, deep cost analysis reports, and intelligent alerts for proactive response. By offering a comprehensive solution for monitoring and visualizing costs across multiple Azure subscriptions, Turbo360 aims to provide a more efficient and effective option for enterprise users compared to Azure’s limitations at the single subscription level.

Turbo360 is an exceptional FinOps tool that makes Azure cost analysis and optimization a breeze. – James Reed, West Coast Cloud

Conclusion

Ultimately, while Azure is incredibly versatile, managing Azure cloud costs boils down to tools, awareness, and solutions that rectify problems before they occur. Establishing what calculates pricing, utilizing the Azure Pricing Calculator and Cost Management + Billing tools, then offsetting your spending with right-sizing, reserved instances, and lifecycle storage policies ensure you’re saving money you don’t need while still achieving optimal performance.

Whether you’re a startup working out your kinks with new endeavors or a full-blown enterprise with mission-critical needs, costs should be a part of your cloud infrastructure from the get-go. While Azure can accommodate any project and any budget, without the right visibility and control, it can lead to excess transgressions.

FAQs

1) What is the azure free tier?

• Azure provides a free tier to allow companies to experiment with a host of services at no cost.
• 12 Months Free Services with Usage Limits (ex. 750 hours of a Windows VM)
• $200 Credit for Any Azure Services in the First 30 Days
• Many Services Free Forever with Usage Limits (ex. 1M Free Requests on Azure Functions)

2) Which services are free for 12 months?

Azure has various services that are free 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, Personalizer, Language Understanding.

3) What happens after the Azure free trial?

After the 12 month period is up or after the $200 credit has been exhausted, any usage over and above will be charged to your credit card like pay as you go. The only thing that will be free after this expiration will be anything that states it is “always free”.

4) Which Azure services are free forever?

These are the Azure services that have free tiers used forever:

• Serverless & Containers: Azure Functions (up to 1M requests/month), Azure Kubernetes Service (AKS), Azure Container Instances.
• Networking: Virtual Networks (VNets), inbound data transfer (unlimited), 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: You will still incur charges for dependent resources (do AKS VMs) even if the service itself is free.

5) What is the Azure Hybrid Benefit?

Azure Hybrid Benefit allows you to bring your Windows Server or SQL Server licenses (BYOL) to workloads running in Azure, offering savings of up to 85% when paired with Reserved Instances.

6) How is Azure cloud cost calculated?

Azure cloud cost is calculated based on usage patterns and resource consumption. For example, Virtual Machines are billed per second of time and storage is charged per gigabyte, per month. In addition, there are charges for egress traffic, database transactions and monitoring. Therefore, it is useful to assess consistently with the Azure Pricing Calculator; that doesn’t give a complete picture yet allows some understanding before deployment.

7) What is the cheapest way to run Azure virtual machines?

The cheapest way to run Azure virtual machines is to use the Azure Hybrid Benefit in conjunction with Reserved Instances. Reserved instances allow users to prepay for Azure usage via a one-year or three-year commitment, saving up to 72% off pay-as-you-go prices. If workloads are not important, spinning up Spot VMs can be used; these are discount VMs up to 90% off but may be taken away at any time by Microsoft Azure for availability elsewhere.

8) How can I reduce my Azure cloud bill?

To reduce your Azure cloud bill, make sure your virtual machines are the right size and autoscale is enabled. Further, decommission nonessential resources overnight or during off-peak hours. For less-accessed data, use the Cool or Archive tiers and incorporate serverless services like Azure Functions whenever possible. Finally, use the tools provided for cost management and regularly check up on what you’re spending.

9) Is Azure cheaper than AWS or Google Cloud?

Azure is cheaper than its competitors for Windows-based workloads due to the ability to bring Windows Server and SQL Server licenses to Azure using Azure Hybrid Benefit.

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

The Azure Pricing Calculator is the official pricing estimation tool Microsoft provides for assessing any monthly costs based on required service in Azure. You can choose Latency, Region, resources needed, products like VMs, fabric databases and storage needs and get an idea of what you’d like and how much it will charge. It’s best to use beforehand for effective budgeting and assessment of what’s available without ticker shock.