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Planning Costs

Updated Nov 16, 2020 ·
NOTES

This is not an exhaustive documentation of all the existing Azure Services. These are summarized notes for the Azure Certifications.

To see the complete documentation, please go to: Azure documentation

Overview​

Effective cost planning in Azure involves using tools to estimate and manage expenses.

  • Utilize the Pricing Calculator to estimate costs before deploying resources.
  • Use the Total Cost of Ownership Calculator to evaluate long-term value and potential savings.
  • Implement best practices for monitoring and optimizing costs to stay within budget.

Total Cost of Ownership​

Moving IT workloads from an on-premises data center to Azure requires a thorough cost comparison between the two environments. Microsoft provides a valuable tool called the Total Cost of Ownership (TCO) Calculator to facilitate this process.

  • Focuses on savings and benefits beyond initial costs, such as operational efficiencies and reduced downtime.
  • Assesses financial outlook as well as the impact on scalability and performance.
  • Helps in understanding the full value of transitioning to Azure.

This tool utilizes industry averages for both on-premises and Azure costs, helping organizations make informed decisions based on financial considerations.

Using the TCO Calculator​

1. Define Workloads

  • Provide details for each workload, such as the number of servers, type of database, storage capacity, and networking requirements.
  • Categorize workloads into four main types:
    • servers
    • databases
    • storage
    • networking.

2. Adjust Assumptions

  • Fine-tune assumptions used by the TCO Calculator to align with specific organizational parameters.
  • Consider factors like Microsoft Software Assurance coverage for Windows and SQL Server licenses.
  • Modify assumptions such as:
    • electricity costs
    • IT labor costs
    • currency

3. View the Report

  • Generate a detailed cost comparison report for a selected timeframe (one to five years).
  • Analyze potential cost savings by moving workloads to Azure.
  • Review breakdowns of on-premises and Azure costs.

Sample Scenario​

Let's consider a scenario where an organization wants to migrate the following workloads to Azure:

  • 20 Windows-based web servers running on Hyper-V.
  • Two physical SQL Servers.
  • One terabyte of storage.

Using the TCO Calculator

1. Define Workloads (Servers)

  • Workload Name: "Web servers"

  • Workload Type: Windows/Linux Server (Change to Virtual Machines)

  • Operating System: Windows

  • Number of Virtual Machines: 20

  • Virtualization: Hyper-V

  • Cores per Virtual Machine: 8

  • RAM per Virtual Machine: 16 GB

2. Define Workloads (Databases)

  • Workload Name: "SQL Servers"

  • Number of Servers: 2

  • Processors per Server: 2

  • Cores per Processor: 4

  • RAM per Server: 8 GB

  • Azure Service: SQL Database Managed Instance

  • Backup Storage: 1,000 GB

3. Define Workloads (Storage)

  • Capacity: 1 TB

  • Backup Storage: 5 TB

  • Archive Storage: 10 TB

4. Define Workloads (Networking)

  • Outbound Bandwidth: 10 TB

5. Adjust Assumptions

  • Modify currency, electricity costs, and IT labor costs if necessary.

  • Indicate Microsoft Software Assurance coverage for Windows and SQL Server licenses.

    -

6. View the Report

  • Examine potential cost savings over the selected timeframe.

  • Review detailed breakdowns of on-premises and Azure costs.

  • By following these steps, organizations can gain valuable insights into the financial aspects of migrating their workloads to Azure and make well-informed decisions based on the generated TCO report.

Azure Pricing Calculator​

The Azure Pricing Calculator helps estimate the costs of Azure services before deployment.

  • Allows for customizable options and scenario simulations to find cost-effective solutions.
  • Provides detailed breakdowns to prevent unexpected expenses.
  • Helps businesses budget accurately and optimize cloud spending.

Unlike the Total Cost of Ownership (TCO) Calculator, which focuses on migration-related savings, the Pricing Calculator provides estimates for running specific Azure services.

Estimating Costs​

1. Choose the Service

  • Access the Pricing Calculator and select the Azure service you want to estimate costs for (e.g., App Service).
  • Alternatively, start typing the product name for quicker selection.

2. Set Service-Specific Options

  • Depending on the service (e.g., App Service), set options such as:
    • Region: Choose the region where the service will be deployed.
    • Operating System: Select the preferred operating system.
    • Tier: Choose the service tier (e.g., Basic, Standard, Premium).

3. Additional Service Configuration

  • Depending on the selected service, configure additional options such as instance type, number of instances, and hours of usage.
  • Some services may have specific configuration options (e.g., SSL connections for App Service).

4. Review and Adjust

  • The Pricing Calculator provides an estimated monthly cost based on the chosen configurations.
  • Review the estimate and adjust options as needed. For example, set the number of hours to "1 month" for simplicity.

5. Optional Configuration Changes

  • Explore additional configuration options like support plans and licensing programs, which may impact the overall cost.

6. Add Other Services

  • If estimating costs for multiple services, add them to the calculation.
  • The total monthly cost will reflect the combined cost of all selected services.

7. Export, Save, or Share

  • Once satisfied with the configurations, options, and estimates, you can export, save, or share the estimate for future reference.
  • Note: The estimated monthly cost is an approximation, and actual costs may vary. The Pricing Calculator provides a helpful tool for planning and budgeting your Azure expenses.

For more information: Pricing Calculator

Azure Hybrid Benefit​

Azure Hybrid Benefit allows organizations to leverage existing on-premises licenses, offering substantial savings.

  • Enables the use of current software licenses to avoid additional purchase costs.
  • Facilitates migration by maintaining a familiar setup and maximizing existing investments.
  • Provides cost incentives and operational consistency, easing the transition to Azure.

Azure Cost Management​

Azure Cost Management provides tools for tracking and analyzing spending through a centralized dashboard.

  • Allows for setting budget caps to control costs and optimize resource usage.
  • Enables detailed analysis by service and resource group to identify high-cost areas.
  • Helps in maintaining financial control and optimizing spending.

Here are key components and strategies for effective cost control:

  • Cost Analysis
  • Budgets and Alerts
  • Hierarchical Cost Tracking
  • Tagging
  • Azure Advisor Recommendations
  • Regular Monitoring

By leveraging Azure Cost Management, organizations can gain insights into their spending patterns, set proactive budgets, and receive alerts to prevent budget overruns.

  • Cost Analysis

    • Allows detailed analysis of costs, breaking down spending by service, region, and subscription.
    • View cost changes on a daily or monthly basis through charts and tables.
    • Provides a forecast of future spending based on current resource usage.

  • Budgets and Alerts

    • Establish monthly spending expectations by setting budgets.
    • Configure alerts to notify when costs approach or exceed specified thresholds.
    • Multiple alerts at different levels, e.g., 75%, 90%, and 100% of the budgeted amount.
    • Receive alerts based on the forecasted spending percentage.

  • Hierarchical Cost Tracking

    • Levels: Utilize three management levels for better cost tracking:
    • Resource Groups: Contain related resources (e.g., services for a specific application).
    • Subscriptions: Group resource groups; can be organized by teams or projects.
    • Management Groups: Aggregate subscriptions (useful for departments).

  • Tagging

    • Apply tags to Azure resources to categorize and organize them.
    • Tags provide a mechanism to track the total cost of resources with the same tag.
    • Enables fine-grained cost attribution and analysis.

  • Azure Advisor Recommendations

    • Azure Cost Management integrates with Azure Advisor for additional recommendations.
    • Leverage Advisor suggestions for optimizing costs and improving resource efficiency.

  • Regular Monitoring

    • Instead of daily analysis, set up budgets and alerts for proactive cost control.
    • Early warnings and alerts help prevent unexpected cost overruns.

Cost Optimization​

Regularly reviewing spending data helps in managing and optimizing costs.

  • Turn off underutilized resources to avoid unnecessary expenses.
  • Azure Advisor offers personalized recommendations for efficient management and cost savings.
  • Provides insights into cost-efficiency and performance improvements.