What Is Azure Cost Management?

Azure Cost Management + Billing is a set of tools from Microsoft that help you analyze, manage, and optimize cloud workload costs.

When you create and use Azure resources, you are charged for only the resources your workloads actually use. New resources are easy to deploy and can add significant cost to your workloads, unless they are properly monitored. 

You can use the Cost Management and Billing experience to pay bills, manage access to billing and cost operations, download cost and usage data for monthly billing, proactively apply data analytics to cloud costs, set hard spending limits, and identify opportunities for cost optimization to to workload fluctuations.

Image Source: Azure

In this article:

• How Azure Cost Management and Billing Relate
• 4 Azure Cost Management Tools
  • Azure Cost Analysis
  • Azure Cost Alerts
  • Exports
  • Cost Details API
• Azure Cost Management Best Practices
  • Azure Onboarding Options
  • Tag Shared Resources
  • Using Cost Analysis
  • Create Budgets

How Azure Cost Management and Billing Relate 

Azure Cost Management provides a set of FinOps tools that let you analyze, manage and optimize costs in the Azure cloud.

Cost Management is available within the Azure Billing experience, which provides tools to manage your account and pay your bills. Cost Management is also available as a standalone tool, to simplify the process of managing costs across multiple billing accounts, subscriptions, resource groups, and management groups.

Image Source: Azure

The Azure Billing experience lets you manage all the products, subscriptions, and subscriptions you use, check credit and commitments, as well as view and pay bills. This billing process runs concurrently with Cost Management data processing. This means that Cost Management might not include some purchases of costs, such as credit, tax, or support charges for non-Microsoft Customer Agreement (MCA) accounts.

4 Azure Cost Management Tools 

1. Azure Cost Analysis

Visibility into Azure spending is a top priority. The cost analysis from Azure Cost Management helps break down your Azure costs by filtering and grouping resources. It lets you see what services currently cost, helping you understand why the bill is higher than expected. 

The cost analysis dashboard offers the following filters:

• Scope—view the costs for management groups, resource groups, or subscriptions.
• Time—filter spending by year, quarter, month, week, or day. 
• Granularity—sort by accumulated, monthly, or daily costs (or none). 
• Group—group information by resource group, type, or tags. 

You can create custom filters or view costs by resource to identify the most expensive resources. The results are exportable to Excel and CSV (you can schedule regular file exports). Combined with recommendations from Azure Advisor, Azure Cost Analysis helps you cut down your Azure costs.

2. Azure Cost Alerts

Azure Cost Management has three types of alerts:

• Budget alerts—notify you when your spending nears or exceeds the budgets defined in the Azure portal or via an Azure Consumption API. Azure sends email alerts to specific recipients.
• Credit alerts—notify you when you’ve consumed 90% and 100% of your Azure credits.
• Spending quota alerts—notify you when a department’s spending nears the threshold specified in the Enterprise Agreement portal. Azure sends email alerts to the department owner. 

3. Exports

You can configure recurring exports on a custom schedule with the Exports API or in the Azure portal. Exports are a scalable way useful for ingesting cost details. They can partition files (for large data sets) and integrate with a queryable data store. Exports must access a storage account to store the data.

4. Cost Details API

This API allows you to download cost detail data sets on-demand. It is useful for smaller data sets as it can only ingest a few GB of cost data. You can use the cost details AP when exports are not viable due to management and security concerns.

Learn more in our detailed guide to Azure cost management tools

4 Azure Cost Management Best Practices

1. Azure Onboarding Options

When starting to use Azure, you need to decide which Azure services are most appropriate for your use case. Also think about your future use of Azure, and which pricing models are most appropriate—on-demand payments, reserved instances, or spot instances. 

Pricing models will also influence your cashflow—whether you pay for Azure services during the month, at the end of the month, or even once per year.

You can use budgets to measure the effectiveness of your initial estimate over time, and compare it to the actual cost of your deployed solution.

2. Tag Shared Resources

Tagging is an effective way to understand costs across teams and types of workloads. Shared resources can be placed in subscriptions belonging to specific departments, or in a special Azure subscription dedicated to shared resources. If resources used by one team are located in a subscription belonging to another team, it is possible to separate the costs using tags, and internally bill it to the other team. 

Similarly, web applications or environments (such as test and production) may use resources from multiple Azure subscriptions owned by different teams. To better understand the overall cost of the workload, you can tag the resources it uses. When tags are applied correctly, they can be used as filters in cost analysis to better understand trends.

3. Using Cost Analysis

Azure Cost Analysis breaks down costs using multiple, standard resource properties. Filter costs and analyze them to perform the following activities:

• Estimate costs for this month—how much has been spent so far this month, and whether a resource is within the budget.
• Investigate anomalies—verifying that costs are kept within reasonable limits for normal use, considering historical trends.
• Reconcile bills—identifying why a recent bill is higher than previous months, and what caused the change in spend.
• Internal chargebacks—managing how to charge back costs to the relevant cost center in the organization.

4. Create Budgets

Once you have identified and analyzed your spending patterns, set limits for yourself and your team using the Azure Budgets feature. This lets you set cost- or usage-based budgets with multiple thresholds and alerts. 

Periodically review the budgets you create to see budget usage and make changes as needed. Azure Budgets also allows you to configure automated triggers when certain budget thresholds are reached—these triggers can be used, for example, to automatically shut down VMs or move infrastructure to a different pricing tier.