Maximize efficiency of cloud spend


You're a solution architect, and your organization, Lamna Healthcare, has moved its workloads to the cloud. Recently, the bill for these resources and workflows has increased more than Lamna had anticipated. You've been asked to determine whether the increase is the result of natural, efficient growth, or whether the cost can be reduced by improving efficiency with the organization's cloud resources.

How the cloud changes your expenses

One of the differences between the public cloud and on-premises infrastructure is how you pay for the services that you use.

In an on-premises datacenter, hardware procurement is a long process. Physical hardware is sized for maximum capacity. Some of the costs, such as computer power and storage space, can be hidden from the business units that are consuming those resources. Purchasing physical infrastructure ties up investments in long-term assets, which hinders your ability to be agile with your resources.

Shifting to the cloud replaces the burgeoning costs of maintaining physical infrastructure with a pay-for-what-you-use cost model. You no longer need to tie up investments in physical assets. If your resource requirements change, you can respond by adding, moving, or removing resources.

Workloads vary between and within services, demand can be unpredictable, and your growth patterns shift over time. Because you pay for only what you use in the cloud, your cost structure can move in sync with the changes in resources.

Cloud infrastructure can handle fluctuating resource usage scenarios. Resources that have significant periods of inactivity can be shut down when not in use, and then not incur any cost at all. Resource allocation can grow automatically with a successful service as demand increases, rather than having to wait for the next procurement cycle. Additional resources can be dynamically added and removed to respond to predictable and unpredictable bursts of demand.

The following illustration shows why an on-premises infrastructure can't handle all of these fluctuating scenarios.

An illustration that shows disadvantages of using on-premises infrastructure.

In an efficient architecture, resources are provisioned to match the demand. If a virtual machine is less than 10 percent utilized the majority of the time, you're wasting resources, both in compute and cost. Conversely, a virtual machine that is running 90 percent utilized is using the majority of the available resources, and is an efficient use of money.

Running a system at 100 percent utilization runs the risk of introducing performance issues. It's important to ensure that maximizing efficiency doesn't negatively affect the performance of your system. Demand is rarely constant, so adjusting resources when possible to match demand is important to ensure efficiency.

Optimize IaaS costs

When you're using infrastructure as a service (IaaS) resources, such as virtual machines as part of your solution, the cost associated with VMs is often the biggest portion of your spending. The compute costs are typically your largest expense, followed by storage costs. Taking time to optimize pay-for-what-you-use resources can have a large impact on the size of your monthly bill.

Let's take a look at best practices to reduce your compute and storage costs.


A few options are available to achieve cost savings for virtual machines:

  • Choose a smaller size for the virtual machine instance.
  • Reduce the number of hours a virtual machine runs.
  • Use discounts for the compute costs.

Rightsize virtual machines

Rightsizing a virtual machine is the process of matching virtual machine sizes with the respective requirements for resource demand. If a VM is running 25 percent idle, reducing the size of the VM will immediately reduce your cost. Virtual machine costs are linear within an instance family; each next size larger will double your cost. Conversely, reducing a VM by a single instance size will reduce your cost by half.

The following illustration shows a 50 percent savings achieved by moving one size down within the same series.

An illustration to demonstrate savings achieved by downsizing an underutilized virtual machine.

Azure Advisor identifies which virtual machines are underutilized. Azure Advisor monitors your virtual machine usage for 14 days, and then it identifies any underutilized virtual machines. Virtual machines with a CPU utilization of 5 percent or less, and network usage of 7 MB or less, for four or more days are considered underutilized.

Implement shutdown schedules for virtual machines

If you have VM workloads that are used only periodically, but are running continuously, you're wasting money. These VMs can be shut down when they're not in use, which saves your compute costs while the VM is deallocated. For example, a development environment is a good candidate for shutdown during your organization's off hours because development generally happens only during business hours.

You have several options to deallocate a VM. For example:

  • You can use Azure Automation to run your VMs only during times that your workloads require.
  • You can use the auto-shutdown feature on a virtual machine to schedule a one-off automated shutdown.
  • You can manually stop a VM in the Azure portal.

You should always use the Azure controls to stop your VMs. Shutting down the OS from inside a VM does not deallocate its Azure resource, so you'll continue to accrue costs.

Apply compute cost discounts

Azure Hybrid Benefit offers an additional way to optimize the costs of your Windows Server and SQL Server instances. It enables you to use your licenses for your on-premises computers running Windows Server or SQL Server with Software Assurance as a discount toward the compute cost of these VMs. You can then reduce or eliminate the costs for Windows Server and SQL Server on enabled instances.

Some virtual machines need to be up and running all the time. Perhaps you have a web application server farm for a production workload. Or maybe you have a domain controller that supports various servers on a virtual network. If you know with certainty that these virtual machines will run continuously throughout the coming year or longer, you can reduce your costs even more by purchasing a reserved instance.

Azure Reserved Virtual Machine Instances (Azure RI) enables you to purchase compute capacity for a one-year or three-year commitment. It offers you significant savings - up to 72 percent - when compared to pay-as-you-go compute resources.

The following illustration shows savings achieved when you combine your on-premises licenses with Azure Hybrid Benefit. It also shows savings achieved when you combine your on-premises licenses with both Azure Reserved Virtual Machine Instances and Azure Hybrid Benefit.

An illustration that shows the savings on Azure products when you have on-premises licenses with Software Assurance.

Cost optimization for VM disk storage

For workloads that don't require high reliability and performance disks, you can use the reduced-cost standard storage. For example, you might choose to use standard storage for your development and test environments that are not required to be an identical match for your production workloads.

Disks that aren't associated with a VM still incur storage costs, so you should make sure you don't have any orphaned disks remaining in your environment. If you've removed a VM but not its associated disks, you can reduce your storage costs by identifying and removing these orphaned disks from your environment.

You should also make sure that you don't have any orphaned snapshots remaining in your environment. Pricing for snapshots is lower than pricing for the disks themselves, but it's still a good practice to eliminate costs for unnecessary resources.

Optimize PaaS costs

Platform as a service (PaaS) services are typically optimized for costs over IaaS services. But there are opportunities to identify waste and optimize for minimal costs in your PaaS services as well. Let's look at ways to reduce Azure SQL Database and Azure Blob storage costs.

Optimize Azure SQL Database costs

When creating an Azure SQL database, you have to select a server and decide on a performance tier. Each tier provides a performance level either in database transaction units (DTUs) or virtual cores (vCores).

For database loads that are steady, it's easy to optimize by selecting the appropriate tier size for the performance needs. But what if your database has unpredictable bursts or spikes in activity? When you're dealing with unpredictable workloads, elastic pools can help you reduce your costs.

SQL Database elastic pools are a simple, cost-effective solution for managing and scaling several databases that have varying and unpredictable usage demands. The databases in an elastic pool are on a single Azure SQL Database server, and share a set number of resources at a set price. Pools are well suited for a large number of databases with specific utilization patterns. For a given database, this pattern is characterized by low average utilization, with relatively infrequent utilization spikes.

The more databases you can add to a pool, the greater your savings become. The following illustration shows the capabilities of the three types of elastic database pools:

  • Basic autoscales up to 5 eDTUs per database.
  • Standard autoscales up to 100 eDTUs per database.
  • Premium autoscales up to 1,000 eDTUs per database.

An illustration that shows autoscaling capacity of different types of elastic database pools.

Elastic pools are a great way to spread costs across multiple databases. They can make a significant impact on reducing your Azure SQL Database costs.

Optimize Blob Storage costs

Blob Storage is a cost-effective way to store data. But as the amount of data grows, your bill can benefit from optimizing how the data is stored.

Azure Storage offers three tiers for blob object storage:

  • Hot access tier: Highest storage costs but lowest access costs. This tier is optimized for storing data that's accessed often.

  • Cool access tier: Lower storage costs and higher access costs compared to hot storage. This tier is optimized for storing data that's infrequently accessed and stored for at least 30 days.

  • Archive access tier: Lowest storage cost and highest data retrieval costs compared to hot and cool storage. This tier is optimized for storing data that is rarely accessed and stored for at least 180 days, with flexible latency requirements (for example, several hours of retrieval latency).

Consumption pricing models

Moving to PaaS services can take the pay-as-you-go model even further into a true consumption pricing model. Services such as Azure Functions have the ability to use consumption plans.

When you're using a consumption plan, instances of the Azure Functions host are dynamically added and removed based on the number of incoming events. This serverless plan scales automatically, and you're charged for compute resources only when your functions are running. On a consumption plan, a function execution times out after a configurable period of time. Billing is based on the number of executions, the length of execution time, and the amount of memory used. Billing is aggregated across all functions within a function app.

Moving to services that use a consumption pricing model can bring a new approach to cost savings into your architecture.

Check your knowledge


Your business stores PDF copies of all purchase orders. These files are accessed infrequently after their initial upload, and there is no time criticality associated with their retrieval. Which of the following storage tiers would be the best choice to reduce costs for long-term storage?


Which of the following databases would be well suited for elastic pools?