The Five Disciplines of Cloud Governance – Cost Management

October 4, 2019 Bode Olushi

As organizations accelerate their move to the cloud by eliminating costly hardware in their on-premises datacenters by saving costs and improving agility in the cloud. It brings the challenge of managing costs and optimizing their cloud spend. Enterprises who use public cloud often feel their cloud bills are spiraling out of control. Research has shown that “nearly 60% of enterprises surpass their spending on budgets and cloud resources. It’s imperative as an organization to plan and manage costs across the organization by understanding where costs are accrued and to identify spending patterns to help plan and meet financial accountability across your organization.

With Azure Cost Management, organizations can provide the right visibility to effectively plan and control costs across their cloud resources, as well as save money with optimization recommendation. It is on by default and gives you the native azure portal experience. Its available to all Microsoft Pay-As-You-Go subscriptions and Enterprise Agreement customers, with CSP (Cloud Solution Provider) coming sometime before the end of the year.

Today, I would like to focus on three characteristics of Azure Cost Management and how you can continuously optimize your Azure resources.


Most organizations cloud budgeting concerns are often related to a disconnect between the finance and IT team. Azure budgets bridge this gap between those teams by helping you plan with cost in mind by tracking without overspending, set budgets, track against your targets, create thresholds and notifications once you hit each of the thresholds.

When you create a new budget in Azure Cost Management, you are able to scope the budget based on subscription or management group if your organization has many subscriptions or you could use additional filters like resource group to monitor your budget with more granularity using thresholds.

The landing page of Budgets in the Cost Management tab shows all the various budgets that have been made in the past and how they are tracking against the threshold you have configured.

As you can see from the screenshot, the budget for the FY19 Quarterly is 54.21% towards being met and has a spend of $8131.72. The threshold that was configured for this is a $15,000 budget. It’s set as a quarterly budget.

When you create a budget, you set a threshold. These thresholds have the ability to alert you via email or action group. Using action group, you can trigger a set of actions as a result of a budget event. You can call an azure function or webhook in order implement automation in response to the budget threshold being met. This is powerful tool because it allows you implement automation in response to that budget. For example, if you want to turn off some VMs in response to a budget threshold being met, Azure functions, Azure Logic Apps or webhooks within action groups would give you the ability to do that.

To be effective at governing cloud costs, a good practice is to have a cost management policy compliance process in place to automate manual processes and reduce the drifts and overhead governance.


Having visibility into your cloud spend is of absolute importance to financial constraints. I have seen cases of customers spinning up high end virtual machines and infrastructures that accrue major costs without keeping a close attention on the spending. These costs can spiral out of control quickly. Azure Cost Management provide three tools to help manage the visibility.

  • Cost Analysis : Azure Cost Management Cost Analysis tools helps break down this spending patterns by making sure there is control mechanism in place enforced. With Cost Analysis, you can answer questions such as which resources cost the most over a period of time, where is the bulk of my expenditure on Azure coming from? By using filters to view your cloud spend, it can answer these questions. The cost analysis dashboard allows you to sift through all of the expense data that Azure generated and use it to find areas of greatest and lowest cost or to predict future spend.
  • Exports : Besides having a great cost analysis tool, there might be times when you need to download your data for further analysis. By exporting the data, you to push it to wherever you need it. You can setup automation from within Azure Cost Management to automatically push your data to a storage account. Personally, I think it’s a great option for keeping snapshots of your data
  • Power BI : You can also view and analyze your spending and create rich set of interactive experiences and dashboard. You can create your own views using the Power BI connector or just use the Power BI content pack which provides a rich set of pre-baked dashboards to better understand and analyze your azure cloud spending.


As organizations deploy or migrate their infrastructures on Azure, you want to make sure that virtual machines have been sized properly and you can forecast how much your bill will be. Azure Cost Management works with Azure Advisor to offer you the best practices recommendation engine that will analyze your resource configuration and usage telemetry to come up with these recommendations which will help you improve performance, security, high availability and optimize the cost of your resources.

  • Right-size & Idle VMs : A great feature of azure advisor is the ability to identify area of under-utilized and over-utilized workloads so that they get the right amount of resources hence keeping costs under control and ensuring performance. It monitors virtual machines usage for 14 days and then identifies underutilized or idle virtual machines. Virtual machines that have an average CPU utilization is 5 percent or less and network usage is 7 MB or less for four or more days are considered underutilized virtual machines. The average CPU utilization threshold is adjustable up to 20 percent. By identifying these virtual machines, you can decide to resize them to a smaller instance type, hereby reducing your costs.
  • Reserved Instance Purchase Recommendation over Pay as-you-go: With one-year or three-year terms, Azure VMs can provide great cost savings using reserved instance. You can get discount of up to (72% on reserved instance) and up to( 80% discount when you combine Azure Hybrid Usage Benefits and Reserved Instances). Azure will review your virtual machine usage statistics over the period of 30 days and identify if there is a cost savings in the future by purchasing reserved instances. In our example, there’s an opportunity to save around $2774 USD yearly on three(3) virtual machines. If we accept these recommendations, this savings will add up.

When you click on one of the recommendations, it shows you more details about the recommendation and what action you can perform on it – postpone it, or dismiss it. Using Azure Advisor can provide huge cost savings and performance for your Azure services

  • Azure Hybrid Use Benefit: Over the years, organizations have invested heavily on Windows Server and SQL Server on-premises licenses. Azure Hybrid Benefit gives organizations the right to make use of these licenses for virtual machines running on Azure. This benefit when combined with reserved instances provide great substantial license savings. To be eligible for this benefit, your windows licenses must be covered by Software Assurance. The Azure Hybrid Benefit documentation provides a detailed list of what must be covered by software assurance.

Cost management is a team effort. It’s about a group of people coming together to learn how to deploy at scale in an optimized fashion. Azure offers great tools at no additional cost that allows you to track and predict your cloud spend and identify where your resources may be inefficient from a performance, security, cost and availability point of view. You should have a good cost governance strategy by automating and monitoring cloud spends and detecting costly anomalies so when violations are detected, enforcement actions are taken to realign with the policy. Organizations need to review cost management best practices(rightsizing instances, shutting down workload after hours, leveraging discounts) periodically. You will need to make it a regular practice to review the recommendations and reports that these tools generate to unlock great savings across your cloud footprint.

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