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8 Common Questions & Answers about Cost Optimization

By Heather Robinette

As more and more organizations are making a move to the cloud, the need for cost optimization is becoming increasingly important. Cloud costs are a growing part of IT budgets, even when there are several ways to cut down on unnecessary expenses. In this blog, we will share 8 common questions about optimizing your costs in Microsoft Azure and the answers. All of the cost optimization strategies discussed below are proven best practices that you can use to reduce waste and improve the utilization of existing resources.

#1. What are some strategies to optimize costs in the cloud?

There are various ways to optimize your costs in the cloud, including purchasing Reserved VM Instances, utilizing Azure Hybrid Benefits, Right-Sizing VMs, and Auto-scaling. These methods are discussed in detail within our previous blog post exploring 5 Ways to Help You Decrease Azure Costs, but below are summaries of each one.

Reserved VM Instances: This strategy involves systematically committing to a fixed number of virtual machines and sizes in Azure for a period of 1 or 3 years. In exchange for the commitment, Microsoft bills at a fixed rate for compute (VM’s) that provides significant cost savings vs. a Pay-as-you-Go model. One of the newer benefits to this model is the flexibility to pay upfront for the committed usage or pay monthly for better cash flow management.

Azure Hybrid Benefits (AHB): Anyone who owns Windows Server or SQL Server licenses with Software Assurance are eligible to run Azure VM’s at Linux-based pricing. As a result, you only pay for the hourly rate for compute of the virtual machine, eliminating the hourly cost of the OS/SQL Server license. Even for customers who don’t currently have eligible licenses, the cost savings of AHB can still be achieved by purchasing new licenses with software assurance or in a 1-year or 3-year subscription model.

Right-Sizing VMs: This is one of the easiest ways to increase cost-savings as this strategy focuses on maximizing the utilization of existing resources at the lowest possible cost. Proper right-sizing is conducted by understanding utilization trends in your environment and then applying these metrics to compare with available VM sizes.

Auto-scaling: Auto-scaling requires the analysis of usage and the consideration of availability. It can also be used in conjunction with schedules to provide elasticity and further savings. At its core, auto-scaling allows you to scale your resources up and down based on need.

#2. How do I select which cost optimization strategy is right for me? Are they each mutually exclusive, or should they be used together?

These cost optimization strategies are not mutually exclusive. It’s all about whether it makes sense for you to use a particular strategy and if it is feasible for you to explore. Some strategies should take precedence before other ones. For example, evaluating whether you need to right-size VMs should take place before committing to specific Reserved VM instance sizes. Multiple strategies can also be combined to see long-term cost savings. For example, Azure Hybrid Benefits can be combined with reserved VM instances to provide up to 70% savings vs. the Pay-As-You-Go model.

#3.  If I were to start optimizing costs right now, what is one easy way to get started and see immediate results?

One of the easiest ways to get a jump-start with cost optimization is through right-sizing or shutting down underutilized virtual machines. Although specific application scenarios can result in low utilization by design, you can often save money by managing the size and number of your virtual designs. The impact of this simple change is quite high and can often have an immediate and tangible impact on your business’s cost savings.

#4. How are right-sizing disk storage and right-sizing resources related, and how do they reduce costs?

The first step to optimization is having your virtual machines sized correctly. Reducing the amount of unused space has the biggest impact on reducing your spending. Many new Azure developers often create virtual machines that are much bigger than needed, leading to unnecessary expenses that are not cost-effective. By reviewing metrics like the disk, memory, and CPU, you can find the best way to right-size your resources. Check out our previous blog on what is right-sizing to learn more.

#5. What are reserved instances, and how do they help me lower costs?

Azure allows companies to reserve instances and receive significant discounts by doing so. There are three different reservation options:

1-year reserved instance: requires paying upfront for one year and grants a 40-50% discount for most virtual machines

3-year reserved instance: requires paying for three years upfront and grants a 60-65% discount for most virtual machines

Spot pricing: allows you to bid for available capacity on the Azure marketplace and receive instances with 80-90% discounts. These instances, however, can be interrupted with no prior notice, so you should only use them for qualifying workloads.

#6. What is the difference between multi-cloud and single-cloud solutions, and how do I pick the right one for my business?

Some enterprises purposely seek out multi-cloud solutions to avoid vendor lock-in. While this is a justified strategy for increasing availability and uptime, potential volume discounts can be missed out on if a single cloud vendor offer is passed up. For example, if a company spends $400k on AWS + $200k on Azure + $100k on Google Cloud, they could miss out on attaining the $1 million tier status with one vendor. This tier could potentially offer substantial discounts on cloud spend and give companies preferred status with a particular vendor. Keeping all of your services consolidated is always the easier option as well.

#7. What are B-Series VMs, and how do they play into cost optimization?

Many of your virtual machines are currently operating at a level that requires full performance of the CPU continuously. In order to further optimize Azure spend, you can consider downgrading specific VMs to the B-series, as they are an efficient method to use and deploy workloads that don’t require full CPU performance constantly. The decision is also dependent on the types of users your company is supporting because if they are typically office users and not power users, then the B-Series VMs are worth considering. Check out our previous blog on where we talk more about how the B Series VM works.

#8. How can shifting workloads to containers have an impact on cost-savings?

Contains are more lightweight than VMs, which means that you can run several containerized applications on one physical host and up to dozens of containers per host in some cases. Consider repackaging your applications as containers to help reduce VM utilization and substantially reduce your costs. Additionally, consider transitioning applications from traditional VMs to a container service like Azure Kubernetes Service (AKS).

Hopefully these 8 questions and answers can help you gain more insight into optimizing costs in your cloud. If you're interested in getting a free cloud cost optimization assessment, we'd be happy to help you discover new opportunities to save money.

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