Optimizing Your Cloud Spending: Planning Resource Group Costs for the Next Year

Cloud cost management remains crucial even after migrating and modernizing your workloads. It's easy to overlook cost optimization once you've adopted the cloud. Without proper governance, you may end up overspending on unnecessary cloud resources.

That's why cost optimization is a key pillar of the Azure Well-Architected Framework. In this article, we’ll explore a structured approach to effectively control and manage costs for a specific Resource Group.

Following is the approach I took

1. Analysis with Daily costs report

First, we need to understand the historical costs for the specific Resource group. To gain these insights, navigate to the Cost Analysis section in Cost Management.

Let's change the scope to our target Resource group first

I like to start the analysis with the Daily Costs report. However, the daily view doesn’t provide meaningful insights for effective cost governance. To get a clearer picture, I change the granularity to Monthly.

This initially gives me only one data point. To gain a broader perspective, I adjust the time frame to one year.

Now, I can see that my usual monthly cost is around $70.

2. Analysis with Cost by resource

With the Daily Cost report, we gained a general view of our Resource group expenditure. Now, we can dive deeper using the built-in Cost by resource report. This will show how individual resources contribute to the monthly costs.

Navigate to the Cost analysis section and select the Cost by resource report.

Set granularity to Monthly as we did for the previous report 

Next, navigate to the time period filter and select Last 12 Months.

Finally, change the chart type to Column (Grouped) for better visibility and a clearer breakdown of resource costs.

Following is the final report I received

With this report, I can clearly see that the majority of the cloud spend for this Resource group comes from my Azure API Management instance.

3. Control and save costs

Now, let's explore how we can control and manage this expenditure for the next year. Ideally, we should review the Azure services within the Resource group and identify measures we can enforce to reduce costs.

In my example, I should focus on cost optimization measures for my APIM instance. One effective way to reduce costs is by implementing Auto-scaling, which adjusts resources based on demand, preventing unnecessary overprovisioning.

Here are some strategies to help reduce costs for your Azure resources:

• Right-Sizing Resources
• Use Reserved Instances
• Leverage Spot Instances
• Auto-scaling
• Optimize storage
• Turn-off unused resources

4. Monitor and govern costs

The next step is to ensure my costs for next year are properly planned and set up alerts to notify me of any deviations from my budget. This helps maintain control and take timely action to avoid unexpected expenses.

Let's create a Budget for my Resource group. To do this, navigate to the Budgets section in Cost Management, ensuring the Scope is set to the specific Resource group.

Click Add to create a new Budget. Then, provide the Creation date, Expiration date, and set a Budget amount. After my cost optimization efforts, I plan for a $60 monthly budget.

Next, I will set up conditions to generate alerts for any deviations or anomalies in my cloud spending. According to the following example, I have configured two Alert conditions.

• Alert 1: Trigger an alert when actual spending reaches 80% of the budget ($48).
• Alert 2: Trigger an alert when Azure predicts that spending will exceed 90% of the budget before the end of the current month.

These measures help me achieve cost optimization for my Resource group, ensuring better financial control and efficient cloud spending.