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Factors That Can Affect Costs in Azure

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Management and governance

Factors That Can Affect Costs in Azure

Short Summary

Azure costs are mainly driven by what you deploy, how much you use it, and where it runs. The same service can have different prices based on region, service tier, and usage pattern (for example, running 24/7 vs. only during business hours). Discounts and purchasing options (like reservations, savings plans, and Azure Hybrid Benefit) can reduce costs when your usage is predictable.

Learning Objectives

By the end of this lesson, you will be able to:

  • Identify the main drivers of Azure costs (service, size, usage, and location).
  • Explain how consumption and time-based billing affect your total bill.
  • Compare common ways to reduce spend (right-sizing, turning things off, and commitment discounts).
  • Use the right tools to estimate and track costs (Pricing Calculator and Microsoft Cost Management + Billing).

Core Concepts

1) Consumption-based pricing (the “meter” idea)

Most Azure services are billed based on measured usage, often called a meter. A meter might count:

  • compute time (for example, a Virtual Machine (VM) running)
  • storage used (how many gigabytes (GB) you store)
  • transactions or requests (how many operations you perform)
  • networking (how much data moves between places)

The big idea: more usage usually means a bigger bill, and small “background” usage can add up over time.

2) What you choose: service, tier, and SKU

Azure offers choices for many services:

  • Service type (VMs vs. Platform as a Service (PaaS) options)
  • Service tier (for example, Standard vs. Premium)
  • SKU (Stock Keeping Unit) (a specific size/configuration)

Choosing a higher tier or larger SKU generally costs more, even before you consider usage.

3) Where you run it: region matters

Azure pricing can differ by region, even for the same service and configuration.

A practical rule: pick the region that meets your compliance/latency needs first, then compare prices across the valid regions.

4) How long you run it: “left on” is a cost driver

Even if you don’t change your app, your costs can increase simply because resources keep running:

  • VMs that run 24/7
  • databases that stay provisioned at a high tier
  • test environments that are never shut down

Time is a hidden multiplier: “per hour” pricing becomes “per month” very quickly.

5) Data movement and “supporting costs”

Costs aren’t only about the main resource. You can also pay for “supporting” usage, like:

  • data transfer between regions
  • data leaving Azure to the public internet (egress)
  • higher-performance storage, backups, or additional managed disks

You don’t need to memorize every bandwidth rule for AZ-900. Just remember: moving and storing data can be a meaningful part of the bill.

6) Discounts and purchasing options

Azure offers common ways to reduce costs when you can commit or reuse existing licenses:

  • Savings plans: commit to a fixed hourly spend for eligible compute to get discounted rates.
  • Reservations: pre-commit to specific resources for a term (often 1 or 3 years) to get discounts.
  • Azure Hybrid Benefit: use eligible existing licenses (like Windows Server or SQL Server) to reduce Azure costs.

These options trade flexibility for savings. If your usage is unpredictable, you may prefer pay-as-you-go.

Practical Understanding

Situation 1: “The app is slow, so we upgraded the VM”

You move from a small VM to a much larger VM to fix performance issues.

  • What changes: the VM SKU (and often the hourly rate) increases.
  • Better approach: validate if you need CPU, memory, disk, or network improvements before jumping sizes.

Common misunderstanding: “A bigger VM is always the cheapest way to fix slowness.” Sometimes optimizing the app or choosing a different service tier is more cost-effective.

Situation 2: “It’s only a dev environment, but it runs all month”

A dev VM runs 24/7 even though developers use it a few hours per day.

  • What changes: billed hours add up (24/7 becomes ~730 hours/month).
  • Better approach: schedule shutdown, use smaller SKUs, or use on-demand environments.

Common misunderstanding: “If nobody logs in, it doesn’t cost anything.” Running resources usually still generates charges.

Situation 3: “We picked a far-away region without checking pricing”

You deploy in a region that isn’t required for latency or compliance.

  • What changes: the regional price may be higher for the same service.
  • Better approach: shortlist valid regions, then compare pricing and availability.

Common misunderstanding: “All regions cost the same.” Region can affect both price and available service options.

Situation 4: “We didn’t realize data transfer could be a line item”

An application sends lots of data out to users or between regions.

  • What changes: networking and data transfer charges can grow quickly.
  • Better approach: reduce cross-region traffic, use caching or a Content Delivery Network (CDN), and plan data placement.

Common misunderstanding: “Only compute and storage matter.” Networking and data movement can materially affect total cost.

Common Pitfalls

  • Mistake: Estimating cost using only the main resource price and ignoring disks, backups, and networking. Correction: Include “supporting” services (storage, backups, bandwidth) in your estimate.
  • Mistake: Leaving non-production resources running 24/7 out of habit. Correction: Use schedules, automation, or policies to shut down or scale down when idle.
  • Mistake: Choosing a region based on convenience rather than requirements and price. Correction: Start with compliance/latency needs, then compare eligible regions.
  • Mistake: Assuming discounts automatically apply with no planning. Correction: Evaluate reservations/savings plans and confirm they match your usage patterns.
  • Mistake: Treating cost review as something you do only at month-end. Correction: Track costs continuously with budgets, alerts, and regular reviews.

Check Your Understanding

  • Pick one Azure resource you’ve used (or could use). What are the likely cost meters for it?
  • If a VM runs 24/7 vs. 8 hours/day, what changes in your costs—and why?
  • Name two reasons region choice might affect cost in practice.
  • When would a savings plan or reservation be a good fit, and when would it be risky?
  • What “supporting costs” might show up on a bill even if your app traffic is low?

Further Reading