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What is Cloud Cost Management?

Cloud cost management is the process of monitoring, measuring, and controlling cloud spend. It involves understanding your cloud usage, identifying areas of waste, and implementing cost-saving measures across your cloud infrastructure, network, apps, and other cloud-based services. Cloud cost management can be a complex process, but it is essential for businesses that want to maximize the value of their cloud investments, improve financial visibility, and make informed decisions around sustainable cloud operations.  

Why is Cloud Cost Management Important?

The cloud is widely considered an equalizer for the IT industry. Small and midsize businesses can get started easily and achieve high-powered results previously available only to enterprise-sized businesses with serious IT budgets. Unfortunately, ad-hoc cloud strategies and architecture can render the transformative power of the cloud less effective and more expensive due to lack of proper planning, optimization, and governance.

And while many IT directors, cloud developers, or CFOs decide to pursue cloud cost management for the very reason the name suggests—to control their cloud costs—there are also a number of other important goals a highly developed cloud cost management strategy can help you address ranging from the increased efficiency of your cloud resources to increased synergy and transparency between business units.

Cloud cost management enables better collaboration and communication between teams, facilitates accurate cost allocation, and promotes a culture of financial accountability throughout the organization. These benefits go beyond cost control and contribute to overall operational efficiency and success in your cloud environment.

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Common Cloud Mistakes that Drive Hidden Cloud Costs:

What initially appears as a cost-effective solution can quickly turn into a financial burden if organizations are unaware of the hidden costs lurking within their cloud environment. Businesses may find themselves grappling with unexpectedly high expenses without a clear understanding of the underlying reasons.

Underutilized resources

If cloud resources, such as virtual machines or storage, are provisioned but not fully utilized, it results in wasted costs. Paying for idle or underused resources without proper optimization leads to unnecessary expenses. 

Oversized instances

Choosing larger instances or higher resource allocations than necessary can significantly increase costs. Overprovisioning resources beyond actual requirements can result in inflated bills and inefficient resource allocation.

Storage redundancy

Cloud storage costs can escalate if data redundancy and backup policies are not properly managed. Unchecked duplication of data, unnecessary snapshots, or storing data for longer than required can drive up storage expenses.

Inefficient data transfer

Transferring data between different regions or availability zones within the cloud provider’s infrastructure can incur additional costs. Inefficient data transfer patterns or improper placement of resources can lead to increased data transfer fees. 

Unoptimized network usage

Poorly optimized network utilization, including excessive outbound data transfer or inefficient network routing, can result in higher network bandwidth charges. Organizations may unknowingly incur additional expenses due to suboptimal network configurations. 

Lack of auto-scaling

Failure to implement auto-scaling mechanisms can lead to inefficient resource allocation during peak demand periods. Without automated scaling based on workload patterns, organizations may end up paying for excess resources during low-demand periods or experience performance issues during peak loads. 

Lack of automation

Manual or ad-hoc management of cloud resources without leveraging automation can lead to increased administrative costs. Automating tasks like resource provisioning, scaling, and scheduling can enhance operational efficiency and reduce associated expenses. 

Absence of cost visibility and monitoring

Without proper monitoring and cost visibility tools, it becomes challenging to identify areas of overspending or inefficient resource utilization. Organizations may miss opportunities to optimize costs and make data-driven decisions.

When stacked on top of each other, these inefficiencies can contribute to a significant overspend that drains your IT budget.  

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Decoding Cloud Cost Models

When it comes to wrangling cloud costs and optimizing your expenses, understanding the different cost models available will be a key piece of your strategy. These cost models can have a big impact on how much you spend, how you allocate resources, and ultimately, how well you optimize your cloud costs.  

Unfortunately, there’s no one-size-fits-all model and your eventual strategy should involve a mix of models that balance the trade-offs of each model with your workload needs.   



This model, also known as on-demand pricing, charges users based on the actual resources consumed. Customers pay for the specific services they use on an hourly or per-usage basis. Pay-as-you-go provides flexibility and scalability, allowing businesses to adjust their resources as needed and pay only for what they actually use.

Reserved Instances

Reserved Instances (RIs) involve committing to a certain level of usage over a specified term, usually one to three years. In return, customers receive discounted hourly rates compared to the on-demand pricing. RIs are suitable for stable workloads with predictable usage patterns and offer cost savings for long-term commitments.

Spot Instances

Spot Instances allow customers to bid on unused compute capacity in the cloud provider's infrastructure. The pricing fluctuates based on supply and demand, and users can access significant discounts compared to on-demand pricing. However, spot instances can be terminated by the cloud provider when the demand for resources increases, so they are best suited for fault-tolerant or non-critical workloads.

Savings Plans

Savings Plans are similar to Reserved Instances, offering a flexible pricing model that provides discounted rates in exchange for committing to a consistent level of usage. However, Savings Plans offer more flexibility in terms of resource types and regions. They provide cost savings for a broader range of usage patterns and workloads, allowing businesses to maximize their savings across multiple services.

Dedicated Hosts

Dedicated Hosts enable businesses to have physical servers entirely dedicated to their use. With this model, customers pay for the entire host capacity, regardless of resource utilization. Dedicated Hosts are suitable for organizations with specific regulatory or compliance requirements that necessitate dedicated infrastructure.

Container- or Function-based pricing

Some cloud providers offer cost models specifically designed for containers or serverless functions. These models allow users to pay based on the number of containers deployed or the number of function executions, respectively. They offer granular pricing for containerized or serverless applications, aligning costs with actual usage.

Cloud Cost Management Solutions

There are many different paths you might take when optimizing your cloud environment. As your strategy develops over time, you may find that a mix of solutions provides the most effective strategy for reducing cloud costs, saving time internally, and gaining access to specialized knowledge and insights.  

The DIY Approach to Cloud Cost Management 

As you begin your cost management journey, you’ll likely first investigate ad-hoc or manual strategies for reducing costs on certain cloud workloads. You can use the two lists above as a starting spot: are you making any of those common mistakes or are you using the best pricing plans available for your specific workloads? These exercises are certainly worthwhile but may require significant knowledge about Azure best practices, involve many hours of manual investigation, and end up being extremely time-consuming. At the end, you might not even be sure that you’ve caught everything or where to go next.  

Working with Service Provider Tools 

Major cloud service providers like AWS, Azure, and Google offer their own cost management tools and dashboards. Microsoft Cost Management is a free solution offered by Microsoft for customers to understand their Azure bill. You can use this in concert with the Azure TCO calculator to calculate the cost of Azure projects you have planned.  

We recommend taking advantage of these free tools provided directly by the cloud service provider. However, the impact of these tools can often fall flat without advanced knowledge or an adopted architectural framework to provide additional guidance. You’re on your own to decide the salience of certain recommendations or how to implement them in a way that follows best practices and doesn’t cause any additional problems for your cloud environment.  

Third-Party Cost Management Tools  

Many third-party vendors offer specialized cloud cost management tools and platforms that can go even further in delivering cloud cost management outcomes for your organization. These tools aren’t free like the ones you can find directly from the cloud providers, but they often help to bridge some of the knowledge gap by providing more useful and more actionable information.  

PEI’s cost management tool, our Azure Optimization dashboard, is an example of a third-party solution that can make your cost management journey more successful. 

Working with Third-Party Cloud Consultants 

Working with a cloud consulting provider can help you better understand, prioritize, and implement the various remediation actions recommended by your toolsets. Some of these providers—like PEI—have their own advanced toolsets, so you won’t be on your own to figure out which recommended actions will drive you forward, and which aren’t a good fit for your overall operational goals.   

Experienced cloud consultants can streamline your cloud cost management efforts by providing an architectural framework to guide your efforts, using their experience to make more specific and actionable recommendations, and by performing remediation actions that might take your internal team too much time. 

PEI is a Microsoft Cloud Solution Provider, and we have a multi-year history of holding advanced cloud certifications and receiving recognition for our work with Microsoft Azure. We pair our extensive experience architecting and managing Microsoft Azure environments with our proprietary Azure Optimization dashboard to drive down cloud costs for our customers.  

Selecting the Best Cloud Cost Management Solution for Your Business 

While the DIY approach may seem like the cheapest, most tempting option at first, it’s important to consider the hidden costs and inefficiencies associated with this solution:  

  • How much time will you or your engineering team spend researching Azure best practices to identify potential targets for optimization?
  • How will your team decide which actions to tackle first?  How long will your team spend calculating the potential savings or counting the individual occurrences of certain cost management actions in order to prioritize them?
  • Will your team spend time optimizing all your VMs only to realize later that the services running on 30% of these VMs would be better shifted to PaaS?
  • How much time will your team spend investigating different portals and chasing down individual optimization targets? Do you have VMs sprawled across multiple resource groups? How will you know when you’ve gotten all of them?
  • How will you know there aren’t other glaring inefficiencies in your environment that your team didn’t catch?
  • Do you have the necessary time or expertise in-house to stay up-to-date with the ever-evolving cloud cost management practices, pricing models, and optimization techniques? How will you bridge any knowledge gaps and ensure continuous improvement in your cost management strategies?

As you consider these questions, it becomes evident that relying solely on manual investigation and internal resources may not provide the comprehensive and efficient cloud cost management solution your business needs. You’re certainly saving money initially by not creating an additional bill, but you’re likely to spend much more time (and money) in the long run deciding on a plan of action and then searching your environment for areas to mitigate.  

Inefficiencies cost you both the salary of your engineers and the money you could have saved on your monthly cloud bill had you moved faster on your remediation actions. A third-party toolset or partner gives your engineers a near-instant, highly targeted roadmap, so they can spend their time driving much more of an impact on your environment. 

Microsoft Azure Optimization

Disorganized or unoptimized cloud environments aren’t specific to a single cloud provider and can plague AWS, Google, and Microsoft Azure customers alike. As a Microsoft Partner, we’ve seen a fair number of unoptimized Azure environments, and Azure often gets a bad rap for being expensive compared to AWS when that doesn’t have to be the case for a well-architected environment. A messy environment is bound to rack up extra costs—regardless of the platform you’re using.  

One misconception about using Azure is that if something “works,” it’s deployed correctly, when unfortunately the power of the cloud to handle nearly unlimited tasks means there’s also nearly unlimited ways to deploy your workloads inefficiently: 

The Lift-and-Shift Scenario

Let’s say your business did a “lift-and-shift” to the cloud. (This is when you take your on-premises infrastructure and replicate it as Infrastructure as a Service workloads in the cloud without any rearchitecting.) Your processes and services are likely still running, but small inefficiencies in your environment were likely multiplied on your cloud bills. In this scenario, you’re not taking advantage of the ways in which the cloud works differently than on-premises infrastructure. You’re likely double licensed for Windows or SQL, and you’re likely paying to run services on your own VMs that you could instead run for free by using Azure’s Platform as a Service capabilities instead. This is one of the most common scenarios we see when working with clients.

The Rogue Developer Scenario

If you hired a developer to build something for you in Azure, they might spin up completely new resources or networks instead of aligning their work with your existing cloud infrastructure. This is not always solely the developer’s fault—you may not have clear documentation on where they should be building or have not set up role-based access controls to set guidelines for how many new resources they can build and where to put them. This might also happen if you have too many engineers working on disparate projects without a centrally adopted architectural framework (or again, role-based access controls in place) to guide them. You’ve likely got huge subnets that overlap, possibly causing routing issues or security vulnerabilities on top of all the extra bandwidth you’re paying for from the inflated virtual network.

When we’re working with Azure, either to build a client’s environment for the first time or remediate an environment we didn’t build after a customer’s cloud costs start ballooning, we follow the Well-Architected and Cloud Adoption Frameworks from Microsoft. A mix of these industry standards and many additional best practices our certified Azure Experts have developed along the way allow us to deliver a cloud cost management strategy that balances cost objectives with performance and security.  

PEI’s Azure Optimization Cloud Cost Management Solution

We built our Azure Optimization dashboard to take the guesswork out of optimizing your cloud environment. We use over 700 data points and best practice definitions from the well-architected and cloud adoption frameworks and our own developed library of standards plus more than 15 APIs to automate the creation of comprehensive documentation that offers actionable insights for meaningfully reducing your cloud spend.  

Our dashboard helps you avoid common snags that doom your Azure cloud cost management journey from the start: 

Too Many Portals

One significant barrier to optimizing your Microsoft Azure environment can be how many separate portals and screens your IT admins need to shift through in order to have a comprehensive understanding of both your spend and sprawl. It can feel like a game of hide and seek to find the information you need. Our Azure Optimization dashboard uses more than 15 APIs to gather all the data you need in a single pane of glass.

Prioritizing Remediation Actions

Our Azure Optimization dashboard lets you sort recommendations based on number of occurrences, severity, and cost impact. You’ll also be working with an Azure Advisor from PEI’s engineering team, so you have an experienced partner ready to craft an actionable roadmap.

Quantifying Your Efforts

We use the Azure Cost API in our Azure Optimization Dashboard to deliver quantified cost savings estimates directly on the dashboard based on both historical data from your environment and up-to-date pricing models and rates from Microsoft.

Knowing which Items to Implement

The recommendations in our platform follow the Azure Well-Architected and Cloud Adoption Frameworks, so you can trust that any recommended cost saving actions won’t be bad for your environment in the long run. Plus, our platform is designed not only to offer cost-saving recommendations. It’ll also keep an eye on important performance, reliability, and security optimization opportunities. You’ll work with one of our Azure advisors to optimize costs without abandoning the other important needs of your cloud environment.

Interested in PEl's Cloud Cost Management? Get a Quote Today!

The Benefits of Implementing a Cloud Cost Management Strategy

While the primary objective for implementing a cloud cost management strategy is usually to reduce cloud spend—as already mentioned—there are other benefits that can have a meaningful impact on your business operations.

Cloud Cost Savings: Reallocate Your Existing Cloud Spend

IT budgets are constantly under fire, often seen more as a necessary evil than a business asset. With technology spending increasing across entire organizations as each department adopts more software and tools, the IT budget may be squeezed from all sides. Optimizing your cloud costs can give you the flexibility to reallocate currently misused cloud spending to other important projects without having to request additional funds from your business leadership team.

Better Cloud Performance

Reducing costs in Azure doesn’t always mean reducing the performance of your cloud services and in fact often means the opposite. Inefficiencies that contribute to inflated costs can also be dragging down the performance of your Azure resources. By rightsizing your resources, ensuring proper utilization, and implementing cost-effective architectural choices, you can improve the overall performance of your cloud environment. Optimized cost management practices also involve continuous monitoring and analysis, enabling you to identify performance bottlenecks, address scalability issues, and enhance resource allocation.

Transparency and Control

Your monthly Azure bill shouldn’t read like a murder mystery novel with the last few chapters removed. One result of your cloud cost management strategy should be that you know exactly where your spend is going, breaking it down by services, resources, and usage patterns, and you are empowered to take control change those numbers when you need to. Whether it’s rightsizing resources, leveraging reserved instances, or another cost-saving strategy, the ability to understand and adjust your spending gives you the confidence to proactively manage your cloud costs and drive financial efficiency. With transparency and control as guiding principles, you can navigate the cloud cost landscape with clarity and purpose, ensuring your Azure bill tells a story of smart cost management rather than a mysterious tale of unknown expenditures.

Frequently asked questions

What is Azure, and how can it help my business?

Azure is Microsoft’s robust and highly scalable public cloud computing platform.

It offers a wide range of cloud services, including platform as a service (PaaS), infrastructure as a service (IaaS), and managed database service capabilities. Designed to empower businesses in the digital age, Azure relies on virtualized hardware and software to run its distributed applications. That means users don’t have to maintain or upgrade their Azure infrastructure as Microsoft handles it behind the scene.

How can the Cloud Cost Management service help my business?

Cloud cost management allows companies to understand and evaluate the expenditures that stem from their usage of cloud technology. This includes exposing unnecessary costs. With these services, businesses can avoid paying for idle or underutilized resources, thereby protecting their bottom line while optimizing one of their organization’s biggest investments.

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How do I get started with the cloud cost management service?

Deploying our cloud cost management solutions is simple and hassle-free. Here is a step-by-step guide on optimizing your cloud expenses with our help:

Initial Consultation: Reach out to our team at PEI and express your interest in our Cloud Cost Management service. We will schedule an initial consultation to understand your requirements, business goals, and cloud infrastructure.

Assessment and Analysis: Our experts will conduct a detailed assessment of your cloud, including your usage patterns, spending history, and cost drivers. This analysis helps us gain insights into your cloud cost landscape.

Recommendations: Based on the assessment results, we will provide recommendations and strategies to optimize your cloud costs. These recommendations may include rightsizing instances, shedding idle resources, implementing automation, and leveraging reserved instances, among other cost-saving measures.

Implementation: Once you approve the recommendations, our team will work closely with yours to implement the cost management strategies. This may involve configuring cost management tools, setting up budgets and alerts, and establishing monitoring mechanisms.

Ongoing Support: Our partnership does not end with implementation. We provide continuous support to make sure that your cloud costs are upgraded over time.

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How much does the cloud cost management service cost?

The price for our cloud cost management service is based on a number of factors, including the size and complexity of your infrastructure, the kinds of solutions that will ultimately be deployed, and your unique business requirements. Since every company is different, we have adjustable pricing that can fit a range of budgets. Please contact our team to receive an accurate estimate for our cloud cost management services. We will be happy to provide you with a full pricing proposal based on your unique needs.

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A Cloud Cost Management Partner You Can Trust

There are many different paths you might take when optimizing your cloud environment. As your strategy develops over time, you may find that a mix of solutions provides the most effective strategy for reducing cloud costs, saving time internally, and gaining access to specialized knowledge and insights.  

PEI has a long history of top-level certifications and recognition as a Microsoft Cloud Partner. We held the Microsoft Gold Certifications for Azure Datacenter and Azure Cloud Platform until Microsoft retired the Gold Partner program in 2022. We’ve also earned the Azure Infrastructure designation as part of Microsoft’s new partner program, which requires significant experience in designing, operating, and optimizing cloud cost, security, and performance for our customers.  

PEI has been ranked two years in a row as a Top 50 Azure Partner in the United States by Cloudtango and have certified Azure Solutions Architect Experts on our staff.


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