CASE STUDY: COST OPTIMIZATION

INDEX

Sr. No. Contents Page. No.

1 Introduction 2

2 Background 2

3 What is Cost Optimization? 3

4 Why do we need Cost Optimization 3-4

1. Maximize ROI and Control Spending:
2. Enhance Operational efficiency &sustainability
3.Gain cost transparency & efficient governance
4.Budget overruns

5 What methods can you ser to reduce Azure costs? 5-7

1. Eliminate Unused Resources
2. Make use of Azure Hybrid Benefit
3. Reserve Azure Instance
4. Storage performance
5. Setup Auto-Scaling
6. Right Size the VMs
7. Choose right payment option

6 Azure Reservations 8-9

7 Azure Advisor 9-10

8 Azure Hybrid Benefits 10-12

INTRODUCTION

EY Solutions: is leading Cloud Consultants deliver a comprehensive cloud platform to achieve business growth
and agility with amplified consistency and proficiency. In 2004, EY Solutions was set up in MUMBAI, India, to
provide services for modernizing data centre’s by implementing a hybrid cloud that propels enterprises in their
IT-as-a-Service journey, enabling global enterprises to become more agile and innovative.

AWT Pvt Ltd : is among the most prominent manufacturing companies in India. They are a rapidly expanding
Indian pharmaceutical firm that develops, manufactures, and markets a wide range of bio pharmaceutical
medicines worldwide. This firm has long been a pioneer in the pharmaceutical industry. AWT Pvt Ltd is the major
client of EY.

BACKGROUND

AWT Private Ltd. (Client) : using Azure platform and They have wide variety of services such as cloud storage,
compute services, network services, databases and Web applications and they want to track the utilization of
these Azure services each month, Azure charges for usage during each month to AWT client and sometimes they
get surprised by the size of their bills. To avoid such surprises, it’s important to keep track of their costs on the
Azure platform. So AWT client they need self-service reporting capability tool which can give them complete
visibility and control of their cloud spend on these services.

EY Private Ltd. (Cloud Service Provider) : is responsible for providing cost management tools and resources to
help AWT customers manage their costs. They can monitor what resources AWT clients are using and the cost,
so They don’t run up unexpected bills. There should also be support for billing-related issues.
What is cost optimization?

Cost optimization is a business-focused, continuous discipline to drive spending and cost reduction, while
maximizing business value. It includes: Obtaining the best pricing and terms for all business purchases.
Standardizing, simplifying and rationalizing platforms, applications, processes and services.
Azure costs includes the amount of storage, computing, and network resources an organization provision.

In other words, you need to pay only for whatever you use. For example, a virtual machine (VM) with more
storage costs more than a VM with lesser storage.

Since Azure is a cloud platform, organizations can easily scale up or down whenever needed. Azure cloud
optimization means bringing the actual resource utilization in line with the optimal usage.

Why do we need cloud cost optimization?

By implementing a cloud optimization strategy, you can ensure that your migration to the cloud pays off both
in the short-term and over the long run.
Optimizing the cloud can reduce cloud costs, boost engineers' productivity, and enable companies to move
more operations from their data centers to the Cloud.

Cost optimization in Azure is crucial for organizations for several compelling reasons:

1. Maximize ROI and Control Spending:

a. Azure offers a wide range of resources, but underutilized or idle resources can inflate costs.
b. By optimizing costs, organizations can maximize their return on investment (ROI) while maintaining
control over spending.

2. Enhance Operational Efficiency and Sustainability:

a. Manually managing resources can be time-consuming and prone to errors.

b. Automating resource management enhances operational efficiency and ensures sustainable practices1.

3. Gain Cost Transparency and Efficient Governance:

a. Cost optimization provides transparency into spending patterns.

 b. Implementing efficient governance practices helps mitigate cloud spending risks and ensures
responsible resource allocation.

4. Budget Overruns and Decreased Profitability:

a. As organizations migrate more workloads to the cloud, Azure usage costs can escalate rapidly if not
managed effectively.
b. Without proper cost optimization, budget overruns can occur, impacting overall profitability.

5. Continuous Process of Review and Adjustment:

a. Azure cost optimization is not just about cutting costs; it’s about continuous review and adjustment.
b. Organizations must regularly assess their spending patterns, adjust resource allocation, and seek
opportunities for savings.
c. In summary, cost optimization isn’t just about saving money—it’s about achieving efficiency,
sustainability, and financial control in the cloud!

What methods can you use to reduce Azure costs?

1. Eliminate Unused Resources:

One of the simplest strategies for Azure cloud cost optimization is shutting down the resources you don’t use.
For that purpose, Azure offers recommendation services that focus on identifying redundant resources in your
Azure environment. For instance, one of such services, Azure Advisor, allows you to pinpoint idle virtual
machines and virtual machine scale sets.

In addition to gaining insights into the current usage patterns and performance of your resources, you also get
recommendations on which resources to shut down to reduce costs.

Moreover, Azure Advisor calculates and visualizes the potential cost savings associated with shutting down
resources. By considering the estimated savings, you can prioritize the actions that yield the most significant
impact on your budget and eliminate them.
2. Make use of Azure Hybrid Benefit:

In case you host your infrastructure on Windows Server and SQL Servers or have a Linux subscription, you can
save cost by taking advantage of Azure Hybrid Benefit.

This licensing offer allows businesses to reach up to 76% cost savings, modernize their hybrid environment, as
well as utilize adjacent Azure services and benefits to their maximum.

3. Reserve Azure Instances:

Apart from reactive Azure cost optimization techniques, Azure specialists can be one step ahead and invest in
cost reduction proactively. One way to do that is to purchase Azure reserved instances one or three years ahead
and make use of the provider’s long-term discounts. According to Microsoft Azure, by reserving instances,
businesses can save up to 72% on select Azure services compared to the cost of pay-as-you-go pricing.

4. Tune Storage Performance:

Another effective Azure cost optimization strategy is cutting down on storage expenses. As enterprise data
matures with time and its accessibility decreases, businesses need to implement an effective data lifecycle
management process. Your trusted Azure team can help you migrate data to the appropriate Azure Blob Storage
Tiers according to usage frequency. To optimize your spending, they will redistribute your data across hot, cool,
and archive tiers, which differ in access and storage prices. Moreover, Azure experts can help you tailor Azure
Files and Azure Disk Storage Tiers to your performance and pricing needs. When combined, these practices will
result not only in cost savings but also in the efficient use of resources and improved business operations.

5. Set up Auto-scaling:

By configuring Azure autoscaling, enterprises can dynamically allocate and de-allocate their resources, adjusting
to the changing workloads. In other words, your service capacity will be automatically expanded during peak
demand periods and then reduced during periods of low demand, enabling cost-efficient resource management.
This feature covers most Azure offerings, including Azure Virtual Machines and Azure Kubernetes.
6. Right size the VMs

Azure offers a lot of options in terms of storage capacity and computing power of the VMs. Since it is a flexible
infrastructure platform, businesses can easily assess infrastructure utilization and make necessary adjustments,
depending on the day-to-day requirement.

Therefore, a sure shot method to optimize Azure costs is to

a) monitor the utilization and b) ensure the VM is rightsized or shut down in line with the current needs.

7. Choose the right payment option

Azure offers several payment options –

a. Pay-as-you-go: The most flexible yet the most expensive option that allows you to add infrastructure on
demand
b. Reserved instances: Azure Reserved instances are suitable for long-term workloads and require an
upfront commitment of 1-3 years but may offer cost savings of up to 70%
c. Spot instances: Spot instances help Azure utilize its unused physical compute capacity and result in a
cost-saving of up to 90%. Since spot instances may be suspended at any time, they are suitable for
workloads that aren’t time-bound

What are Azure Reservations?

Azure Reservations can help you to save up to 80% on your Azure costs compared to Pay-as-you-go
pricing! For this reduction to happen, you must have consistent usage of supported Azure resources like
Virtual Machines, App Service Plans, Databases, Storage, etc.
To benefit from Azure Reservations, you must buy one-year or three-year Azure Reservation plans for the
supported resources; the more you buy upfront, the more you save. Those plans can be bought in the
Azure portal, and after the purchase, the matching resources within the scope of the Reservation plan,
Resource Groups, Single/Shared Subscriptions, or Management Group (in preview) are automatically
applied, and you immediately start benefitting from the discount.
Besides having a decreased monthly Azure bill, using Reservations also increases efficiency with
predictable resource capacity.
Available types of Azure Reservations
Microsoft offers two different types of Azure Reservations. This mainly depends on the Resource Type for
which you want to purchase Azure Reservations. Those types are:
 Azure Reserved Instances
 Azure Reserved Capacity
Azure Reserved Instances
With Azure Reserved instances, you can save up to 72% on the costs of your Windows or Linux Virtual
Machines. The discount can increase to 80% if you use Microsoft’s Azure Hybrid Benefit offering. To apply for
that additional benefit, you must already pay for your Windows or SQL Server core license or own a Linux
subscription.
Microsoft can help you decide whether to buy Azure Reservations for your VMs. For that, it gives
recommendations based on the last 7, 30, or 60 days of usage history and, based on that, provides an
overview of the potential savings.
Azure Reserved Capacity
In the case of Azure Reserved Capacity, you can achieve savings of up to 67% on Azure resources like Azure
SQL Database, Azure Cosmos Database, Azure Database for MySQL, Azure Database for PostgreSQL, Azure
Cache for Redis, and Azure Synapsis Analytics. Purchasing Reserved Capacity helps easily manage costs across
predictable and variable workloads and helps optimize budgeting and forecasting
How to create Azure Reservations?
Purchasing an Azure Reservation is a simple process and can be done in the Azure Portal.
1. Login to the Azure portal; the following link

redirects you to the purchase Reservations page

2. Select the Resource Type for which you want to create a Reservation.
You must choose the Scope of the Reservation in the blade that appears. The available choices are:
a. Single Resource Group – The discount applies to matching resources in the selected Resource
Group only.
b. Single Subscription – The discount applies to the matching resources in the selected

subscription.
c. Shared Subscriptions – The discount applies to matching resources in eligible subscriptions.
d. Management Group – The discount applies to matching resources in the list of subscriptions

part of the Management Group and billing scope.

Depending on the Scope you selected, you must also select the Subscription(s), Management Group, or
Resource Group that contains the resources for which you want to purchase a Reservation.
The lower part of the blade shows the Recommendations that are provided by the Azure Reservations
Purchase experience to help you decide whether purchasing Reservations is beneficial. You can use the filters
to select properties like Region, Size, Term, and Billing frequency.
3. Next, you select the resources you want to purchase a Reservation and click the Add to cart button.
4. After selecting the relevant resources, finish the purchase via the shopping cart.
After a Reservation is purchased, it is automatically applied to all the matching resources within the Scope of
the Reservation, and you will start taking benefits immediately.
What is Azure Advisor?

Advisor is a personalized cloud consultant that helps you follow best practices to optimize your Azure
deployments. It analyzes your resource configuration and usage telemetry and then recommends solutions that
can help you improve the cost effectiveness, performance, Reliability (formerly called High availability), and
security of your Azure resources.

With Advisor, you can:

a. Get proactive, actionable, and personalized best practices recommendations.

b. Improve the performance, security, and reliability of your resources, as you identify opportunities to
reduce your overall Azure spend.
c. Get recommendations with proposed actions inline.

You can access Advisor through the Azure portal. Sign in to the portal, locate Advisor in the navigation menu,
or search for it in the All services menu.

The Advisor dashboard displays personalized recommendations for all your subscriptions. You can apply filters
to display recommendations for specific subscriptions and resource types. The recommendations are divided
into five categories:

a. Reliability (formerly called High Availability): To ensure and improve the continuity of your business-
critical applications. For more information, see Advisor Reliability recommendations.
b. Security: To detect threats and vulnerabilities that might lead to security breaches. For more
information, see Advisor Security recommendations.
c. Performance: To improve the speed of your applications. For more information, see Advisor
Performance recommendations.
d. Cost: To optimize and reduce your overall Azure spending. For more information, see Advisor Cost
recommendations.
e. Operational Excellence: To help you achieve process and workflow efficiency, resource manageability
and deployment best practices. For more information, see Advisor Operational Excellence
recommendations.
What is Azure Hybrid Benefit?

The Azure Hybrid Benefit allows customers to use their on-premises Windows Server licenses with active
Software Assurance to pay a reduced rate for virtual machines in Azure. So you need to have licenses with
Software Assurance!

This benefit also applies to customers who have purchased Windows Server through the Microsoft Cloud
Agreement.

Microsoft Azure Hybrid Benefit is a good option for most organizations. Many organizations move to the cloud
to cut costs and to improve scalability and security. However, you’ll need to have strong internal software asset
management processes to benefit fully from the cloud.
How does Azure Hybrid Benefit work?

The Azure Hybrid Benefit allows you to use your on-premises Windows Server licenses to pay for Azure Virtual
Machines. It can save you up to 40% on your Azure VM costs.

The Benefit is available for both Standard and Data center editions of Windows Server.

To use the Azure Hybrid Benefit, you must have Software Assurance coverage for your Windows Server licenses.
When you create an Azure VM, you can select the “Use Hybrid Benefit” option. This will apply the discount to
your VM cost.

How do I get started with Azure Hybrid Benefit?

In order to get started with the Azure Hybrid Benefit, you will need to have an active Azure subscription. Once
you have registered for an account, you can then start using your on-premises Windows Server licenses to pay
for Azure VMs at the reduced rate.

Azure Hybrid Benefit explained by License

a. Use the entitlements (procuring licenses, renewing Software Assurance, etc.) you have built up over time
when moving to the cloud and/or Azure

b. Reduce your spend on Azure Services by leveraging past investments

c. Available for Windows Server and SQL Server core licenses – both Standard and Datacentre (for Win
Server) or Standard and Enterprise (for SQL) with Software Assurance can be leveraged

d. Easy set up so you can start saving right away

e. Receive free Extended Security Updates (ESU) when moving your environment to the cloud
 INDEX
Sr. No. Contents Page. No.
1 Introduction 2
2 Background 2
3 What is Cost Optimization? 3

4 Why do we need Cost Optimization 3-4

1. Maximize ROI and Control Spending:
2. Enhance Operational efficiency &sustainability
3.Gain cost transparency & efficient governance
4.Budget overruns

5 What methods can you ser to reduce Azure costs? 5-7

1. Eliminate Unused Resources
2. Make use of Azure Hybrid Benefit
3. Reserve Azure Instance
4. Storage performance
5. Setup Auto-Scaling
6. Right Size the VMs
7. Choose right payment option

6 Azure Reservations 8-9

7 Azure Advisor 9-10
8 Azure Hybrid Benefits 10-12