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Azure Cost Reporting to boost cloud resilience and reduce costs

Azure Cost Management

9 Mins Read | Last modified on February 8th, 2024

Managing costs within your Azure datacenter is a crucial aspect of ensuring efficiency and optimizing resources. The Azure portal has Azure Cost Management Reports embedded, offering a detailed lens into your cloud spending. In this article, we’ll explore the ins and outs of these reports, their key metrics, best practices, and how to generate and interpret cost reports.

Azure Cost Management Reports

Azure Cost Management Reports offer visibility into resource consumption and spending patterns. These reports are designed to provide a comprehensive overview of your Azure expenditures, helping you make informed decisions and keep budgets in check. Different report types are available from the portal:

  • Cost Analysis Reports take center stage and are the first report to open when dealing with cost governance: they offer a comprehensive view of your Azure spending across scopes and can dive into detailed breakdowns of costs by resource type, region, or service, allowing you to pinpoint where your cloud budget is flowing. I usually recommend starting with a daily view grouped by service name, to understand what your top 3-5 services spend on a daily basis.
  • Usage Reports provide a granular analysis of resource consumption, helping you understand how your organization utilizes Azure resources, identify trends, and ensure optimal allocation based on actual usage patterns.
  • Budget Reports empower your organization to set, track, and manage spending thresholds and to receive timely alerts when nearing or exceeding predefined budgets, allowing you to proactively manage and optimize your cloud expenses.
  • For those leveraging Reserved Instances, these reports offer insights into utilization, which should always be set as the first goal of committed plans. The value of your commitments is ensured when reserved resources are actively utilized, preventing potential waste.

Read more: How to Monitor Azure Reservation Utilization to Save Cost?

The key benefits of using cost management reports are:

  • Visibility and Transparency
  • Customization and Flexibility
  • Proactive Budget Management
  • Strategic Decision-Making
  • Reserved Instances Optimization

Key metrics and insights to be considered for Cost Reporting

Unlocking the full potential of cost reports requires a grasp of key metrics. Dive into metrics like Resource Costs, Usage Details, and Service Costs to gain a nuanced understanding of where your cloud budget is heading:

  • Resource Costs by Type, Region, and Service
    • Metric: Breakdown of costs by resource type, region, and Azure service.
    • Insight: Identify where your spending is concentrated, allowing strategic resource allocation.
  • Usage Metrics
    • Metric: Actual usage of Azure resources.
    • Insight: Understand how resources are utilized to align consumption with costs effectively.
  • Cost Trends and Anomalies
    • Metric: Patterns and irregularities in cost fluctuations.
    • Insight: Uncover unexpected spikes or drops in costs, enabling proactive management.
  • Forecasting
    • Metric: Predicted future costs based on historical data.
    • Insight: Anticipate future spending, aiding in budgeting and resource planning.
  • Reserved Instances Utilization
    • Metric: Efficiency of reserved resources.
    • Insight: Optimize commitments by ensuring active utilization of reserved instances.

Leverage insights such as cost trends, anomalies, and forecasting to stay ahead of the financial curve:

  • Identify Cost Drivers
    • Analysis: Examine high-cost areas by type, region, or service.
    • Insight: Pinpoint resource categories contributing most to expenditure, allowing targeted optimization.
  • Usage vs. Cost Analysis
    • Analysis: Compare usage metrics with associated costs.
    • Insight: Correlate usage patterns to spending, ensuring resources align with actual needs.
  • Budget Variance Analysis
    • Analysis: Compare actual costs against predefined budgets.
    • Insight: Recognize budget overruns early, enabling timely corrective actions.
  • Forecast Accuracy Assessment
    • Analysis: Evaluate the accuracy of cost forecasting.
    • Insight: Refine forecasting models for more precise future predictions.
 

In my experience, there are common Cost Reporting Scenarios that are key to your governance, and not just in terms of costs:

  • Unexpected Cost Spike: If you see a sudden increase in costs, you can use the cost analysis to investigate root causes, adjust resource allocation, and implement cost controls.
  • Underutilized Resources: When you realize one or more resources are not actively utilized. This might also come as a suggestion from the Advisor tool, and the immediate remediation is often using reserved instances or savings plans, right-size resources, or considering scaling down or switching off underutilized resources.
  • Budget Overrun: You are warned that you are about to exceed the predefined budgets for a particular resource group or subscription. In that case, you should re-evaluate budgets, adjust resource allocations, and implement cost management-saving techniques to keep your application’s costs within the original budget.
  • Forecasting Inaccuracy: You spot large disparities between forecasted and actual costs. This is a pretty common scenario, especially after a lift and shift migration. You must understand how the original pricing was calculated, optimize the migrated workloads, and refine forecasting models based on historical or manual data and usage patterns.

Best practices to get the best out of your Azure Reports

Using reports to understand costs can be a challenging task if the allocated resources are not prepared for that scope, which is sometimes the case. Several things must be considered and designed for proper report tracking, as always in IT. Here are a few tips on how to get the best out of your reports:

  • Tagging for Effective Cost Allocation – Implementing a consistent tagging strategy for resources will result in meaningful labels for easy identification and allocation of costs to specific projects or departments. If you are starting the tagging process with already deployed resources, I recommend tagging everything with a common “baseline” tag, so that any saving attempt can be tracked against that baseline without confusing any new project that was added after the start of the governance process.
  • Implement Cost Policies – Azure Policy is a great tool to establish cost controls, either in audit or enforcement. You can set up alerts for budget thresholds, implement policies to enforce resource usage guidelines, and actively manage budgets.
  • Regularly Review and Adjust Budgets – As with everything in the public cloud, budgets should also be dynamic and reflective of organizational goals. Regularly review budgets, adjusting them based on changing priorities, business needs, or unexpected changes in resource demands.

Granular cost allocation, dynamic budgeting, and accurate forecasting models are additional strategies for cost allocation, budgeting, and forecasting, that will allow you to allocate costs with precision, adapt to changing circumstances by regularly reviewing and adjusting budgets, enhance the accuracy of cost predictions, ultimately aiding in proactive resource planning and budgeting.

Continuous monitoring and regular review are something that I always insist upon. To have full control of your cloud costs, you must exercise the FinOps discipline on a regular basis, possibly daily, with the aid of the available tool and reports: real-time alerts, proactive resource optimization, adaptability to change to adjust strategies and policies based on evolving business needs and technological advancements.

How to generate Azure Cost Management Reports

Follow these simple steps to get to your Cost Management Reports:

  1. Navigate and log into Azure Portal.
  2. In the left navigation pane, select “Cost Management + Billing.”
  3. Access Cost Analysis. Under “Cost Management,” select “Cost analysis” from the submenu.
  4. Configure Report Settings: Choose your target scope, such as a subscription or resource group, and customize the date range to reflect the desired reporting period.
  5. View Default Cost Analysis. The default view provides an overview of costs by service, resource, and region.
  6. Customize Report Views.
    1. Click on the “Add filter” to customize the report further.
    2. Filter by resource group, service, or other parameters to tailor the report to your specific needs.
    3. Customize reports for specific durations, from daily breakdowns to monthly overviews.
    4. Focus on specific resource groups to analyze costs within defined project boundaries.
  7. Utilize Grouping and Chart Options: Experiment with grouping options for a more granular breakdown. Explore chart views for visual representations of your cost data.
  8. Save or Export the Report. Click “Save as” to save the configured report for future use. Choose “Export” to download the report in various formats. You can also leverage the Power BI export option for seamless integration into your Power BI dashboards.

Generating cost reports with Azure is a simple task, once you know where and what to look at. By following these step-by-step instructions, exploring customization options, and understanding the various export formats, you can unlock the full potential of these reports.

How to interpret Azure Cost Management Reports

Deciphering the numbers from a report is always an art. To get the most out of your report, you will need to understand resource-specific costs, identify trends over time, and correlate usage patterns to spending:

  • Analyze reports to align cloud resources with business objectives, ensuring strategic decision-making.
  • Identify underutilized resources and right-size or decommission them for optimal resource allocation.
  • Analyze trends to enhance forecasting accuracy, allowing for more predictable budgeting.
  • Identify upward or downward trends, allowing for proactive cost management.
  • Uncover anomalies that may indicate issues or opportunities for optimization.
  • Identify areas where reserved instances are underutilized, optimizing commitment, and maximizing cost savings.
  • Pinpoint resources with low usage relative to costs, indicating potential opportunities for optimization.
  • Adjust reserved instance configurations or reallocate resources to ensure commitment aligns with actual usage.
  • Right-size or decommission underutilized resources to prevent unnecessary costs.
  • Investigate the reasons behind the overrun, adjust budgets, and implement cost controls.

Uncover the stories behind the data – let your cost reports be a guide, discovering opportunities for efficiency, cost savings, and strategic alignment in the ever-evolving journey of Azure cloud financial management.

Challenges with Cost Reporting tools

As always, no tool is without its challenges. Azure Cost Management Reports might be difficult to use and interpret in the beginning, especially if the application landscape is confusing for the cloud manager. Complex data structures or occasional delays in report updates might result in a difficult interpretation of data.

Being aware of these challenges is the first step in overcoming them ensuring a smoother financial management journey, and once you have mastered the use of all the available reports, it’s time to move your FinOps to the next step, which is building your own (or using a third party) cost governance tool.

Conclusion

In the ever-evolving cloud landscape, mastering Azure Cost Management Reports is a mandatory skill which can provide precious insights, metrics, and best practices. Effective cost reporting is not just a financial exercise – it’s a process for optimizing your cloud resources within your company’s business, ensuring a resilient, cost-efficient, powerful infrastructure.

Related reading

This article was originally published on Feb 7, 2024. It was most recently updated on Feb 8, 2024.

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