How costs work in Azure

Natasha Ong
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4 min read

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In a nutshell:

Cloud computing operates on a pay-as-you-go model (OpEx model), eliminating upfront costs.
You pay only for the IT resources used, with the ability to scale resources as needed.
Factors that impact the cost of using Azure include: resource type and settings, consumption, maintenance, geography, subscription type, and Azure Marketplace choices

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The consumption-based model

When thinking about IT infrastructure, there are two types of expenses to think about. Capital expenditure (CapEx) and operational expenditure (OpEx).

CapEx is a one-time, up-front purchase of resources you can see or touch. A new building, repaving the parking lot, building your own data centre, getting printers or buying a company vehicle are all examples of CapEx.

With a traditional data centre, you try to estimate the future resource needs:

  • If you overestimate, you spend more on your data centre than you need to and potentially waste money.
  • If you underestimate, your data centre will quickly reach capacity and your applications and services may suffer from decreased performance.
  • Fixing an under-resourced data centre can take a long time. You may need to order, receive, and install more hardware (this takes weeks and even months). You'll also need to add power, cooling, and networking for the extra hardware.

OpEx is spending money on services or products over time. Renting a convention centre, leasing a company vehicle, or signing up for cloud services are all examples of OpEx.

Cloud computing falls under OpEx, because it operates on a consumption-based model. This means:

  • If you find that you need more virtual machines, you add more.
  • If the demand drops and you don’t need as many virtual machines, you remove machines as needed.
  • Either way - you don’t pay for the physical infrastructure, the electricity, the security, or anything else associated with maintaining a data centre. There are no upfront costs!

Factors that can affect costs in Azure

So we've just learnt that Azure shifts development costs from the capital expense (CapEx) of building out and maintaining infrastructure and facilities to an operational expense (OpEx) of renting infrastructure as you need it, whether it’s compute, storage, networking, and so on.

That OpEx cost can be impacted by many factors. Understanding these factors helps optimise costs when using Azure, ensuring efficient resource allocation and budget management. Some of the impacting factors are:

Resource type

The settings you pick when setting up a resource all affect costs. For instance, changing the access tier for a blob you're setting up, or changing the size of your virtual machine will influence their price.

Consumption

Azure follows a pay-as-you-go model - if you use more compute this cycle, you pay more. If you use less in the current cycle, you pay less. Nice and simple!

  • Azure also offers reserved resources with discounts, suitable for consistent workloads and cost savings.
  • This means many services, including databases, compute, and storage all provide the option to commit to a level of use and receive a discount, in some cases up to 72%.
  • When you reserve capacity, you’re committing to using and paying for a certain amount of Azure resources during a given period (typically one or three years).
  • If you use beyond the the amount you've committed to, the additional resources are charged in the classic pay-as-you-go model.

Maintenance

Regularly monitoring resources is essential. Unused resources can accumulate, increasing costs. Proper management helps control expenses.

  • For example, every time you provision a VM, additional resources such as storage and networking are also provisioned. But, if you deprovision (i.e. shutting down) the VM, some of the additional resources may not get deleted.

Geography

Azure's global infrastructure allows you to deploy resources in regions all across the world. Deploying the same resource in a different region can change the costs, because of changes in power, taxes, and fees.

  • Network traffic is also impacted based on geography.
  • Some inbound data transfers (data going into Azure data centres) are free. For outbound data transfers (data leaving Azure data centres), data transfer pricing is based on zones. For example, it’s less expensive to move information within Europe than to move information from Europe to Asia or South America.

Subscription type

Different subscription types include usage allowances that affect how much you'll need to pay.

For example, an Azure free trial subscription provides access to a number of Azure products that are free for 12 months. It also includes credit to spend within your first 30 days of sign-up. You'll get access to more than 25 products that are always free (based on resource and region availability).

Azure Marketplace

Purchasing third-party solutions from Azure Marketplace may involve not only Azure services but also third-party vendor services and expertise. Billing structures are determined by the vendor, and all solutions are certified and compliant with Azure policies and standards.