Cost optimization

Overview

Cost Analyzer provides a set of tools to identify, prioritize, and act on Azure cost reduction opportunities — from automated scheduling to AI-powered rightsizing and commitment-based discounts. This article outlines the recommended approach to using these tools effectively and sustainably across your Azure environment.

Business value

• Systematically reduce Azure spend without impacting workload performance
• Prioritize optimization actions by financial impact using the Impact tracker
• Combine short-term savings (schedules, rightsizing) with long-term commitments (reservations, savings plans) for compounding cost reduction
• Build a repeatable optimization cadence that scales with your Azure footprint

How it works

1. Start with visibility before acting

Optimization decisions made without accurate cost data produce inconsistent results. Before configuring any optimization tool, establish a clear picture of where spend is concentrated:

• Use cost analysis to identify the top 5–10 cost drivers across your subscriptions.
• Use forecasting to understand which workloads are growing fastest.
• Use anomaly detection to surface unexpected spend spikes before they become optimization priorities.

Act on the highest-impact opportunities first, not the most accessible ones.

2. Use schedules for predictable idle workloads

Schedule automation delivers immediate, measurable savings for resources that run outside business hours with no justification. Apply schedules to:

• Development and test environments that only need to run during working hours.
• Batch processing resources that operate on a defined window.
• Non-production databases and app service plans that mirror production unnecessarily.

Avoid applying schedules to production workloads without verifying that downtime is acceptable and that dependent services handle unavailability gracefully.

3. Apply rightsizing recommendations progressively

Rightsizing recommendations identify resources that are consistently underutilized and suggest a smaller, more appropriate SKU. To apply these effectively:

• Start with non-production environments to validate that the recommended SKU meets workload requirements before applying to production.
• Use the advanced recommendations mode for workloads with variable utilization patterns — it accounts for peak usage, not just averages.
• Review recommendations monthly. Utilization patterns shift as workloads evolve, and a correct recommendation today may no longer apply in three months.

Do not apply rightsizing to resources with burst workloads or unpredictable usage without first consulting the resource owner.

4. Layer commitment-based discounts strategically

Commitment-based discounts (Reservations, Savings Plans, Hybrid Benefits) offer the deepest per-unit savings but require upfront commitment. Layer these in the correct order:

1. Stabilize first — apply schedules and rightsizing before committing. Purchasing a reservation for an oversized VM that will be rightsized next month wastes the commitment.
2. Reservations — purchase for stable, predictable workloads with consistent SKU and region (Virtual Machines, SQL Databases, Cosmos DB). Prefer 1-year terms until utilization patterns are well-established.
3. Savings Plans — use for workloads that are consistent in compute spend but variable in SKU, region, or service type.
4. Hybrid Benefit — apply to eligible Windows Server and SQL Server workloads immediately. This is a license-based discount with no usage risk.
5. Spot Instances — use only for fault-tolerant, interruptible workloads. Not appropriate for production or latency-sensitive applications.

5. Track realized savings with Impact tracker

Every optimization action taken in Cost Analyzer is recorded in the Impact tracker. Use it to:

• Quantify the financial impact of completed optimization actions.
• Report savings to finance and leadership with a verifiable audit trail.
• Identify which optimization types deliver the highest return in your environment.

Review the Impact tracker monthly as part of your cost governance cycle.

6. Build a repeatable optimization cadence

Ad-hoc optimization produces diminishing returns. Establish a regular cadence:

• Weekly — review anomaly detection alerts and new rightsizing recommendations.
• Monthly — review schedule performance, apply new rightsizing recommendations, check reservation utilization.
• Quarterly — assess commitment strategy. Review reservation expiry dates, evaluate savings plan coverage, identify new candidates for Hybrid Benefit.

Limitations

• Rightsizing recommendations are based on Azure Monitor utilization data. Resources without sufficient monitoring history (less than 7 days) may not generate recommendations.
• Commitment-based discounts (Reservations, Savings Plans) cannot be reversed without a penalty period. Verify workload stability before purchasing.
• Schedule automation requires the Turbo360 service principal to have the appropriate role to start and stop the target resource types.

Related articles

• Cost optimization opportunities
• Rightsizing
• Reservations
• Savings plans
• Impact tracker
• Budget planning