FinOps on Azure: How to Reduce and Optimize Your Cloud Costs

Summary

• Many companies struggle with cloud cost control, often leaving 10-20% in untapped savings.

• Engineers may not prioritize cost management, leading to inefficiencies and cloud waste.

• Microsoft Azure offers built-in cost management tools, including Cost Management + Billing, Azure Advisor, and pricing calculators.

• Reserved Instances, Savings Plans, and Spot Instances provide opportunities for significant cost reduction.

• Automating cost optimization, such as shutting down unused resources, prevents unnecessary expenses.

• Relying on manual tracking can lead to inefficiencies—automation and built-in Azure tools improve accuracy.

• Implementing FinOps on Azure enables businesses to maintain control over cloud investments while optimizing performance.

When navigating Microsoft’s ecosystem, you might find yourself confused by the multitude of tools that complement each other.  

Everything seems to be a "must-have" for your implementation, but you have to take into account that each tool comes with its own pricing.  

When you add up the costs, you might find yourself in a situation where you start overspending on recurring costs, especially when you apply those solutions to a large enterprise.  

This is the moment when you’ll want to take a step back and apply a cost-optimization approach through the FinOps methodology. 

For example, many organizations struggle with cloud cost optimization, even with dedicated FinOps teams in place.  

A review of over $3 billion in cloud spending found that most companies have 10 to 20 percent in untapped cost savings, yet capturing these savings remains a challenge.  

Engineers, often focused on security, resiliency, and other priorities, may not have the incentives or access needed to act on cloud costs.  

As cloud waste continues to grow—estimated at 28 percent of total cloud spending—adopting FinOps strategies, including FinOps as Code (FaC), can help organizations integrate cost optimization directly into engineering workflows and drive significant savings. 

In this article, we’ll explore how adopting FinOps in Microsoft’s ecosystem can help you streamline cost management, avoid unexpected billing surprises, and ensure that your cloud investments remain efficient and aligned with your organization's goals. 

Understanding FinOps in the Azure Context 

FinOps, or Financial Operations, is a set of practices designed to bring financial management to the cloud, enabling businesses to manage and optimize cloud spending effectively.  

In the context of Azure, FinOps provides a structured approach to ensure that finance, engineering, and operations teams are aligned on predefined cost management strategies.  

Azure’s extensive suite of cloud services supports FinOps principles, helping organizations achieve greater financial governance and efficiency. 

The core objective of FinOps on Microsoft Azure is to maintain clear visibility into cloud expenditures, optimize costs, and foster collaboration between business and technical teams.  

Microsoft has integrated GenAI into FinOps workflows via Azure Copilot, enabling businesses to gain deeper insights into AI-related costs and optimize spending in real time.  

AI significantly improves the efficiency of operational processes, therefore organizations should proactively apply FinOps principles to prevent cost overruns and maintain financial control. 

FinOps Principles Based on the FinOps Foundation 

The FinOps Foundation outlines several core principles that guide the effective management of cloud costs, which can be applied within the Microsoft Azure ecosystem: 

1. Collaboration Between Finance and Engineering - FinOps fosters a strong partnership between financial, cloud financial management and technical teams, ensuring that both groups work together to manage cloud costs. In the Azure context, this involves close communication between cloud architects, engineers, and finance teams to optimize cloud spending. 

2. Visibility and Transparency - Providing full visibility into cloud costs is central to the FinOps methodology. In Microsoft Azure, this is achieved through native tools that offer detailed insights into resource consumption, helping teams understand where and why money is being spent. 

3. Decentralized Accountability -  Each team can track and optimize the costs associated with their resources using Azure’s cost management features. In a successful FinOps practice, cost ownership is distributed across teams that are responsible for specific cloud workloads. Each team should not only track spending but also optimize costs within the solutions they manage, ensuring that their workloads run efficiently while meeting business and technical requirements. Azure’s cost management features provide the necessary insights and controls to help teams monitor and refine their cloud usage based on real consumption data.

4. Optimization and Automation - FinOps emphasizes continual optimization of cloud spend by identifying inefficiencies and automating cost-saving measures. Azure's various tools, like Azure Advisor, support ongoing recommendations for optimization and help implement automated processes. 

5. Continuous Improvement - FinOps is not a one-time initiative; it’s an ongoing process that drives continuous improvements in cloud cost management. As Azure evolves, new service tiers and more cost-efficient alternatives frequently become available. Teams should regularly review their workloads and assess whether their current services remain the best choice or if newer options provide better performance and cost efficiency. Azure’s tools, such as the Azure Pricing Calculator and Total Cost of Ownership (TCO) Calculator, enable businesses to forecast, simulate, and refine their cloud strategies as needs evolve.

Microsoft Azure’s Native Tools and Features for Cost Management 

Azure provides several powerful tools to assist with the practical application of FinOps: 

1. Azure Cost Management + Billing - This tool is at the heart of Azure’s cost management capabilities. It enables organizations to track, allocate, and optimize cloud spending. Microsoft Azure Cost Management provides insights into usage patterns, forecasts future costs, and allows users to set up budgets and alerts to monitor their cloud expenses in real time. 

2. Azure Advisor - Azure Advisor offers personalized best practices to help optimize cloud resources. It provides cost recommendations, such as resizing or shutting down underutilized resources, helping organizations save money by right-sizing their Azure services. 

3. Azure Pricing Calculator - This tool helps organizations estimate the cost of Azure services based on their usage requirements. It allows users to experiment with different configurations and pricing models, helping finance and engineering teams plan budgets accurately. 

4. Total Cost of Ownership (TCO) Calculator - The TCO Calculator allows businesses to assess the potential savings when migrating to Azure by comparing the costs of their on-premises infrastructure with cloud-based solutions. It provides a clear view of how transitioning to Azure can impact an organization’s bottom line. 

5. Azure Hybrid Benefit Savings Calculator - For businesses with existing on-premises Microsoft licenses, the Azure Hybrid Benefit Savings Calculator helps estimate potential savings when transferring workloads to Azure using those licenses. This can significantly reduce Azure pricing for Windows Server and SQL Server deployments. 

6. FinOps Toolkit (Microsoft Cloud) - The FinOps toolkit for Microsoft Cloud includes resources and templates that help businesses implement the principles of Azure FinOps. It provides templates for cost tracking, reporting, and analysis, and offers guidelines to help organizations automate cost optimization processes and integrate FinOps into their daily cloud operations. 

Role of FinOps in Ensuring Cloud Cost Optimization 

FinOps plays a key role in promoting cost transparency and accountability in the cloud. With Microsoft Azure’s complex pricing models, it’s easy for costs to become opaque, especially in large enterprises where different teams might be deploying resources across regions and services.  

FinOps helps counter this by creating clear visibility into where and how money is being spent. 

Through Azure’s cost optimization tools, FinOps ensures that cloud costs are tracked and also optimized by identifying waste and underutilized resources.  

Tools like Microsoft Cost Management and Azure Advisor, organizations can receive actionable insights and recommendations that help reduce costs. 

Moreover, FinOps instills a culture of financial accountability, where teams at all levels—from finance to engineering—are responsible for the resources they provide.  

Microsoft Azure’s reporting and billing tools, combined with FinOps best practices, ensure that there is no ambiguity about resource ownership and cost responsibility. 

Ultimately, adopting FinOps leads to a more controlled, predictable, and cost-effective cloud environment, empowering businesses to fully leverage Microsoft Azure’s capabilities while managing costs efficiently. 

The Do’s of FinOps on Microsoft Azure 

Do Leverage Azure Cost Management + Billing 

One of the most essential steps in adopting FinOps on Azure is taking full advantage of Azure Cost Management + Billing.  

This native tool enables organizations to enable cloud cost optimization. 

• Utilize Azure’s cost tracking, budgeting, and forecasting tools: Azure offers a variety of features that allow you to track the costs associated with your Azure resources. With cost analysis tools, you can monitor spending trends and identify areas where optimization is needed. Additionally, Azure’s budgeting and forecasting capabilities help you plan for future expenditures, ensuring you stay within your allocated budget. 

• Set up cost alerts and budgets to keep spending under control: To avoid surprises, it’s important to set up cost alerts and budget limits. Setting up cost alerts and budget limits is crucial to avoid surprises. Azure allows you to create customized budgets based on your business needs and configure automatic notifications when you approach or exceed these thresholds. These alerts help maintain visibility into your cloud costs and ensure you can react before overspending occurs. 

Do Implement Tagging Strategies 

Azure provides robust tagging features that allow you to allocate and manage costs more effectively.  

To get insights into where and how resources are being used across your organization, you should consider implementing a standardized tagging strategy.

• Use Azure tags for cost allocation across departments, projects, or services: Tags are essential for organizing resources and tracking costs across various departments or business units. They enable you to break down cloud costs by different dimensions, such as project, environment (e.g., production, staging), or department, making it easier to attribute costs and identify inefficiencies. 

• Ensure consistent and standardized tagging practices: For tagging to be effective, consistency is key. Establish a standardized approach to tagging across your organization, ensuring that all teams use the same tag names and conventions. This consistency will improve reporting accuracy and make it easier to analyze cloud spending patterns across the business. 

• Enforce tagging requirements with Azure Policy: To ensure compliance with your tagging strategy, use Azure Policy to enforce tag requirements across your cloud resources. Azure Policy can automatically reject deployments that lack required tags or add missing tags to ensure consistency.

Do Use Reserved Instances and Savings Plans 

Azure provides several pricing models that can significantly reduce your cloud costs when utilized correctly.  

• Take advantage of Azure’s Reserved Instances (RIs) for predictable workloads to save on long-term costs: For workloads that have predictable usage patterns, Azure’s Reserved Instances (RIs) can help you save up to 72% over pay-as-you-go pricing. By committing to a one- or three-year term for virtual machines (VMs) and other services, you can take advantage of these substantial savings. 

• Understand the various pricing models (e.g., Azure Savings Plans) and apply them when suitable: In addition to Reserved Instances, Azure also offers Savings Plans, which allow for flexible cost savings across various compute services. These plans provide the same level of savings as RIs but with added flexibility to switch VM types or regions. Evaluate the workloads and pricing models that best fit your organization’s needs, ensuring you make the most of long-term savings opportunities. 

• Leverage Spot Instances for cost-sensitive, interruptible workloads: Azure Spot Instances offer a cost-effective way to run workloads by using unused cloud capacity at a discounted rate. However, these instances can be interrupted by Azure when capacity is needed elsewhere, making them ideal for batch processing, fault-tolerant applications, testing, and workloads that can handle interruptions. Organizations looking to further reduce cloud costs should consider integrating Spot Instances where appropriate.

Do Monitor and Optimize Resource Utilization 

Regularly reviewing resource usage is critical for maintaining cost efficiency in the cloud. To maintain cost efficiency in the cloud, you need to regularly review resource usage.  

• Regularly review resource usage to identify over-provisioned or underutilized resources: Microsoft’s cost management tools give you detailed insights into the utilization of your azure resources. Use these tools to regularly audit your cloud environment for underused or idle resources that are inflating your costs. For example, you might find VMs that are over-provisioned or storage accounts that are underutilized, which can be optimized to save costs. 

• Enable auto-scaling where applicable and resize virtual machines (VMs) to match actual demand: Auto-scaling allows Azure services to automatically adjust based on demand, helping to ensure that you are only paying for the resources you actually need. Implement auto-scaling for applications with variable demand, and make sure VMs are resized to the appropriate specifications to match your actual usage. This will help prevent over-provisioning and unnecessary expenses. 

Do Automate Cost Optimization 

Automation is a powerful tool for reducing cloud costs and ensuring efficient resource management. 

• Use Azure Automation and Logic Apps to automatically shut down unused resources during off-hours: Leverage Azure Automation to create schedules that automatically power down non-critical resources (e.g., VMs, databases) during off-hours or when they are not in use. This can significantly reduce your costs, particularly for development or testing environments that don’t need to run 24/7. 

• Set up policies to automatically scale down or delete idle resources: In addition to manual intervention, you can set up policies that automatically scale down resources when they are idle or delete unused resources altogether. Using Azure Policy and Azure Automation, you can enforce rules that prevent unnecessary resource usage, helping to keep your cloud environment lean and cost-efficient. 

Do Foster Cross-functional Collaboration 

Successful FinOps requires strong collaboration between various teams within the organization. 

• Collaborate with finance, DevOps, and cloud architecture teams for aligned financial goals: It’s crucial for finance, DevOps, and cloud architecture teams to work together on cost management. Finance teams need visibility into cloud spending, while engineering and DevOps teams need to ensure that cloud resources are being used efficiently. Regular communication and collaboration between these groups help to align financial goals with operational decisions, leading to more effective cloud cost management. 

• Promote transparency and accountability in managing cloud costs: Establish a culture of transparency around cloud spending, where each team understands how their actions impact the organization’s overall costs. Empower teams to take responsibility for the resources they provision and ensure that there is accountability for cost optimization. 

The Don’ts of FinOps on Microsoft Azure 

Don’t Ignore Azure Cost Alerts and Budgets 

One of the easiest ways to stay on top of your Azure spending is by setting up and monitoring cost alerts and budgets. 

• Failing to set up or review cost alerts and budgets can lead to unexpected surges in costs: If you don’t set up cost alerts in Azure, you risk overspending without realizing it until it’s too late. Unexpected surges in usage—due to changes in project requirements or unexpected resource consumption—can quickly lead to cost overruns. Cost data alerts allow you to proactively monitor spending and take action before it spirals out of control. 

• Ignoring budget thresholds can result in unmonitored, uncontrolled spending: Without defined budgets, it's easy for spending to get out of hand, especially in a dynamic cloud environment like Azure. You can prevent unchecked spending by setting up clear budget limits. It’s essential to not only set up budgets but also to regularly review them and adjust as necessary based on the evolving needs of your projects. 

Don’t Overlook Billing and Pricing Models 

Azure offers a variety of pricing models and choosing the right one can make a significant impact on your costs. 

• Avoid assuming the default pricing model fits all workloads: Azure’s default pay-as-you-go pricing may work for some scenarios but not for all workloads. For predictable workloads, Reserved Instances (RIs) or Azure Savings Plans can offer substantial savings. Failing to consider these options can result in unnecessarily high costs for long-term projects or services that run continuously. 

• Don’t ignore the intricacies of Azure’s pricing models (e.g., pay-as-you-go vs. subscription-based): Azure offers multiple pricing models—such as pay-as-you-go, subscription-based pricing, and commitment-based pricing options like RIs and Savings Plans. It’s important to thoroughly evaluate each model based on your specific workload to determine which one offers the best cost savings. Ignoring these nuances could lead to inefficient use of cloud resources and higher-than-necessary expenditures. 

• Be mindful of networking costs: Networking charges can add up quickly, especially for outbound data transfers, inter-region communication, VPN gateways, and load balancing services. These costs are often overlooked when optimizing cloud spending. Teams should regularly review network usage patterns, choose cost-effective architectures, and minimize unnecessary data transfer between regions to reduce networking expenses.

Don’t Neglect Resource Cleanup 

One of the simplest but most overlooked cost-saving strategies is properly managing unused resources. 

• Leaving orphaned or unused resources running can accumulate unnecessary costs: Many organizations forget to deallocate resources when they are no longer in use, such as virtual machines (VMs), storage accounts, or databases. These idle resources continue to incur costs, even though they aren't serving any purpose. Avoid unnecessary expenses by regularly checking for and cleaning up unused expenses.  

• Don’t overlook the need to deallocate unused VMs or delete unused storage accounts: Virtual machines and other resources can continue to accrue costs even when they are idle. For example, if a VM is left running overnight or over the weekend when it's not needed, it will incur charges. Make it a practice to deallocate or delete unused resources to eliminate these ongoing costs. Additionally, unused storage accounts or unattached disks can contribute to unnecessary charges, so ensure they are regularly reviewed and cleaned up. 

Don’t Skip Regular Reviews of Cloud Spending 

Cloud environments are dynamic, and cloud costs can change rapidly. Without continuous oversight, you may miss opportunities to optimize your spending. 

• Failing to review and analyze spending patterns can result in overspending or missed savings opportunities: It's not enough to set budgets and forget about them. Regularly reviewing cloud spending ensures you catch anomalies or unexpected spikes in costs before they become a problem. Without periodic reviews, you might overlook inefficiencies and miss out on opportunities for optimization, such as consolidating resources, switching to more cost-effective services, or applying Reserved Instances. 

• Conduct regular audits to track anomalies and refine cost strategies: Schedule regular audits of your cloud usage and spending. These reviews should focus on tracking any spending anomalies, such as sudden spikes in resource consumption or unoptimized usage patterns. By conducting audits, you can refine your cost strategies, identify areas of improvement, and adjust your approach accordingly. This ongoing process helps ensure that your cloud costs remain in line with your financial goals. 

Don’t Rely on Manual Processes for Cost Management 

Managing cloud costs manually can lead to inefficiencies and errors that can quickly spiral out of control. 

• Avoid manual tracking and reporting—rely on Azure’s automated tools for cost optimization: While it may be tempting to track cloud costs using spreadsheets or manual reports, this method is prone to errors and can be incredibly time-consuming. Instead, leverage Azure’s native automated tools like Cost Management, Azure Advisor, and automation features to monitor and report on cloud spending. These tools provide real-time data, automate reports, and help ensure that your cost optimization practices are both accurate and efficient. 

• Manual processes increase the risk of errors and inefficiency: Manual cost tracking often results in inaccurate data, missed opportunities for cost optimization, and a lack of timely insight into spending patterns.  

Conclusion 

Using FinOps for Azure cost management is an important step for companies businesses that want to keep cloud costs under control while making the most of their resources.  

FinOps helps teams work together, track expenses, and constantly find ways to save money while keeping everything running smoothly. 

Azure provides several built-in tools that make it easier to monitor spending and make smart financial decisions.  

Setting up budgets, optimizing resources, and using automation can prevent unexpected costs and ensure your cloud strategy supports your business value. 

Managing cloud finances isn’t something you do just once—it requires regular reviews and adjustments. 

If you’re looking to reduce costs on Azure but don’t know where to start, book a call with our team of experts and let us help you achieve your FinOps goal as your Microsoft Gold-Certified Partner.