Azure pricing explained

Have you ever wondered how Azure pricing actually works?

So, you’ve decided to use Azure as your primary cloud platform and want to calculate your infrastructure costs. You estimate them based on listed prices, and rest assured that your startup/project will meet its budget. And then, suddenly, at the end of the month, you receive an invoice from Azure for an amount two times higher than you originally expected.

Sounds familiar? If so, don’t worry. Many people fall into this trap. And this is because Azure pricing, like all public cloud pricing, is a little bit more complicated than people tend to think. The service itself is available in a variety of modes, and there are more ingredients you need to consider when estimating costs (aside from compute resources). The good news is there are many tools available to assist you with those calculations.

What are those tools? How exactly does Azure pricing work? Let’s dive straight in!

Service modes

To help you optimise your cloud infrastructure costs, Azure is available in various service modes. While some of them are more suitable for micro workloads launched on-demand, others are more suitable for long-term production workloads.

Free Tier

Free Tier allows for free usage of Azure resources up to a specific limit. At the time of writing, this includes 40+ Azure services with 750 hours of Linux and Windows B1s virtual machines each month for one year. Moreover, Azure provides $200 billing credit that is valid for 30 days and can be spent in addition to free services. This might be a good option for organisations preparing for a cloud migration as well as students and individuals willing to learn Azure.

Pay as You Go

Pay as You Go mode is usually the default and the most popular mode across all leading public cloud providers. Users can launch instances on-demand and get charged for the exact amount of resources consumed over time. As its name indicates, this approach is based on the pay-as-you-go (PAYG) approach with no upfront payments and long-term commitments.

Spot Virtual Machines

Spot Virtual Machines benefit from unused Azure resources which would otherwise be wasted. Spot Virtual Machines are launched whenever any extra resources are available. They are hibernated, stopped or terminated when the cloud needs those resources back. Spot Virtual Machines allow for significant cost savings compared to Pay as You Go pricing but are not suitable for workloads that need to meet service-level agreements (SLAs).

Reservations

Reservations are a compelling option to save costs when you are running workloads in the long term. By committing to specific usage, measured in $/hour, for at least one year, organisations can benefit from competitive pricing compared to the Pay as You Go mode. Reservations are suitable for production environments with predefined resource requirements.

Azure pricing ingredients

All the Azure service modes presented work based on PAYG billing. Organisations pay for the exact amount of resources consumed over time according to the official Azure pricing. There are multiple ingredients, however, that have an impact on the final quote. Those include:

• Compute resources – the number of vCPUs and the amount of RAM as defined in the Azure Virtual Machines instance type,
• Storage resources – the amount of storage, IOPS, throughput and snapshots as defined in the Azure Manage Disks volume type,
• Network traffic – the amount of intra-region, inter-region and region-Internet network traffic, measured in GB of data transfer per month,
• Other resources – any other resources, such as Public IP addresses or Azure Load Balancers, that create extra charges.

To complicate things even more, a bunch of those resources are available for free up to certain limits. However, extra charges apply when you exceed those limits. As a result, Azure pricing often leads to confusion. If your latest invoice from Azure surprised you, you might not be taking all those ingredients into account.

Furthermore, Canonical’s research confirms that compute resources account for only a portion of overall spending on public cloud infrastructure. According to our Cloud Pricing Report 2022, many organisations claim that the most significant portion of their budget is spent on storage resources (TB) and network resources. 

 Source: Canonical’s Cloud Pricing Report 2022

Azure pricing calculator

At this point, it should be clear that there are multiple factors that determine the final pricing. However, estimating all those individual costs manually can be a nightmare. Especially when you’re dealing with large, multi-service workloads. Fortunately, Azure provides dedicated tools to help its customers with this process.

Azure’s pricing calculator provides total cost of ownership (TCO) estimates for cloud instances based on their number, configuration and additional requirements regarding storage and network. More detailed estimates are available for various regions, guest operating systems and pricing models. The calculator estimates total monthly and yearly costs.

Another option is pricing assistance. This option involves reaching out to Azure’s sales team for a personalised quote based on detailed workload resource requirements. This might be the most convenient option for big enterprises as underestimating costs can have a negative impact on the entire cloud migration process.

Canonical’s Cloud Pricing Report 2022

Now that you have got a better understanding of how Azure pricing works, you might be wondering how it compares to other leading cloud providers.

Canonical’s cloud pricing report 2022 provides an overview of cloud list prices from leading public and private cloud providers as of July 2022. By considering three sample cost scenarios and using official TCO calculators, we estimate the costs of running the same workload across leading cloud platforms. The report includes results from our Cloud Pricing Survey 2022 and commentary from industry experts. The survey’s outcomes show the growing importance of hybrid multi-cloud architecture and confirm its advantages from a TCO stance.

Get free report

Learn more

Canonical partners with Azure to provide Ubuntu Pro for Azure customers. Ubuntu Pro is a premium Ubuntu image, delivering the most comprehensive open-source security and compliance for production mission-critical workloads.

Learn more about Ubuntu Pro >

Canonical helps Ubuntu users optimise infrastructure costs in hybrid multi-cloud environments, allowing enterprises to benefit from the best of the public and private cloud space simultaneously.

Read a whitepaper – “A business guide to hybrid multi-cloud” >