(dramatic beats)
- Welcome to Azure Essentials,
in the next few minutes I'll explain the fundamentals
of Cloud Economics in Azure.
Now whether you're running existing workloads
or architecting new solutions in Azure,
I'll share some lesser-known tips to help you navigate
the economics of the cloud for your organization
so you can optimize your operating costs in Azure,
based on your specific workloads.
So let's start with the key question:
how does cloud pricing work?
Well, cloud billing is mainly tied to compute and storage,
and this includes the underlying software licensing fees.
Costs accrue via a pay-for-what-you-consume model,
versus the up-front server infrastructure
and software licensing costs
you would typically pay on-premises in your data center.
Put another way, it's the difference between
operational expenses, OpEx,
and capital expenses, or CapEx.
Now, there are a few ways to consume Cloud services,
but because many of you
are used to managing your own infrastructure,
today I'll focus on infrastructure as a service, or IaaS,
and dig into how
the cloud consumption model in Azure applies.
Now the first thing to note is
the cloud is infinitely flexible.
It's not one size fits all,
and as you literally pay for what you consume,
for the best pricing
you need to consider how you will consume resources
for your specific workloads.
Now the overall premise and major advantage of the cloud
that you're probably most familiar with,
is the power it gives you
to elastically scale compute resources
in response to different peaks in your business.
This is great for unpredictable workloads,
where you can add and subtract resources as you need them,
resulting in variable cost.
Think of this as paying per night to stay in a hotel,
only when you need to.
Now, if a portion or all of what you're consuming
is more consistent,
for example, a batch process that runs every day
using the same resources on a schedule,
what we call a predictable workload,
well, here we have options for that too.
Here, if you make an upfront commitment
to consume at a certain level for a longer period of time,
you can benefit from fixed costs at reduced pricing.
Now in this case,
it's like paying for an extended stay in a hotel,
where you are getting a better nightly rate,
because the hotel doesn't have to worry about
keeping the room occupied.
Now striking the right balance across both models
is the first step towards saving costs.
In fact, variable and fixed cost models for consumption
aren't an either-or decision, they complement each other.
So for your steady, predictable workloads,
you can establish a fixed-cost, low water mark
for the level of compute that will always be used,
and reserve at that capacity.
Now there are a few options to achieve this,
with Azure Reservations and Dedicated Host
that we'll explain more in a moment.
And you can layer on top of that,
variable resources for your seasonal
or demand-based activities,
where elastic computing makes sense,
and where you can consume on demand
or automate against specific capacity thresholds.
Now, across both of these consumption approaches,
one of the most important levers
to keep your costs in check, is software licensing,
which can make up to 30 to 40% of your cloud bill.
For example, if you're an existing Microsoft customer,
the good news is you can bring your existing
and even future Windows Server and SQL Server licenses
with you into Azure, including any negotiated rates,
using the Azure Hybrid Benefit.
This brings dramatic savings versus
the default Service Provider License Agreement or SPLA,
which is often rolled into compute costs by default,
across all cloud vendors offering Microsoft software.
Now one tip here, if you don't already hold licenses,
you can save costs by acquiring licenses
with an enterprise agreement,
or with a software subscription,
before provisioning resources in Azure.
Visiting aka.ms/LicensingEssentials is going to arm you
with lots more useful information.
That said, beyond Microsoft software,
with Azure Hybrid Benefit,
you can even bring your Red Hat Enterprise Linux
and SUSE licenses with you.
Now we've covered the three main areas to focus on
to manage costs,
let's drill more deeply into best practices
for paying for what you consume.
Of course, this starts with understanding
what you really need to run your workloads in Azure.
If you're lifting and shifting an existing infrastructure,
a key tip here is to not just bring things
like-for-like into the cloud.
This often leads to over provisioning.
And in fact, over provisioning
is one of the most common pitfalls to avoid.
So for example, when provisioning on-premises,
you'll likely use virtual machines with more memory
or cores than you need
in anticipation of peak traffic and load.
But in the cloud, it's best to start with right-sized VMs,
and scale as needed.
Now, let's look in more detail
at our two cost models and your options,
starting with variable costs.
Once you've determined the baseline
for your fixed cost predictable workloads,
you can align your variable cost workloads
directly to fluctuations in your business demand.
Purposefully architecting for elasticity
can help save costs
and set yourself up for future peaks in demand,
all without giving up performance,
and it's important to choose the right tool for the job
and reconfigure as needed.
For example, take your database backends
that run in virtual machines.
Here you can use Constrained vCPU capable VMs,
while maintaining the same memory,
storage, and I/O bandwidth.
This is like a car with a V8 engine
that can disable four of its cylinders at freeway speeds
to save fuel.
Now because many database workloads are not CPU-intensive,
not only can you save on compute,
but because licensing is based on the number of cores,
you can save on software licensing too.
Then for storage, Azure offers multiple storage options
and a variety of access tiers for blob storage,
like Hot, Cool and Archive,
and here you're paying for the speed
and frequency of access.
So, matching storage types to your requirements
can help save considerable costs,
while meeting your required performance levels.
Now let's go into more detail on your options
for fixed cost predictable workloads,
where in return for a longer-term commitment,
you've got a few options to save costs.
The first, and lesser-known option, is Azure Dedicated Host.
This service provides the physical servers you need
dedicated to your Azure subscription,
which means that capacity
isn't shared with other organizations.
You can start with as little as one VM,
or of course, once you've right sized the VMs you need,
you can even bring
your whole data center infrastructure to Azure.
And in fact, some organizations use this option
just to get a footing in the cloud.
And because you can bring over
your on-premises Windows Server and SQL Server licenses
with Software Assurance benefits,
there's little change
to your existing processes and procedures.
It's managed just like you would be on-premises.
Now the trick for best efficiency
is to make sure that your utilization level
is at around 90%,
as you would if you owned the infrastructure, to save costs.
Now a stronger, more commonly used option
is Azure Reservations.
This allows you to commit resources
for one-year or three-year plans for multiple services.
Now if you're worried about lock-in,
in Azure that's not an issue, this model's flexible.
You can pick the same premium compute resources
that you're familiar with,
mix VM sizes and trade them over time.
Costs are then evenly spread out
over the duration of your reservation.
So let's put these economic tips to the test.
A good idea is to leverage the free Azure Pricing Calculator
available at aka.ms/azurepricingcalculator.
Now, assuming that you decide to bring over
your existing software licensing assets
with Software Assurance, let's walk through an example.
Now bear with me in this,
because it's going to involve some maths.
Here I've got an E16 VM with 16 virtual cores
running Windows server in the West U.S. region.
Now if I do nothing at all, it's going to cost me
around $1354 per month.
Now if I take advantage
of my existing Windows server licenses,
and apply the Azure Hybrid Benefit,
that price is going to be reduced to $817 per month.
But, to get a more accurate view of costs,
we need to add back the cost of Software Assurance
of your Windows Server 2019 Standard license,
which at 25% of $972 in open pricing,
equates to $243 per year for Software Assurance,
or about $20 per month.
Now I add that $20 to my $817 total
from the Azure Hybrid Benefit earlier,
and this brings my monthly total to around $837.
And that's a saving of $517 per month,
and you can check these calculations
at aka.ms/WSOpenLicensing and aka.ms/SAMechanics.
Now let's see how this affects SQL Server,
starting with constrained vCPUs.
In many cases, your database might need the memory
and throughput of a larger VM,
but not the processing power
that the additional cores give you.
So we'll use the same VM with 16 cores,
this time running SQL Server Enterprise
and Windows Server Standard.
And it's $5734 per month.
Now if we change this to a constrained vCPU instance,
of this same VM with four active cores,
you'll see the price change to around $2450.
Now in addition to the constrained vCPUs,
in the same way we applied existing Windows Server licenses
and Software Assurance before,
we can also do this with SQL Server.
So let's continue with our same VM,
now I'm going to add Azure Hybrid Benefit for SQL only,
and that gets us back to $1354,
and then adding the Hybrid benefit for Windows Server,
I'm back down to $817.
So I've effectively brought over my license assets
for Windows and SQL, and I'm only paying for compute.
But now we'll go one step further,
and add an Azure Reservation.
Let's see what happens if I apply a one-year reservation.
You'll see the cost goes down to around $482 per month.
And with a three-year reservation, it goes down even further
to around $310 per month.
Again, if we add the required Software Assurance costs
at 25% for Windows Server and 25% for SQL Server,
that adds around $20 per month for Windows Server,
as we saw earlier.
And then using similar calculations
for SQL Server Enterprise,
this ends up at around $573 per month
for Software Assurance on four cores.
Now you can find all the pricing details
for SQL Server at aka.ms/SQLOpenLicensing.
So hopefully you're still following along,
and that's $593 per month total
for Software Assurance costs
across Windows Server and SQL Server
that we need to add back
to our last running total of $310,
which is with a three-year reservation
and the Azure Hybrid Benefit applied.
So that brings us to $903 per month in total.
So slightly higher than earlier,
but when you compare this to the original cost
of around $5734 per month without
the three-year reservation and hybrid benefit applied,
you can see how bringing your licenses with you
is a significant advantage.
So that was just one example,
but whatever levers you use,
again you're not locked into
any specific resource configuration.
You can tweak your selections over time,
and in fact, once you're in Azure,
the Azure Cost Management tool
allows you to set target budgets
and track against your spending.
And of course, beyond the costs associated with resources
and software licenses that we've gone through today,
there are some additional benefits with Azure
that accrue to business value and savings
that are worth taking into consideration
as you build your economic plan.
For example, if you're trying to reduce
your carbon footprint,
studies show that Microsoft cloud services
are up to 93% more energy efficient
and up to 98% more carbon efficient
than data centers run on-premises.
Moving to Azure also helps you
to take advantage of built-in security
and platform resilience to offset overall costs.
And as an open platform, you can bring the skills
and the tools that you've got today
to reduce your management overhead
and focus on building new apps and services to get ahead.
So that was a quick overview of Cloud Economics in Azure.
Keep checking back to Microsoft Mechanics
for more tips on Cloud Economics,
and to learn more, check out aka.ms/AzureCloudEconomics.
Thanks for watching.