The Cost Management Framework

 

The Cost Management Framework


🧾 1. Custom Budgeting Strategy

What: Define budgets and alerts by business unit, environment (Prod/UAT/Dev), and app groups.

Example:

  • Set a monthly budget of $8,000 for the HR Application in Production.

  • Alert at 80% usage via email and Teams notification.

  • Dev/Test environments get auto-shutdown rules outside working hours to stay within a $2,000 cap.


🏷️ 2. Cost Allocation Model

What: Use of resource tagging, management groups, and subscription design to map spend accurately.

Example:

  • Tags like:

    • Environment=UAT

    • CostCenter=Finance

    • Application=PayrollApp

  • Assign separate subscriptions for business units like Corporate Services, Operations, and Compliance to generate department-wise chargebacks.


📊 3. Cost Visibility Dashboards

What: Configure dashboards in Azure Cost Management + Power BI (optional) for financial insights.

Example:

  • A dashboard showing top 10 costliest services, monthly spend trends, and cost anomalies across regions.

  • Finance can view costs broken down by app or project phase (e.g., Development vs Production).


🛡️ 4. Governance Guardrails

What: Azure Policies & Blueprints to prevent misconfiguration and overprovisioning.

Example:

  • Block provisioning of D-series VMs in Dev environments via Azure Policy.

  • Enforce tagging on all resources using Environment, Owner, and Project before allowing deployment.

  • Apply auto-shutdown policies for non-prod VMs using built-in policy definitions.


💰 5. Reservation Planning Guide

What: Plan Reserved Instances and Savings Plans based on usage patterns.

Example:

  • Identify that 80% of the Production environment uses D2s_v3 VMs consistently → Recommend 1-year Reserved Instance with payment upfront for max savings.

  • Run Azure Advisor reports and filter for "Eligible for Reservation" to identify under-utilized resources.


⚙️ 6. Automation Guidance

What: Use automation to manage cost via schedules and alerts.

Example:

  • Azure Automation Runbook to shut down Dev VMs at 7 PM daily and start at 8 AM.

  • Logic App to send cost alerts to Finance when spend crosses 90% of budget.

  • Use Azure Function to auto-tag untagged resources based on naming conventions.


📋 7. Action Tracker

What: A shared, living Excel/Power BI document or tracker to track optimization progress.

Example:

RecommendationStatusOwnerImpact ($/mo)Deadline
Right-size 20 UAT VMsIn ProgressInfra Team$1,200May 15
Implement Dev Auto-OffCompletedDevOps$800Apr 30

🔁 8. Review Cadence

What: Schedule structured monthly/quarterly cost reviews.

Example Agenda:

  • Review top resource consumers

  • Check compliance to budget thresholds

  • Evaluate unused resources for decommission

  • Plan reservations or savings

  • Assign new action items

Participants: Cloud team, Application owners, Finance lead.


🧠 9. Training and Knowledge Transfer (KT)

What: Enable Customer's internal IT, finance, and app teams to manage cloud spend effectively.

Example:

  • Conduct a 1-hour workshop on using Azure Cost Management and Azure Advisor

  • Share a "How to read your Azure bill" guide

  • Live demo: Setting up budgets, alerts, and cost reports


Let me know if you'd like this compiled into a presentation slide or Word/PDF format for stakeholder

Approach for Benchmarking and Over- All assessment on Azure

 

Approach

Phase 1: Discovery and Data Collection

  • Objective: Understand the current state of TMF's IT environment.
  • Activities:

o   Inventory all resources using Azure.

o   Identify application and resource dependencies with the help of customer.

o   Conduct stakeholder interviews to gather insights into critical applications.

o   Collect data from Azure Monitor, Log Analytics, and Application Insights.

o   Document existing policies, governance practices, and tagging strategies.


Phase 2: Pilot Mapping and Baseline Establishment

  • Objective: Develop a reference model using a pilot application.
  • Activities:

o   Choose a representative application with TMF's input.

o   Map resource dependencies and utilization metrics.

o   Establish benchmarks for CPU, memory, disk I/O, and network usage.

o   Analyse application performance metrics using Application Insights.

o   Identify initial optimization opportunities based on the pilot.


Phase 3: Scalable Assessment

  • Objective: Scale the methodology to assess all applications and resources.
  • Activities:

o   Extend pilot methodology to other applications and environments.

o   Use automated tools and manual efforts as per the extensive experience in Azure.

o   Categorize applications by criticality, cost, and complexity.

o   Document findings and prioritize actions based on ROI.


Phase 4: Governance and Policy Implementation

  • Objective: Ensure resource control and enforce best practices.
  • Activities:

o   Design and implement Azure Policies to restrict resource sprawl.

o   Develop a comprehensive tagging framework for cost management and visibility.

o   Implement role-based access controls (RBAC) for secure resource management.

o   Automate policy enforcement using Azure Blueprints.


Phase 5: Optimization Planning

  • Objective: Develop actionable recommendations for optimization.
  • Activities:

o   Propose rightsizing for underutilized or oversized resources.

o   Identify workloads for autoscaling configurations.

o   Recommend PaaS or SaaS options for refactoring applications.

o   Highlight opportunities for cost savings through reserved instances and savings plans.


Phase 6: Reporting and Final Presentation

  • Objective: Deliver insights and align with stakeholders.
  • Activities:

o   Compile a detailed final report summarizing findings and recommendations.

o   Provide a roadmap for implementing recommendations, including estimated ROI and timelines.

 

Steps for Benchmarking

Steps to Find Benchmarking of Applications Running on Azure

 Benchmarking involves establishing performance, utilization, and cost baselines for applications to identify optimization opportunities. Here's how to systematically benchmark applications running on Azure:


1. Inventory and Dependency Mapping

·       Objective: Identify all resources associated with the application and its dependencies.

o   Use Azure Resource Graph Explorer, Powershell or Azure CLI to list resources tagged with the application's name.

o   az resource list --tag ApplicationName=YourApp

o   Map resource dependencies using Azure Monitor Service Map or Network Watcher.

o   Meet with Stakeholders.

Output: Complete inventory of the application resources and dependency graph. Mapping dependencies ensures you don’t break critical integrations or services during optimization or deprovisioning.

How It Helps:

·       Prevents accidental deletion of dependent resources.

·       Enables accurate scope definition for optimization and migration planning.


2. Monitor Resource Utilization

Objective: Gather real-time and historical performance data for resources. This will help us understand how resources are actually used and prevents overprovision or under provisioning.

o   Enable Azure Monitor for each resource (App Service, VMs, databases, etc.).

o   Key metrics to monitor:

§  App Service: CPU, Memory, Request Latency, Throughput.

§  Azure SQL Database: DTU/VCU utilization, Query Performance.

§  VMs: CPU, Memory, Disk I/O, Network Bandwidth.

§  Azure Storage: Transaction Metrics, Data Ingress/Egress.

o   Configure data collection in Log Analytics Workspace for centralized monitoring.

  • Output: Performance dashboards and utilization reports.

How It Helps:

·       Informs right-sizing decisions.

·       Helps trigger auto-scaling rules.

 


3. Collect Application Insights

·       Objective: Analyze application-level metrics and performance.

·       Steps:

o   Enable Application Insights for the application.

o   Track key metrics:

§  Response Times.

§  Error Rates.

§  Dependency Failures (e.g., Database Calls).

§  User Load Patterns.

o   Review the Performance and Failures tabs for actionable insights.

·       Output: Application performance reports highlighting bottlenecks and usage trends.

How It Helps:

·       Supports application tuning and faster root-cause analysis.

·       Improves resiliency and responsiveness of the app.

 


4. Establish Utilization Patterns

Objective: Identify normal, peak, and underutilized usage patterns. Supports planning for auto-scale, shutdown, or resizing.

o   Analyze usage trends over a representative period (e.g., 30 days).

o   Use Azure Metrics to view hourly, daily, and monthly usage patterns.

    • Correlate usage data with business activities (e.g., peak hours, campaigns).
  • Output: Detailed utilization patterns and baseline thresholds.

How It Helps:

  • Enables time-based optimizations like auto-shutdown for dev/test or scheduled scaling.

 


5. Conduct Load Testing

  • Objective: Simulate user activity to evaluate application performance under varying loads. Load test results with recommendations for scaling and optimization. Helps identify performance breaking points before users do.

o   Use Azure Load Testing or third-party tools like JMeter or Locust.

o   Define test scenarios to mimic real-world workloads (e.g., peak user traffic).

o   Monitor resource performance during tests using Azure Monitor and Application Insights.

  • Output: Load test results with recommendations for scaling and optimization.

How It Helps:

  • Informs capacity planning and auto-scaling thresholds.
  • Validates infrastructure readiness for high demand (e.g., campaigns, product launches).

6. Cost Benchmarking

  • Objective: Understand cost allocation and identify areas for savings. Helps us to understand the breakdown of what is costing and why. Identifies wasteful or inefficient spending.

o   Use Azure Cost Management to analyze cost by resource, service, and application.

o   Identify underutilized or idle resources contributing to unnecessary costs.

o   Review recommendations in Azure Advisor for cost-saving opportunities.

  • Output: Cost breakdown reports and optimization suggestions.

How It Helps:

  • Enables cost governance policies.
  • Helps forecast and set budgets per app or department.

 


7. Compare Against Industry Standards

  • Objective: Ensure the application meets performance and security benchmarks. We will have the report and prioritized improvement list here to act upon.

o   Use the Azure Well-Architected Framework Review Tool to evaluate the application.

o   Compare findings with industry standards for performance, security, and reliability.

o   Identify gaps and prioritize improvements.

  • Output: Compliance report and prioritized improvement list.

How It Helps:

  • Guides roadmap for architectural and governance improvements.
  • Justifies investments in refactoring or modernization.

8. Document and Validate Benchmarks

  • Objective: Compile a report of established benchmarks and validate with stakeholders. Ensure everyone agrees on what’s normal as per the apps and business needs and what needs improvement. Captures everything in one place for stakeholder validation and future reference.

o   Document baseline metrics, including:

§  Resource utilization thresholds.

§  Performance benchmarks.

§  Cost metrics.

o   Validate benchmarks with TMF stakeholders to ensure alignment with business goals.

  • Output: Final benchmarking report ready for optimization planning.

How It Helps:

  • Becomes the foundation for governance policy design.
  • Drives data-backed decision-making.

 

benchmarking report provides data-driven insights into resource utilization, cost efficiency, and performance. This information is essential for implementing Azure governance and baseline policies to prevent wastage and optimize spending.

 

Technical Excecution of Baseline Benchmarking on Azure

 

1. Inventory and Dependency Mapping

 

What to Check

Tools Used

Action / How It’s Done

Full Inventory of Resources

Azure Resource Graph, Azure CLI, PowerShell, Azure Portal, Azure REST API, Monitoring tool

Run queries to list all VMs, Storage, Databases, App Services, etc., grouped by workload

Application to Infra Mapping

Stakeholder interviews, Tags, Naming conventions Resource Groups, Management Groups

Interview app owners and correlate apps to the infra stack; validate by environment & tier

Network & App Dependencies

Azure Monitor Dependency Map, Network Watcher, Log Analytics

visualize inter-service calls and port dependencies

Identify Shared Services

Network Topology (via Network Watcher), Peering Maps, Application Diagrams

Identify common services like AD, DNS, SQL, Bastion shared across apps

Service Connectivity Patterns

Azure Activity Logs, NSG Flow Logs, Application Gateway Diagnostics, Firewalls, VPN

Analyze east-west and north-south traffic for planning segmentation or isolation

 

 

2. Monitor Resource Utilization

What to Check

Tools Used

Action / How It’s Done

VM Performance (CPU, Mem, Disk)

Azure Monitor, Log Analytics, Azure Metrics, Insights, Monitoring Tools in-place

Enable diagnostics; review average vs. peak CPU, memory, disk I/O over 30+ days

App Service Metrics

Azure Monitor, Application Insights, APM tool in-place

Monitor requests/sec, response time, memory %, and throughput; check for autoscale triggers

Azure SQL DB/MI Usage

Query Performance Insight, Azure SQL Analytics, Metrics Blade

Track DTU/VCU usage, long-running queries, deadlocks, and connection spikes

Storage Usage

Azure Monitor, Storage Metrics, Capacity Alerts

Monitor egress/ingress, request latency, IOPS, and blob capacity over time

Network Bandwidth

Network Watcher, NSG Flow Logs, Azure Metrics

Evaluate outbound/inbound traffic trends for sizing and security optimization

 

 

3. Collect Application Insights

What to Check

Tools Used

Action / How It’s Done

Application Performance

Application Insights (Azure-native) or APM in use, Monitoring tool in place

Enable App Insights via Azure Portal, SDK, or ARM/Bicep templates for supported platforms

Response Time & Latency Trends

Application Insights – Performance Blade, APM in use

Track response times per API or operation; identify slow endpoints

Error Rates & Exceptions

Application Insights – Failures Blade

Analyze failed requests, unhandled exceptions, and HTTP status code distribution

Dependency Failures

Application Insights – Dependencies View

Detect failures in backend services like SQL DB, Redis, or APIs; correlate with spike timing

User Load Patterns

Application Insights – Users/Session View

Identify peak usage hours, geography, session duration, and entry/exit pages

Transaction Tracing

Application Map & Transaction Search

Visualize request flow; use distributed tracing to pinpoint performance bottlenecks

 

 

4. Establish Utilization Patterns

What to Check

Tools Used

Action / How It’s Done

Daily/Weekly Usage Patterns

Azure Monitor, Log Analytics, Azure Metrics

Collect and chart resource utilization over 30+ days (CPU, memory, DTUs, IOPS)

Peak vs. Idle Hours

Workbooks, Application Insights – Users & Sessions

Analyze traffic and usage during business hours vs off-hours

Seasonal or Campaign-Based Spikes

Azure Metrics Correlation, App Insights + Biz Event Mapping

Match resource spikes to business events (e.g., month-end jobs, promotions)

Service Uptime & Scaling History

Autoscale Logs, Activity Logs

Review when autoscaling was triggered or service restarted due to load

Time-based Shutdown Opportunities

Azure Automation, Scheduled Events

Identify consistent idle periods (e.g., 7PM–7AM) to schedule auto-shutdown for savings

 

 

5. Conduct Load Testing

What to Check

Tools Used

Action / How It's Done

Load Testing Capabilities

Azure Load Testing (native), JMeter, Locust (Customer)

Simulate user traffic to test application behavior under stress

Real-time Performance Under Load

Azure Monitor, Application Insights. IN-use tools

Monitor CPU, memory, response time, and failures during the load test

Test Result Analysis

Azure Load Testing Reports, Logs, Dashboards

Identify bottlenecks, configure scaling rules, plan for pre-scaling during heavy usage

Integration into CI/CD

Azure DevOps, GitHub Actions

Automate load tests as part of your release pipelines to validate each build under load

 

 

 

6. Cost Benchmarking

What to Check

Tools Used

Action / How It’s Done

Cost by Resource, Service, Subscription

Azure Cost Management + Billing, Azure Resource Graph, Stakeholders

View cost breakdown by service/resource group/app using “Cost by Resource” and “Cost by Tag” views

Unused or Idle Resources

Azure Advisor, Cost Analysis, Azure Monitor

Identify VMs, disks, NICs, IPs, or PaaS services with little or no usage

High-Cost Services with Low Utilization

Azure Monitor + Cost Management + Manual efforts

Correlate top spenders with underutilized metrics (e.g., high-cost VM using 5% CPU)

Opportunities for Reservations or Savings Plans

Azure Advisor, Reservations Blade, Savings Plans (Preview)

Identify workloads with steady usage to move to Reserved Instances or Savings Plans

Department or Project Spend Allocation

Tags (CostCenter, AppName, Owner), Cost Allocation Reports

Apply and enforce tagging, then use tag-based reports to show department or team-level costs

Budget & Forecasting

Budgets in Azure Cost Management

Set monthly budgets per app, department, or subscription with email alerts and forecasting

 

 

 

7. Compare Against Industry Standards (WAF)

What to Check

Tools Used

Action / How It’s Done

Alignment with WAF Best Practices

Azure Well-Architected Review Tool (Portal or PDF), Microsoft Learn

Perform structured WAF assessment across 5 pillars (Cost, Security, Ops, Performance, Reliability)

Secure Score & Compliance Posture

Microsoft Defender for Cloud – Secure Score, Compliance Blade

Review current Secure Score and drill into controls not met (e.g., NSG, encryption, patching)

Gaps in Architecture Design

WAF Review + Architectural Diagrams

Identify missing design patterns (e.g., HA, autoscale, tagging, DR strategy)

Security Benchmark CIS (Azure Default)

Defender for Cloud

Azure Policies

Check mapped standards and list of passed/failed controls

Comparison to Reference Architectures

Microsoft Azure Architecture Center, Landing Zone Accelerator Docs

Use reference architectures to benchmark current setup for each workload type

Prioritized Improvement List

WAF Review Summary, Secure Score Action Plan

Document prioritized and quick-win areas for improvement based on criticality and impact

 

 

 

8. Document and Validate Benchmarks

What to Check

Tools Used

Action / How It’s Done

Consolidated Performance & Utilization Metrics

Azure Monitor, Log Analytics, Application Insights, Cost Management

Export dashboards, charts, or workbook summaries showing baseline CPU, memory, cost, availability

Cost Benchmarks with Trends

Azure Cost Management, Cost Analysis Reports, Advisor Snapshots

Summarize top spenders, idle resources, and forecasted trends over the past 30–90 days

Security & Governance Baseline

Defender for Cloud Reports, Policy Compliance Reports, Secure Score

Export Secure Score, policy compliance, and RBAC audit reports

Business-Accepted “Normal” Thresholds

Stakeholder Interviews, Workbook Snapshots, Shared Dashboards

Review utilization and cost baselines with app owners to validate what’s “normal” or expected

Stakeholder Sign-Off on Benchmark Report

Excel, Power BI, SharePoint, or PowerPoint

Compile all benchmarking data into a unified report; review in workshop; finalize scope

Optimization Readiness Snapshot

All of the Above

Use the validated benchmark report as the foundation for optimization, governance, or modernization planning

 

Implementation of Governance and Optimization

 

1. Defining & Enforcing Cost Governance Policies

  • Use the benchmarking report to identify idle, underutilized, or overprovisioned resources.
  • Implement Azure Policies to automatically detect and deallocate unused VMs, storage, and databases.
  • Enforce budget limits using Azure Cost Management + Billing.

Example Policy:

  • Auto-shutdown non-production VMs after business hours.
  • Restrict VM sizes to cost-effective SKUs for dev/test environments.
  • Set budgets with cost alerts in Azure Cost Management.

2. Automating Performance & Resource Optimization

  • Benchmarking identifies CPU, Memory, and Network bottlenecks.
  • Helps Identifies when and where resources are maxing out or sitting idle.
  • Use Azure Auto-Scaling to dynamically scale resources based on real usage patterns.

Example Policy:

  • Set up Azure Monitor alerts to detect VMs exceeding 80% CPU for 10+ minutes.
  • Auto-scale or move to a larger SKU only if sustained high usage is observed.
  • Scale down databases when DTU/VCU utilization is below 10% for 7 consecutive days.

3. Implementing Security & Compliance Baselines

  • The benchmarking report highlights security gaps like unencrypted storage, open ports, and missing access controls.
  • Use Azure Security Center (Microsoft Defender for Cloud) to apply governance policies.

Example Policy:

  • Enforce RBAC (Role-Based Access Control) for least privilege access.
  • Block resources that are not encrypted at rest.
  • Monitor for publicly exposed endpoints and enforce Private Link where required.

🔹 Action: Apply Azure Policy definitions for security compliance.


4. Enforcing Tagging & Naming Conventions

 

  • Use the benchmarking report to track untagged resources.
  • Apply Azure Policy to enforce consistent naming and tagging standards.

Example Policy:

  • Enforce tagging on resources (e.g., Environment=Production, CostCenter=IT).
  • Block deployment of untagged resources to prevent untraceable costs.
  • Utilize Azure devOps with Gates to deploy as per the conditions met
  • Use IAC with preconfigured naming convention and tagging

🔹 Action: Implement Azure Policy to enforce tagging and naming conventions.


5. Aligning with Azure Well-Architected Framework

  • Benchmark results can be evaluated against the Azure Well-Architected Framework. Shows gaps in architecture compared to WAF principles.
  • Which will help us Prioritize improvements in performance, security, cost, and operational efficiency.

🔹 Action: Perform Azure Well-Architected Review and implement governance recommendations.

 

**************************************


How Azure Application Insights contributes to:

  1. 🔍 Baseline Benchmarking

  2. 💰 Governance and Cost Optimization

  3. 🏛 Azure Well-Architected Framework (WAF) Assessment


🔹 1. Baseline Benchmarking

Objective: Establish a performance and usage baseline for each application.

How App Insights Helps:

  • Captures historical performance data (e.g., average response time, CPU load, number of requests)

  • Identifies normal vs. peak usage patterns

  • Highlights areas with frequent errors or long latencies

📊 Example: You observe that CPU usage spikes at 2 PM daily and response time increases by 40% — this becomes part of your baseline for scaling or optimization.

Value for Benchmarking:

  • Helps determine minimum required resources

  • Sets alert thresholds for future deviations

  • Informs auto-scaling policies and VM/app sizing

  • Forms the “before” picture for comparison after optimization


🔹 2. Governance and Cost Optimization

Objective: Reduce unnecessary spending by identifying inefficient or idle application behavior.

How App Insights Helps:

  • Detects unused features (low engagement endpoints)

  • Identifies overprovisioned services (low throughput, low CPU/memory usage)

  • Finds dependency failures causing retries or timeouts (wasting compute resources)

💡 Example: A backend API makes redundant calls to a DB causing timeouts and re-executions. Fixing this saves compute time and reduces load — directly reducing cost.

Governance Use Cases:

  • Tag apps and resources by function, environment, or owner for traceability

  • Monitor non-compliant response times or security exceptions

  • Align apps to resource usage governance policies


🔹 3. Azure Well-Architected Framework (WAF) Assessment

App Insights contributes to multiple WAF pillars, including:

WAF PillarApp Insights Contribution
Performance EfficiencyMeasures app responsiveness, identifies scaling bottlenecks
Reliability (Resiliency)Detects failed dependencies and service interruptions
Operational ExcellenceMonitors live telemetry, supports alerting and proactive issue fixing
Cost OptimizationFlags inefficient code paths or redundant calls wasting compute
Security (indirect)Can surface exceptions related to authentication/authorization failures or insecure endpoints

🛠 Example (WAF Use Case): During a resiliency assessment, App Insights reveals a 7% failure rate in outbound API calls to a 3rd-party payment gateway — a candidate for retry logic improvement and failover design.


🔁 Summary Table

GoalHow App Insights Helps
Baseline BenchmarkingEstablishes app usage and performance trends over time
GovernanceMonitors policy violations, resource inefficiencies, tag-based visibility
Cost OptimizationFlags unnecessary compute usage, dependency issues, and idle resources
WAF AssessmentProvides evidence for performance, resiliency, and operational reviews

Would you like a sample report template or a set of recommended queries to extract insights from App Insights for these use cases?

 

The Cost Management Framework

  The Cost Management Framework 🧾 1. Custom Budgeting Strategy What: Define budgets and alerts by business unit, environment (Prod/UAT/...