Azure Billing and Pricing Best Practices
Many Microsoft Partners starting out in Azure get stuck on the cost of Azure and managing the billing thus discouraging them from selling it and losing out on the dominating cloud opportunity Azure provides.
The IDC chapter “Optimize your Operations” in the ebook The Modern Microsoft Partner Series, sponsored by Microsoft, discusses building repeatable business practices and touches on Azure billing and pricing.
IDC asserts that “maximizing margin is directly related to the customer’s perceived value,” and therefore influences whether a customer sees enough value for the price in order to buy the solution.
In other words, a customer must have a true need for which the solution addresses in order for pricing to be justified by the customer. The first issue with this lies around communicating that value of the solution and how it addresses the customer’s needs specifically. The second issue is actually pricing the solution.
IDC recommends pricing within a range with which customers find acceptable but still allows for enough margin to be profitable. However, unless one understands how to optimize the infrastructure of an Azure cloud environment, the truth is Azure can be very expensive depending on the workloads.
Regardless of the methods used in optimizing cloud infrastructure, one should always give a range in Azure pricing to the customer to allow for slack in the event of unforeseen circumstances that could not only affect profitability but also reduce client satisfaction and jeopardize one’s credibility.
Another possible solution, as demonstrated by Rackspace’s business model, is to have customers pay monthly for consumption, but to have customers sign a flexible agreement so that when there are spikes in consumption the cost is spread out over several months instead of having one big bill.
IOTAP’s CEO also discusses his thoughts on the subject of Azure billing for CSP Partners; read it here! You can also attend his Webinar discussing Azure subscription Management and invoicing for CSP Partners using Work 365.
How to Azure Pricing
When pricing Azure, one needs to think about more than just the number of VMs and storage a customer will need. In order to quote optimized Azure pricing, one must first understand the client’s business. Questions to ask could include:
- Are there any servers that don’t need to be on all day every day? Are there any that can be turned off during non-business hours?
- Thinking about the customer’s industry, are there certain times in their business where spikes in consumption can be calculated? For example, if the customer is in retail will they get more activity on their online website during a holiday season? Appropriately changing server sizes when more capacity is needed is an excellent way to not acquire overhead costs of unused larger servers, and to easily scale up or down as the business demands.
- Instead of big monolithic boxes for RDS sessions, can some of those sessions be reduced to redundant smaller RDS boxes? For example, gateways often have identical sessions. Instead of letting a large monolithic box go mostly unused, put those sessions in much smaller boxes that can be scaled up and down when more capacity is needed.
These may be infrastructure related questions, but they directly influence consumption and the end cost; therefore, these variables must be considered when leveraging the Azure calculator to produce quotes.
Tips and Tricks on Azure Cost Management
To see detailed information around Azure cost management, the article “Prevent Unexpected Charges with Azure Billing and Cost Management” found on Microsoft’s Azure documentation site lists several examples with instructions. Here are a few highlighted features:
- Set up billing alerts: Billing email alerts can be set up so that an email alert is sent when usage costs exceed an amount that is specified.
- Add tags to group your billing data: For example, use tags to categorize costs by business departments or production environments that run their own VMs.
- Enable auto-shutdown for VMs in the Azure portal for cutting costs: Create scripts for shutting down specific VMs during specified times. More information can be found here.
- Turn on Azure Advisor recommendations: Identify resources with low usage to reduce costs. More information can be found here.
Lastly, here are two Azure optimization benefits that can save on costs up to 80% combined!
- Azure Reserved Instances: Get 72% price savings when purchasing VMs up front for one or three years in specified regions. Use this savings to reduce cost and increase margin.
- Hybrid-Use Benefit: If a client already has Windows VM licenses Software Assurance or Windows Server Subscriptions, for each license Microsoft covers the cost of the operating system while the customer just pays for base compute costs.
Work 365 Tip of the Month
Bundle different types of subscriptions as differentiated product offerings!
Work 365 allows Partners to bundle together license-based subscriptions, usage-based subscriptions, and even service-based subscriptions.
What this means is that Partners can create bundles incorporating Microsoft licensed products and usage-based products like Azure, third-party vendor products, packaged IP, and services such as support and migration services in the Work 365 application.
To create bundles like these, Partners create a Parent subscription with the name of the bundle and then child subscriptions, which are the various products and services included in the bundle, are added and linked to the Parent subscription.
This way, anytime a customer would like to add licenses to their subscription all the Partner has to do is add the licenses to the Parent subscription and the child subscriptions are automatically updated.
Furthermore, when the invoice is automatically generated the only subscription information that shows comes from the Parent. This allows Partners to send simplified invoices that only show the product bundles they provide and not the various products and services included within the bundle.
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Related Blog Post: Best Practices of Subscription and Recurring Billing for CSPs