Azure cost management is the process of tracking, monitoring, allocating, and controlling cloud costs in your Microsoft Azure environment. Each step is critically important to prevent a simple oversight—such as the dev team unknowingly leaving high-cost VMs running overnight a few times—from becoming an incredibly unpleasant surprise on your monthly invoice.
Taking the guesswork out of costs is an indispensable, foundational practice that enables future cloud cost optimization. And together, cost management and cost optimization are the key to operational cost efficiency. Still, it’s easy to feel lost when it comes to the financial side of cloud computing, especially with hundreds of services and infrastructure elements under your watch.
That’s where this guide to the native Azure suite, Microsoft Cost Management, comes in. Read on for a closer look at cost management and cost optimization, along with a breakdown of the core components of Microsoft Cost Management, how to use its tools, and how to integrate it into engineering workflows.
Azure cost management vs. Azure cost optimization
Although the two are often confused, there’s a big difference between cost management and cost optimization. Optimization is all about cloud cost savings, while cost management is about visibility, governance, and ownership:
Cost management = Visibility, budgets, governance
Cost optimization = Rightsizing, cleanup, pricing model adjustments
There’s an important relationship between these two practices. At its core, optimization depends entirely on cost management. You can’t optimize what you can’t see, so without cost management, your choices for cutting costs are limited to generic, catch-all practices, severely reducing the effectiveness of your efforts.
More downsides to skipping cost management? Without visibility and ownership, costly and wasteful services get lost in the sprawl of provisioned cloud resources. And insufficient governance is yet another recipe for uncontrolled spending.
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Key components of Azure cost management
Cost management practices in Azure can be organized into a few distinct categories:
Cost monitoring and analysis
Cost monitoring and analysis form the data-driven backbone of your budget decisions. Monitoring and analysis allow you to track real-time and historical spending across selected scopes (think subscriptions, resource groups, or services). As a result, you can pinpoint sudden spikes in your spending, which you can investigate and potentially eliminate, depending on the root cause.
Cost monitoring and analysis are also key to identifying past and present trends in your Azure costs. Armed with this data, you’ll have a clear sense of where your budget went—and what services were, or still are, the biggest contributors to your expenditure.
Microsoft Cost Management monitoring and analysis tools
All your monitoring and analysis details are in the Cost Analysis blade in the Azure portal. Make sure to periodically review it to stay up-to-date on how much you’re spending on Azure services—and to make informed decisions about the future needs and costs of your projects.
Budgeting and alerts
Budgeting and alerts are some of the most important elements of FinOps on every cloud, and Azure is no exception. For most projects, it’s not about committing a predefined amount of money towards specific infrastructure. Rather, it serves as a critical failsafe, a protective guardrail against accidentally spending enormous sums on compute services or unknowingly running out of money in a pre-allocated project budget pool and then facing service interruptions.
The bottom line? It’s crucial to set budgets and alerts. Remember: Unmetered spending without any kind of limit or notifications is an enormous risk. The stories about invoices for thousands of dollars for an overlooked virtual machine or database are very common, and unfortunately, very real.
Microsoft Cost Management budgeting and alert tools
In Azure, you can set up budgets for various scopes, such as subscriptions and resource groups. Thresholds can be based on either actual or forecasted spending. When it reaches the limits you define, Azure will let you know via e-mail, voice call, SMS, or push notifications.
With Microsoft Cost Management, you can also configure action groups, which trigger automation (i.e., runbooks). For example, your action groups could deallocate or downscale services from development environments when there’s no need for their resources, like outside of business hours.
Cost allocation and tagging
Modern projects typically involve a lot of different cloud services that are provisioned and maintained by separate teams, departments, or business branches. Some costs might be tagged as internal spend; but often, a customer contributes to the budget and wants to know exactly what they’re paying for. Allocating fees from shared or customer-dedicated Azure tenancies to business units, teams, or environments makes establishing accountability for those costs much easier.
Microsoft Cost Management cost allocation and tagging tools
Luckily, Azure provides a way to maintain granular control over spending allocation. Tags can be used to convey detailed ownership information: By telling you what should be billed to whom, they can help you track spending at the resource, resource group, and subscription level.
Keep in mind that too much granularity might make effective management harder. For a clear and understandable cloud billing structure, bundle your subscriptions into a hierarchy using management groups. This way, every unit of your organization gets an easy overview of costs accrued—both by themselves and by the subunits they manage.
Forecasting and reporting
Forecasting provides a glimpse of costs to come. By predicting future spend based on historical usage patterns, it serves as a source of valuable insights, enabling teams to anticipate bills coming their way and preemptively identify areas worth of additional effort or improvement. Forecasting also benefits from security-context overlays—understanding whether recurrent cost spikes are tied to misconfigured or insufficiently restricted resources is immensely helpful for both improving your security posture and cutting down unnecessary spending.
Microsoft Cost Management forecasting and reporting tools
Historical Azure usage data and forecasts are available in the Cost Analysis tool, but in some cases, the simple visualization it provides might not be enough. The solution? Combine scheduled exports with BI tools, such as Power BI, for more extensive visual presentation. If it’s still not enough to satisfy your craving for insights, external cloud cost management tools can make good use of this data as well, enabling more thorough and comprehensive analysis.
Azure’s native cost management tools and capabilities
Next, let’s look at a few Azure cost management tools at your disposal:
Microsoft Cost Management
As we’ve seen, Microsoft Cost Management is the native solution for tracking, analyzing, and controlling Azure spending. It provides all the basic capabilities of a cost management platform: dashboards, budgets, cost alerts, and export options. What we haven’t covered yet? It has an optional capability (through a dedicated connector) that can help you manage and analyze AWS costs.
Azure Advisor
Azure Advisor doesn’t solely focus on costs, but it does recommend cost-saving and efficiency improvements across services, based on their configuration and usage patterns. If you’re looking for a summary report on your spend and proposed actionable steps to decrease it, Azure Advisor has you covered.
Pricing calculator
The pricing calculator lets you calculate the total cost of services before deployment, such as the cost of a particular virtual machine specification, a certain amount of ingested data, or processed pipelines.
Native or external tools?
The Azure-native tools we’ve discussed help you track, manage, and report costs. The downsides? Detailed analysis is available only in subscription scope, there’s a lack of real-time cost monitoring, and there are historical data retention limits.
But there’s an even more important factor to consider. This toolkit lacks the cross-service, contextual visibility engineers need to act. It may surface raw spend, but it often misses context—like how cost intersects with architectural sprawl or unused permissions. For organizations with hybrid or multi-cloud footprints, native tools fall short on unified visibility, too.
External tools that work across multiple platforms (including Azure) bridge the gaps we’ve discussed. A solution like Wiz helps engineers avoid the tedious guesswork of managing cost in isolation. By correlating cost drivers with cloud usage, security context, and architectural risk, Wiz makes it easier to identify areas of spend that deserve scrutiny—without manual piecing-together.
Picking the best solution is a matter of thorough consideration. Native tools are free, which is definitely a benefit, but an external solution that provides comprehensive context is well worth the price.
Integrating Azure cost management with engineering workflows
To implement Azure cost management successfully, you need to start from the ground up and integrate its principles into your engineering workflows.
Here are a few tips on how to implement cost management best practices:
Tie budgets and alerts into Slack or Microsoft Teams. It’s much easier to miss an e-mail than the chime of a new message on the communication app.
Use meaningful, descriptive, and comprehensive tags in your infrastructure as code (whether that’s Terraform/OpenTofu, Bicep, or ARM templates).
Include cost visualization tools in your CI/CD pipelines so teams can estimate the price of infrastructure operations before they materialize.
Take advantage of engineering dashboards. After all, they’re a great way to clearly and comprehensively keep track of your Azure expenditure—besides visual clarity, they make sharing relevant information much easier, facilitating smoother communication and fostering collaboration.
Keep in mind that platform teams benefit from tools that surface cost alongside cloud architecture, usage, and security insights, not in isolation. Costs need to be understood in order to be optimized—some are justified and unavoidable, others are unnecessary; Without the full context, you might lose more business value than the money you saved.
How to set up Azure cost management for your organization
Tackling cost management might seem very complicated, but you can streamline the process by following a few simple steps:
Identify ownership: Who manages cost at each platform level (subscription, business unit)? Those are the people who you want to keep well-informed and touch base with frequently.
Configure management groups and tags: Remember, groups and tags need to be comprehensively defined and convey enough information to clearly distinguish tagged resources from others. Start with a simple list, such as the department, project and customer name, and the environment name. For resources themselves, list the source from which they are provisioned (e.g., name the Git repository that contains corresponding code) and the team they belong to.
Create budgets and alert policies: Establish thresholds of concern and active crisis (for example, when the project reaches 50% and 75% of allocated budget). Tie alerts to Slack, Teams, or other communicators. But avoid overdoing alerts: Too many can often turn out worse than not enough!
Enable reporting exports and API access for tooling: Various aggregation platforms will definitely need reporting and API privileges, but remember about the principle of least privilege and the rule of “no privileges standing.” Financial performance and forecasting data can also end up as a target of malicious actions!
Integrate dashboards into internal portals or BI tools: Construct clear, meaningful dashboards that present the costs of your Azure operations at a glance. Don’t focus on real-time data presentation. Instead, aim for comprehensive, exhaustive analysis, precise tracking of trends and anomalies, and the extraction of useful insights that can later be used to improve your cloud spend management and further optimize showcased costs.
Looking for an all-in-one platform that surfaces Azure cost alongside cloud architecture, usage, and security insights? Book a demo of Wiz today, and learn more about how Wiz supports contextual cloud cost decisions by correlating spend with architecture, usage, and security risk.