Understanding Azure's pricing model is essential for cost-effective cloud operations and for the AZ-900 exam, which dedicates a significant portion to cloud economics and billing.
Azure Pricing Principles
- Consumption-based: Pay only for what you use — no upfront capital expenditure (CapEx). This shifts to operational expenditure (OpEx).
- Per-second or per-minute billing: VMs are billed per minute or second (varies by service). No rounding to the hour.
- Free services: Azure offers a free tier with 12 months of popular services free, 55+ always-free services, and a $200 credit for new accounts.
- Zone pricing: Intra-region data transfer (within the same AZ) is typically free. Cross-region and internet egress incur charges.
Pricing and Licensing Options
| Option | Discount | Commitment |
|---|---|---|
| Pay-as-you-go | — | None — stop anytime |
| Azure Spot VMs | Up to 90% | None (preemptible) |
| Reserved Instances (RI) | Up to 72% | 1 or 3 years |
| Azure Savings Plans | Up to 65% | 1 or 3 years (flexible, not VM-specific) |
| Azure Hybrid Benefit | Up to 85% combined | Bring existing Windows Server / SQL Server licences |
| Dev/Test pricing | Varies | Visual Studio / MSDN subscription required |
Azure Cost Management + Billing
Azure Cost Management is the native tool for monitoring and optimising Azure spend:
- Cost Analysis: Visualise spending by subscription, resource group, service, tag, or time period
- Budgets: Set spending limits and receive alerts when thresholds are crossed (e.g., 80%, 100%, 120% of budget)
- Cost Alerts: Budget alerts, anomaly alerts, and department/account quota alerts
- Recommendations: Azure Advisor cost recommendations (right-sizing, reserved instance opportunities)
- Exports: Schedule recurring CSV exports to Storage for custom analysis in Power BI
Pricing Calculator
The Azure Pricing Calculator (azure.microsoft.com/pricing/calculator) lets you estimate costs before provisioning any resource. Select services, configure them, and get a monthly cost estimate. Save and share estimates with your team.
Total Cost of Ownership (TCO) Calculator
The TCO Calculator compares the cost of running workloads on-premises vs in Azure, factoring in hardware, software licences, electricity, data centre space, and IT staff. Useful for building the business case for cloud migration.
Service Level Agreements (SLAs)
Azure SLAs define the guaranteed uptime and connectivity percentages for each service:
| SLA | Max Annual Downtime |
|---|---|
| 99% | ~87.6 hours |
| 99.9% | ~8.76 hours |
| 99.95% | ~4.38 hours |
| 99.99% | ~52.6 minutes |
| 99.999% | ~5.3 minutes |
Composite SLA: When multiple services are combined, the effective SLA is the product of individual SLAs (e.g., 99.9% × 99.9% = 99.8%).
Shared Responsibility Model
| Microsoft Responsibility | Customer Responsibility |
|---|---|
| Physical data centre security | Data and application security |
| Network and hypervisor infrastructure | Identity and access management |
| Managed service patching (PaaS/SaaS) | OS patching (for IaaS VMs) |
| Default encryption at rest and in transit | Customer-managed key rotation (optional) |
Ready to test your Azure knowledge?
Practice with real exam-style questions for AZ-900 Azure Fundamentals and AZ-104 Azure Administrator.