Optimizing Azure Spend Under an MCA: Best Practices for IT and Finance

Optimizing Azure Spend Under an MCA

Controlling cloud costs is a top priority for organizations using Azure under the Microsoft Customer Agreement (MCA). However, MCA’s pay-as-you-go flexibility also comes with the challenge of preventing cost overruns.

This article outlines practical Azure cost optimization strategies tailored for enterprises on MCA.

We’ll cover using Azure’s native cost management tools, including budget alerts and tagging for accountability, leveraging Reserved Instances and Savings Plans, and applying Azure Hybrid Benefit to achieve maximum savings.

A sample cost savings calculation (Reserved vs. pay-as-you-go) is included to illustrate potential gains, and a best-practices comparison table summarizes key tactics.

The goal is to help CIOs, CTOs, and IT finance leaders optimize Azure spend without compromising performance.

Use Azure Cost Management and Budget Alerts

Start with the basics: Azure Cost Management + Billing, which is included for all Azure customers. This suite provides dashboards and reports on your Azure spending.

Under MCA, you likely have multiple subscriptions (and possibly multiple billing profiles). Cost Management can aggregate this data, allowing you to analyze total spending or drill down by subscription, resource group, and more.

Key actions in this area:

• Set Budgets with Alerts: Azure enables you to set budgets at various scopes, including subscription, resource group, or even by tag. For example, you can set a monthly budget of $50k on the “Marketing” resource group. Configure alerts at thresholds (e.g., 75% and 90% of the budget). If spending is trending high, your team gets notified in time to react. Budget alerts are proactive, not just after-the-fact; they can warn you mid-cycle so you can course-correct before a huge bill hits. Budgets won’t stop consumption, but you can tie alerts to automation (for instance, trigger an Azure Function to scale down or shut VMs when 100% of the budget is reached).
• Monitor Costs Daily/Weekly: Designate a cloud financial admin (FinOps practitioner) to regularly review cost reports. Azure Cost Management allows custom dashboards. Under MCA’s monthly billing, you don’t want to wait until invoice time to discover a spike. Use Azure Cost Analysis to see which services or projects are driving costs. Additionally, leverage cost forecasts – Azure can project whether you will exceed your budget based on the current trajectory.
• Use Azure Advisor for cost recommendations: Azure Advisor provides cost optimization tips, such as identifying idle or underutilized resources that could be shut down or resized. For instance, the Advisor might highlight VMs with low usage and suggest downgrading or idling ExpressRoute circuits. Enabling Advisor recommendations and reviewing them monthly can yield significant savings by eliminating waste.

From a process perspective, integrate cost reviews into IT operations. For example, project teams must tag and report their Azure spend, and hold monthly cross-functional meetings (including IT and Finance) to review budget versus actual.

A FinOps culture fosters a shared responsibility: engineering teams are aware of their “cloud budget,” and finance gains visibility into upcoming costs.

Azure budgets help create this shared understanding by setting explicit spending targets and alerting tech and finance stakeholders.

Read Microsoft MCA: Key Terms You Should Review Before Accepting.

Implement Tagging Strategies for Accountability

Tagging in Azure is critical for cost allocation and accountability. Azure tags are key-value pairs you attach to resources (e.g., Environment: Production, CostCenter: 1234, Application: WebPortal).

They don’t affect how services run, but they immensely help in organizing cost data:

• Organize by Tags in Cost Reports: Azure Cost Management allows filtering or grouping by tags. If you tag resources with project names or owner teams, you can easily break down the monthly bill by those dimensions. This enables chargeback or showing back to internal departments—a must for IT finance transparency.
• Best Practices for Tagging: Establish a standard tagging taxonomy for your organization. Common tags include: Department, Project, Environment (Prod/Dev), Application, and Owner. Enforce tagging through Azure Policy (you can create policies that require certain tags on resource creation, or automatically append default tags). A CloudZero guide notes that tags support governance and cost management by letting you map resource usage to specific teams or functions. For example, a tag Department: Finance on all FinOps-related resources helps quickly total the “Finance department’s Azure costs” each month.
• Use Tags for Alerts and Automation: You can use tags in budget scopes or automation scripts. For instance, set up a budget per application tag – if “App=XYZ” resources exceed $N, alert the app owner. Azure also allows programmatic retrieval of tag data, so you can script the cleanup of unused resources by tag (such as deleting all). Environment:Dev VMs not used in 30 days).
• Overcoming Challenges: Tagging can be labor-intensive, particularly when done retroactively. Aim to integrate tagging into the resource deployment process (DevOps pipelines should include tags in their ARM templates or Terraform). Also, ensure consistency (e.g., decide singular vs. plural—use “Department”, not sometimes “Dept”). Tools exist to help with tagging hygiene if you have a mess, but it’s easier to start right.

By implementing tagging, organizations achieve accountability: Engineering knows its spend and can’t hide runaway costs since everything is attributed.

This aligns with FinOps principles and helps answer a CFO’s tough question: “Which products or teams are driving our Azure bill?” With tagging, you can answer in a click rather than a week of spreadsheet wrangling.

Optimize with Azure Reservations and Savings Plans

One of Azure’s biggest cost optimization levers is switching suitable workloads from pay-as-you-go pricing to Reserved Instances (RIs) or Savings Plans.

Under MCA, you can purchase these options via the Azure portal.

• Azure Reservations (Reserved VM Instances and other resource reservations): This is committing to a specific VM (or database, etc.) for a 1- or 3-year term in exchange for a significantly lower rate. For example, if you know a certain virtual machine will run 24/7 for the next year, you can reserve it and save up to 72% vs pay-as-you-go pricing. Microsoft states RIs can yield 72% savings on some workloads (especially when combined with Azure Hybrid Benefit for Windows, which we’ll cover next). The catch is you’re paying for it regardless of actual usage – use it or lose it. So RIs are ideal for steady-state production workloads.
• Azure Savings Plans for Compute: A more flexible alternative introduced recently, where you commit to spend a certain dollar amount per hour on compute for 1 or 3 years. Azure offers lower rates across all compute usage (VMs, Azure Functions Premium, container instances, etc.) until you reach your hourly commitment. Savings Plans can save up to 65% off pay-as-you-go rates. They are great if you have many varied workloads or expect growth, since they aren’t tied to specific VM sizes or regions (unlike RIs).
• When to use which: If you have very predictable needs for specific VMs or databases, RIs may yield slightly higher discounts (and they give you capacity priority on Azure). A Savings Plan offers flexibility if your usage patterns are more dynamic or spread across many services. You can combine them: Azure will apply RIs first (with a higher discount) and then the Savings Plan for the remaining usage. Under MCA, the process to buy these is straightforward through the portal (ensure the buyer has the Billing account owner or reservation purchase role).
• Example – Cost Savings Calculation: Suppose you have a Windows Server VM (Standard_M32ts size) running continuously to illustrate the impact. Pay-as-you-go might cost ~$3,660 per month. A 3-year reserved instance for that VM reduces the cost to approximately $663 per month – a 72% decrease. Over 3 years, that’s tens of thousands saved on just one VM. Multiply across dozens of VMs, and the savings are substantial. If that VM were running Linux or if you had added Azure Hybrid Benefit, the savings would be even greater. The key is identifying which resources have stable usage and converting them to reserved pricing.
• Manage and monitor reservations: A best practice is to periodically check RI utilization. Azure provides metrics that show whether you’re fully utilizing your reserved instances. If not (perhaps an application scaled down), you may have unused reservation hours – address this by reassigning reservations to other workloads or, if eligible, exchanging or canceling (note: Azure RIs allow exchanges or refunds with some limitations, although Microsoft has been evolving this policy). Under MCA, any refunds or exchanges for RIs would follow the standard policy (e.g., a cap on refunded amount per year).

In summary, utilize RIs/Savings Plans for predictable base loads and reserve some workload for pay-as-you-go to maintain elasticity.

A conservative approach (reserve 50% of your baseline usage) can yield big savings with minimal risk. And remember to document these commitments in your internal budgeting, as they represent an obligation similar to a fixed cost.

Leverage Azure Hybrid Benefit for License Savings

Azure Hybrid Benefit (AHB) is a must-use lever if your Azure workloads include Windows Servers or SQL Servers.

AHB allows you to use your existing on-premises licenses with Software Assurance (or eligible subscription licenses) to cover the Microsoft software cost in Azure, so you don’t pay for the license portion again in the VM hourly rate.

• What are the savings? For Windows Server VMs, AHB can save you up to ~40% of the VM cost because that’s roughly the portion attributable to the Windows license. For Azure SQL Database or SQL Managed Instance, AHB can save around 30-55%, depending on the deployment (the license cost for SQL can be even higher than Windows). Customers can save ~40% on VMs and ~55% on Azure SQL PaaS by using their existing licenses. Microsoft also often quotes “up to 80%” savings if you combine AHB and a 3-year reserved instance – that’s how powerful stacking these benefits can be.
• Applying AHB is as simple as checking a checkbox or specifying a parameter when creating the VM or database. For a VM, you’d specify that you have Windows Server licenses for which you want to apply. You must ensure that you own sufficient licenses (e.g., Windows Server Datacenter licenses cover unlimited VMs in Azure if properly allocated; Standard licenses cover some VMs). The MCA covers AHB eligibility because it’s available to customers with valid licenses (it doesn’t cost extra, it’s a benefit of having Software Assurance or equivalent).
• Governance of AHB use: Maintain a record of which on-premises licenses you allocated to Azure. This is important for compliance – if Microsoft audits you, you need to prove that you had, for example, 16-core licenses of Windows Server to cover the Azure VM with 16 vCPUs. Use tools or spreadsheets to track this, or consider Azure’s integration with on-premises licensing (e.g., Azure Arc or other services can help bridge the gap). The MCA and Product Terms will include legal rules (such as the requirement to assign licenses to Azure for at least 90 days) – ensure your SAM team is aware of these.
• Re-assess new purchases: In some cases, even if you’re a cloud-first org without many on-prem licenses, it could be worth buying licenses with Software Assurance to use AHB if you plan heavy Azure usage. For example, if you’re spinning up 100 Windows VMs and pricing them out, you might find that buying Windows Server Datacenter licenses is cheaper over three years than paying the Windows VM surcharge hourly.

Using AHB essentially takes credit for investments you’ve already made in Microsoft licenses. It’s low-hanging fruit for cost savings. Ensure your cloud admins always enable AHB where applicable; it’s surprising how often this is overlooked, and companies often pay more than necessary.

Under MCA, since there’s no contract true-up, it’s entirely on you to utilize this benefit and inform Microsoft (via the portal settings) that you’re doing so.

Continuously Right-Size and Clean Up Resources

While the above are specific programs and tools, a general best practice is fostering an ongoing optimization discipline:

• Right-size workloads: Regularly review resource utilization metrics to ensure optimal allocation. If a VM consistently uses 10% of its CPU, it may be downsized to a smaller VM SKU. If a database throughput is way under the provisioned capacity, scale it down. Azure Advisor will flag some of these, but your team should have a schedule (e.g., quarterly optimization review) for each major system.
• Shut down or schedule off hours: Non-production environments often don’t need to run 24/7. Use Azure Automation or schedules to shut down development and test machines on nights and weekends. This can significantly reduce costs for workloads that don’t require high availability. Under MCA’s flexible billing, every hour you shut something off saves money (since it’s pay-as-you-go).
• Use Azure Spot instances for interruptible workloads: If you have VM workloads that are not critical or can handle interruptions (batch jobs, testing, etc.), consider Azure Spot VMs, which offer deep discounts for using surplus capacity (with the caveat that they can be evicted if Azure needs that capacity back). This is another way to save, although it comes with reliability trade-offs.
• Governance using Azure Policy: Employ Azure Policy to enforce cost-saving configurations. For example, prevent developers from deploying very large VM sizes unless approved, or restrict certain expensive regions or services if not needed. Also, use Policy to enforce tagging, as mentioned.

Consider creating a dashboard of key cost KPIs, such as monthly Azure spend versus budget, the number of untagged resources, and reservation utilization percentage, and review it in IT leadership meetings. The more visibility, the better decisions your team will make on a daily basis.

Best Practices Comparison Table

The table below summarizes several best practices and their benefits, highlighting how they help optimize costs under the MCA model:

By combining these best practices, enterprises under MCA can significantly reduce Azure waste and optimize spending. Remember that cost optimization is not a one-time project but an ongoing process, especially in the cloud, where things change rapidly.

The MCA’s flexibility (with no fixed commitment unless you choose) makes it easy to create new services, but that makes disciplined cost management all the more crucial.

Recommendations

1. Establish a Cloud FinOps Team or Role: Designate individuals (from IT and Finance) responsible for cloud cost oversight. This team should regularly monitor Azure spend, generate reports for stakeholders, and coordinate optimization efforts. Under MCA, where usage can scale quickly, having a dedicated FinOps function ensures someone is always looking at cost efficiency.
2. Enable and Tune Azure Budgets: Right after moving to MCA, set up Azure Budgets for all major scopes (each production subscription, each project, etc.). Don’t just set a 100% alert – include early warning at 50-80% thresholds. Ensure the alert notifications are sent to the relevant people, such as the project owner, the FinOps lead, and an email that creates a ticket for visibility. These alerts are your first line of defense against runaway costs.
3. Implement a Mandatory Tagging Policy: Ensure that no resource is left untagged as part of your cloud governance. Use Azure Policy to enforce at least critical tags (like CostCenter or AppName). In parallel, get executive buy-in that tagging is non-negotiable for teams deploying resources – it’s required for transparency. This might involve some re-education of developers, but emphasize how tags help avoid indiscriminate cost allocation. You can’t optimize what you can’t attribute.
4. Audit Your Azure Environment for Quick Wins: Perform a one-time assessment (possibly with Azure Advisor or third-party tools) to identify obvious waste, such as unused IP addresses, powered-on VMs with 0% CPU, abandoned storage disks, etc. Clean those up immediately to get instant savings. This also sets a precedent for the culture of housekeeping.
5. Leverage Purchase Programs Strategically: Review your last 3-6 months of Azure usage data and identify which services would benefit from reservations or savings plans. As a general rule, if a VM runs for more than 50-60% of the time, an RI will likely result in cost savings. A savings plan might be worthwhile if your total computer spend is sizable. Use Azure’s pricing calculator or reports to simulate savings (Microsoft provides a reservations/savings plan recommendation tool in the portal). Plan purchases to align with budget cycles – for example, you might make a batch of RI purchases at the start of a fiscal year when budgets are established.
6. Combine Discounts for Maximum Effect: Ensure you’re stacking discounts where possible by using AHB on eligible resources and RIs/Savings Plans. These are complementary. For example, apply AHB to remove the OS cost for a Windows VM, then reserve it to cut the remaining cost. This two-step stack drastically reduces the unit cost of that VM. Missing one of the two is leaving money on the table.
7. Monitor and Adjust Commitments: If you’ve made commitments (Azure Savings Plan, MACC, or RIs), monitor their utilization monthly. If utilization is low, take action: for RIs, consider reassigning or exchanging them to a more frequently used resource. If you consistently under-use it for the Savings Plan, you may have room to add more workloads under that commitment or adjust your consumption patterns. Conversely, if you’re overusing beyond your commitment (meaning you pay for the excess on a pay-as-you-go basis), consider increasing the commitment to cover that and save.
8. Engage Azure Cost Management Tools and Training: Use Microsoft’s free resources. The Azure portal’s Cost Management section is powerful – get your team trained on it. Microsoft Learn modules on cost management or a Cloud Economics workshop (sometimes offered to customers by Microsoft) can help build internal expertise. Also, consider third-party cost management tools if your environment is complex (some tools provide advanced analytics, anomaly detection, etc., beyond Azure’s native capabilities).
9. Encourage Cost-Conscious Architecture: When designing solutions for Azure, architects should consider cost alongside performance and reliability. This might mean choosing PaaS over IaaS to reduce management overhead and cost, or using serverless functions where possible to benefit from consumption-based billing (and auto-scale to zero when idle). Over time, these architectural choices significantly impact the cost. Make cost optimization a checkpoint in your architecture review boards.
10. Review MCA Billing Structure for Optimization: Since MCA allows multiple billing profiles, consider whether splitting profiles by department would help teams adhere to budgets (some organizations allocate an invoice to each department, allowing them to “own” their costs). Alternatively, a single profile can simplify, but you must manually allocate costs. Choose what drives the right behavior in your org. If needed, restructure your billing profiles and invoice sections in consultation with Microsoft to best reflect your organizational budget ownership. A well-structured billing setup combined with the above practices creates accountability at the right level.

By following these recommendations, IT and Finance can collaboratively gain control over Azure spending under an MCA.

The key is to be proactive and data-driven—use the tools at hand to prevent surprises and steadily drive costs down or outputs up (more value for the same spend). Many enterprises have saved 15-30% or more on their Azure bills by adopting these practices and reinvested those savings into innovation.

FAQ

Q1: What tools does Azure provide to help monitor and control costs?
A1: Azure offers Cost Management and Billing, which includes cost analysis charts, cost alerts, budgets, and recommendations. Within that, Azure Budgets enable you to set spending limits and receive alerts when thresholds are reached. Azure Advisor gives cost optimization recommendations (like identifying idle resources or suggesting reserved instances). There are also APIs (for example, the Consumption API) that allow for the programmatically retrieval of cost data for custom analysis.

Q2: How do I set up a budget alert in Azure?
A2: In the Azure portal, go to Cost Management and select Budgets. Choose the scope (subscription, resource group, etc.), period (monthly, quarterly, etc.), and amount. Then set up alert thresholds (e.g., 80% and 100%). You’ll specify an Action Group: who or what to notify when the threshold is hit (emails, SMS, webhook, etc.). Once created, Azure will automatically send alerts as your spending crosses those levels. Remember, budgets reset at the end of each period (if monthly), and you can carry over settings to the next period.

Q3: What are Azure Reserved Instances, and when should we use them?
A3: Reserved Instances (RIs) are an upfront commitment to use specific Azure resources (such as a VM of a particular type or a SQL database) for 1 or 3 years. In return, you get a much lower price for those resources. Use RIs for workloads that run continuously at a steady state, such as a production database server that operates 24/7. This guarantees you’re paying the lowest rate for that resource. Avoid RIs for very spiky or transient workloads that you might turn off, as you pay for the reservation regardless of whether you use it (unused time is wasted). You purchase RIs through the Azure Portal (with the appropriate permissions), and they apply automatically to matching resources.

Q4: What’s the difference between Azure Reservations and Savings Plans?
A4: Both are commitment-based discounts. Reservations are resource-specific: you reserve a particular VM family or region, or other service, and the discount only applies to that resource. Savings Plans are monetary commitments: you commit to spending, say, $10 per hour on Azure compute for 3 years, and that commitment can cover any compute usage across VMs, containers, etc. Reservations can save slightly more (up to 72% in some cases) but are less flexible (you pick exact VM sizes). Savings Plans save up to ~65% but are flexible across services and regions. Also, reservations prioritize capacity (useful if you worry about Azure data center capacity), whereas savings plans do not reserve capacity; they just discount usage.

Q5: How does Azure Hybrid Benefit work?
A5: Azure Hybrid Benefit (AHB) lets you apply your existing Windows and SQL Server licenses to Azure VMs or databases. Normally, Azure’s VM price includes a Windows license if the VM is running Windows. If you own a Windows license with Software Assurance, AHB allows you to not pay for that license again in Azure. In practice, you indicate in Azure that you’re using your license, and Azure bills you at the lower “Linux rate” for that VM. You must have enough licenses to cover the cores of the VM. AHB can also be used for SQL – e.g., on Azure SQL Database, you can pay a reduced rate if you have SQL Server licenses. It’s a huge cost saver for those with Microsoft licensing investments (up to 40-55% savings as noted above).

Q6: How much can we save with these optimizations?
A6: It varies, but commonly organizations can save 20-30% of their Azure costs (or more) by fully utilizing these measures. For example, simply rightsizing and deleting unused resources might cut 10% off the top. Reserved instances, if applied to half of your spend, could reduce that portion by 50% (resulting in a 25% overall reduction). Azure Hybrid Benefit for Windows and SQL workloads can reduce costs by ~40%. Tagging and accountability won’t directly reduce the bill, but they expose opportunities for savings. We’ve seen cases where companies saved millions annually after a FinOps initiative, essentially reclaiming value previously lost to inefficiency.

Q7: Should we prefer Reservations or Savings Plans?
A7: Ideally, use both as appropriate. If you have a predictable environment, you may want to lock in frequently with Reservations for maximum savings. Savings Plans offer flexibility if your environment is more dynamic or you plan to shift resources around. One strategy is to start with a savings plan that covers a broad base of usage at a good discount, then layer specific reservations for the most stable workloads to secure a larger discount on those. Azure will always apply the most beneficial option first, for example, a VM with a reservation will be used; otherwise, it may consume your savings plan. Evaluate using Azure’s recommendation tools, which often suggest a mix.

Q8: How can we enforce that developers don’t spin up huge, costly resources or forget to shut things down?
A8: Use Azure Policy and Role-Based Access Control (RBAC). With Azure Policy, you can restrict the VM sizes that can be deployed (for instance, prevent anything above 16 cores in non-production subscriptions). You can also require tags like “ExpirationDate” on certain resources so that they naturally get flagged for cleanup. For shutdowns, you can create automation (scripts or use Azure DevTest Labs schedules) to automatically shut down VMs at specific times. Additionally, RBAC allows only certain roles to create resources of a certain type – e.g., only cloud administrators can create very expensive resource types. Regular training and awareness for developers are also key, as they should be informed of the cost implications of their chosen resources.

Q9: How do we allocate Azure costs to different teams under MCA for internal charging?
A9: The best way is to use tags and possibly multiple invoice sections. If you have an MCA billing profile, you can create invoice sections for each team or project, and have subscriptions billed to the respective sections. That way, the Azure invoice will subtotal costs by section, providing each team with its bill. Alternatively, tag all resources with a team identifier and split costs using Azure Cost Management reports. Some organizations also use third-party tools to generate chargeback reports. The MCA doesn’t allocate this for you by default (it just gives raw costs), so you must implement tagging or structural separation (multiple subscriptions or invoice sections) to allocate costs.

Q10: How often should we review and adjust our cloud spending?
A10: Continuously in small ways, and in depth on a regular cycle. In practice, a quick review of cost anomalies should be conducted weekly (some organizations do this daily via automated reports). A deeper dive should be conducted monthly – reconcile the Azure invoice with the expected spend, review the budget versus actual, and identify any new areas of concern. Then, quarterly or biannually, conduct a strategic review: examine long-term trends, determine any new Reservations or Savings Plans to purchase, and so on. Cloud cost optimization isn’t one-and-done; it’s analogous to a monthly financial closing process, plus a quarterly strategy update. If you have a FinOps team, they will likely provide monthly reporting. Also, anytime there’s a known change (such as a new big project starting or an old one ending), that’s a cue to adjust budgets and optimizations accordingly (for example, retiring reservations that are no longer needed and using funds for new ones where needed).