Manage Azure subscriptions and governance

📘Microsoft Certified: Azure Administrator Associate (AZ-104)

1. Overview of Azure Cost Management

Azure Cost Management is a built-in tool that helps organizations:

Monitor their spending
Analyze usage
Set budgets
Receive cost alerts
Optimize cloud resources
Forecast future expenses

You access it in the Azure portal under:

Home → Cost Management + Billing

It works for:

Azure subscriptions
Resource groups
Management groups
Individual resources

The main goal is to help IT teams avoid overspending and understand how their cloud resources are being used.

2. Understanding Azure Budgets

A budget in Azure is a limit you define for how much money you want to spend for:

A subscription
A resource group
A specific service (VMs, Storage, Networking, etc.)

A budget does not stop resources automatically.
It only notifies you when the spending reaches certain thresholds.

Why IT Teams Use Budgets

Example IT scenario (allowed type of example):
Your team runs development servers, test servers, and production servers. To prevent the development team from accidentally increasing cost, you set a budget for the Dev resource group.

Key Points for the Exam

You can set monthly, quarterly, or yearly budgets.
You choose the amount and thresholds (e.g., 50%, 75%, 90%, 100%).
Alerts are sent to email addresses or action groups.
Budgets don’t stop services automatically (unless integrated with automation).
Budgets can be created at subscription or resource group scope.

Steps to Create a Budget (Exam-Important)

Go to Cost Management + Billing.
Select Cost Management.
Select Budgets → Add.
Choose scope (subscription/resource group).
Enter the name, reset period, and amount.
Add alert conditions (thresholds).
Assign email recipients or action groups.
Save.

3. Cost Alerts

Cost alerts notify you when spending hits a certain level.

There are three types of cost alerts you must know for the exam:

1. Budget Alerts

Triggered when your budget thresholds are reached.
Example: When 80% of the monthly budget is spent.

2. Credit Alerts

Triggered when organizations using Azure with credits (e.g., EA or CSP agreements) reach their credit limit.

3. Department or Account Owner Alerts

Used in Enterprise Agreements when departments reach spending thresholds.

Key exam concept:

Cost alerts do not stop resources. They only notify.

4. Azure Advisor Cost Recommendations

Azure Advisor is a built-in service that analyzes your environment and provides recommendations in these categories:

Cost
Security
Reliability
Performance
Operational excellence

Here we focus on the Cost category.

Common Cost Recommendations from Azure Advisor (Exam-Focused)

1. Shut down or delete idle resources

Examples:

VMs that are running but not used
Underutilized SQL databases
Storage disks not attached to any VM

2. Right-size virtual machines

If a VM uses very low CPU/RAM, Advisor may suggest:

Use a smaller VM size
Switch to a cheaper VM tier

3. Buy reserved instances

If the system notices VMs running continuously, Advisor suggests:

Purchase 1-year or 3-year reserved VM instances
This reduces VM cost by up to 72%.

4. Move workloads to Azure Hybrid Benefit

For organizations with existing Windows Server or SQL Server licenses, Advisor recommends using Hybrid Benefit to reduce cost.

5. Use savings plans

Advisor may recommend purchasing a compute savings plan to reduce costs for continuously running compute services.

Why IT teams rely on Azure Advisor

In a real IT environment, different departments may deploy various VMs, databases, and storage accounts. Azure Advisor helps central IT teams detect cost inefficiencies automatically.

5. Cost Analysis (Important for the Exam)

Azure Cost Analysis helps you:

View cost trends
Filter by service, resource group, location, or tag
Analyze cost spikes
Understand daily cost burn
Forecast future spending

IT administrators often use tags to categorize costs, such as:

Environment: Production
Project: Migration
Department: HR

This helps teams break down spending per project or department.

Key features of Cost Analysis

Line charts, bar charts, pie charts
Daily/monthly cost breakdown
Export cost data to storage
Schedule automatic exports

The exam may ask:
Where do you go to analyze cost?
Answer:
Cost Management → Cost Analysis

6. Combining Budgets, Alerts, and Advisor for Effective Cost Governance

To manage cost efficiently, an Azure Administrator uses:

1. Cost Analysis

To understand spending trends and identify patterns.

2. Budgets

To define spending limits for each project, department, or environment.

3. Alerts

To notify teams before the budget is exceeded.

4. Azure Advisor

To automatically optimize resources and reduce waste.

This combination helps IT teams avoid unexpected bills, especially when many teams use Azure.

7. Exam Tips and Key Takeaways

Budgets

Used to set spending limits.
Trigger alerts when thresholds are reached.
Do not stop resources automatically.
Can be applied at subscription or resource group scopes.

Cost Alerts

Three types: budget, credit, department.
Alerts notify; they do not stop services.

Azure Advisor

Gives recommendations in categories: Cost, Security, Reliability, Performance, Ops Excellence.
Cost recommendations include right-sizing, shutting idle resources, reserved instances, hybrid benefit.

Cost Analysis

Helps analyze spending trends.
Allows filtering by tags, resource groups, services, and more.

Exports

You can export cost data to a storage account for reporting.

8. Realistic IT Environment Usage (No inappropriate examples)

Here are acceptable real IT examples:

Example 1: Development Team

A development team deploys multiple VMs for application testing.
A budget is created for the “Dev” resource group.
When usage reaches 80%, an alert is sent to the DevOps team to review and stop unused VMs.

Example 2: 24/7 Production VM

A production VM runs continuously.
Azure Advisor suggests a Reserved Instance or Savings Plan to reduce cost long-term.

Example 3: Idle Resources

A storage disk is found unattached to any VM.
Advisor alerts the admin to delete it to save cost.

Example 4: Departmental Billing

Tags are used to identify costs for HR, Finance, and IT.
Cost Analysis breaks down spending by department.

Conclusion

Managing costs in Azure is essential for both financial governance and operational efficiency.
For the AZ-104 exam, you must clearly understand:

How budgets and cost alerts work
What Azure Advisor cost recommendations look like
How to analyze spending with Cost Analysis
How an IT team uses these tools to prevent overspending

This topic is heavily tested because cost management is one of the most important responsibilities of an Azure Administrator.