FinOps
Finabeo Team
Nov 24, 2025
Introduction to Microsoft’s 2025 List Pricing Change for CFOs
As a CFO overseeing a company that spends substantial sums on cloud services, understanding upcoming pricing changes is crucial to managing your budget effectively. In 2025, Microsoft is implementing a significant shift from its traditional discount models to a new pricing approach called Level A pricing. This change can have a direct and sometimes unexpected impact on your cloud expenses, especially if your organization relies heavily on Microsoft’s cloud solutions such as Azure or other enterprise services.
Why does this matter for you? Because cloud costs often represent a sizeable portion of your IT expenses, sometimes even surpassing traditional hardware and infrastructure costs. Without a clear understanding of how the pricing adjustments work, you may miss opportunities for cost control or inadvertently face budget overruns. For example, a company using Microsoft services last year might have paid reduced rates thanks to negotiated discounts. Starting in 2025, those discounts may no longer apply in the same way, leading to higher invoices unless you adjust your approach.
What You Need to Know and Do
To effectively navigate this change, you should first understand the core difference: what the new Level A pricing model entails and how it compares to current discount arrangements. This involves analyzing your current cloud usage, identifying which services are most critical, and estimating how the new pricing might affect your costs. For instance, if your company uses Microsoft Azure for hosting data warehouses, web applications, or machine learning workloads, you need to calculate potential cost increases based on your usage patterns and the new list prices. If your current discounted rate was 20 percent off list pricing, and now the list prices are rising without similar discounts, your expenses could increase significantly—say, by 20 percent on services you rely on daily.
Next, you should review your existing cloud contracts, identify any clauses tied to discounts, and plan negotiations or optimizations. For example, acquiring reserved instances or committing to consistent usage levels could help you lock in better rates under the new pricing structure. Additionally, developing strategies for monitoring your cloud consumption in real-time becomes essential—this helps ensure you're not unknowingly overspending. You might, for example, establish monthly expense reviews and set cost thresholds for alerts, so you can take immediate action if costs spike unexpectedly.
Concrete Examples and Simple Calculations
Imagine your annual cloud spend was £600,000 last year. If your discount was 20 percent, your actual costs paid were roughly £480,000. Now, with Microsoft’s new leveling system, if list prices increase by 10 percent without similar discounts, your new list costs might jump to £660,000. Without negotiating for reserved capacity or optimizing workloads, your costs could rise without corresponding increases in value or productivity.
Another example might involve a workload that consumes about £50,000 per month. Previously, discounts reduced this to roughly £40,000. Under the new pricing without discounts, your monthly costs could go back to £50,000. Over a year, this adds up to a £120,000 increase, which is a significant hit on your IT budget.
Summary of Key Points
To sum up, understanding Microsoft’s 2025 pricing change is essential for CFOs aiming to control cloud expenses. Recognize that the shift to Level A pricing means list prices are rising, and previous discount models may no longer apply. Act now by analyzing your current cloud usage, estimating future costs based on new prices, and exploring cost-saving strategies like contract negotiations, workload optimization, and continuous monitoring. Ultimately, staying proactive allows you to avoid surprises, better manage your IT budget, and ensure cloud investments deliver maximum value for your organization.
Adjusting Your Cloud Budget Forecasts for Higher Microsoft License Costs
Building a reliable cloud budget is crucial, especially when Microsoft announces changes that could make your licensing costs rise significantly. For CFOs managing companies that spend over 50,000 pounds a year on cloud services, understanding how to adapt your financial forecasts is key to maintaining control over your IT expenses and avoiding unexpected overspending. Let’s walk through simple, practical steps to help you adjust your budgets effectively, using tools and scenario planning to stay ahead of the cost increases.
Why Accurate Forecasting Matters
Imagine you forecast your cloud costs for the upcoming year, planning your cash flow and expenses accordingly. Now, suppose Microsoft increases its licensing prices by 15%, 20%, or even more. Without adjusting your forecast, your expenses could balloon beyond your planned budget. This disruption can impact your financial stability and operational planning.
What You Need to Know
To refine your budget forecasts, you should understand the upcoming price changes, estimate their impact on your current cloud setup, and develop flexible models that accommodate these increases. Think of it like a GPS system for your finances, helping you navigate the changing landscape without costly detours. You don’t need to be a finance wizard to do this — just a clear plan and some straightforward calculations.
Step-by-Step Practical Action Plan
Step 1: Gather Your Current Cloud Cost Data
Start by collecting your recent cloud invoices and usage reports, focusing specifically on Microsoft licensing costs. Break down your costs by services, such as Azure VMs, Microsoft 365, and other subscriptions. For instance, if you spent 60,000 pounds last year, and 20,000 pounds of that was licensing, note that figure — it’s your starting point for adjustments.
Step 2: Identify the Expected Price Increase
Check Microsoft’s official announcements or pricing pages to find the specific increase percentage for licensing. Let’s say Microsoft announced a 15% increase for Microsoft 365 licenses and Azure subscriptions. Understanding this percentage helps you estimate how much more you will pay after the change.
Step 3: Calculate the New Cost Estimates
Use a simple multiplication to project your new licensing costs:
In our example:
This means you should plan for a 3,000 pounds increase in your licensing costs alone.
Step 4: Incorporate These Changes Into Your Budget Model
Update your existing budget forecasts by replacing previous licensing cost estimates with your new higher figures. If your budget was based on last year's costs, adjust it by adding the increased amount, so your total forecast reflects these new licensing expenses.
Step 5: Use Scenario Planning for Different Outcomes
To prepare for uncertainties, create different scenarios — for example:
Optimistic: Price increase is 10%, costing an extra 2,000 pounds
Likely: Price increase is 15%, costing an extra 3,000 pounds
Pessimistic: Price increase is 20%, costing an extra 4,000 pounds
By modeling these scenarios, you can see how each affects your overall budget, helping you plan for any situation.
Step 6: Build Flexibility Into Your Financial Models
Integrate flexible budgeting tools or spreadsheets that allow quick adjustments when new pricing information emerges. This flexibility helps avoid re-creating your budget from scratch each time a new price change is announced.
Use Tools to Simplify the Process
Leverage simple financial planning tools, such as Excel spreadsheets or budget management software, to visualize your forecast adjustments. For more advanced control, cloud financial management tools can connect directly with your cloud usage reports, automating part of the estimation process. These tools enable real-time updates and scenario testing, making ongoing adjustments hassle-free.
Summary - Key Points to Remember
Start by reviewing your current cloud expenses, especially licensing costs.
Understand the announced percentage increase from Microsoft.
Calculate the new licensing costs using simple multiplication.
Update your budgets with these new estimates, incorporating different scenarios for safety.
Use flexible tools and models to make ongoing adjustments easier and more accurate.
By proactively revising your forecast models, you keep your company financially prepared for Microsoft's pricing changes, avoiding surprises and ensuring your cloud expenditure remains under control, no matter how the market shifts.
Setting Effective Budgeting and Thresholds to Control Cloud Spend
For CFOs overseeing sizable cloud budgets, setting clear budgets and implementing spending thresholds are crucial strategies to prevent unexpected costs from spiraling out of control. Cloud expenses can sometimes be unpredictable, especially when usage patterns change or new services are introduced without proper oversight. Establishing a disciplined approach to budgeting helps you stay on top of expenses and make informed decisions that protect your company's financial health.
Understanding Why Budgeting and Thresholds Matter
Imagine your current monthly cloud spend is around 60,000 pounds. Without proper controls, a sudden spike — perhaps from forgotten resources or unanticipated service usage — could push costs to 80,000 pounds or more. This kind of surprise can impact cash flow and profitability. Setting budgets and thresholds acts like a financial fence, ensuring you know when you're approaching limits so you can act before costs become excessive.
What You Need to Know Before Getting Started
Budgets: These are predefined amounts you allocate for your cloud expenses within a certain period, usually monthly or quarterly.
Thresholds: These are specific points set within your budget that trigger alerts or actions when crossed, such as reaching 80% of your budget.
Automation: Modern cloud platforms like Azure and GCP offer tools to automate monitoring and enforcement of budgets and thresholds.
Action: When thresholds are crossed, you should be able to receive alerts and possibly trigger automated actions to reduce unnecessary spending.
Step-By-Step Guide to Setting Cloud Budgets and Thresholds
Step 1: Analyze Past Cloud Usage Data
Start by gathering your historical cloud usage data, ideally over the past three to six months. Look for patterns — which services cost the most, times when costs spiked, and any seasonal variations. For example, if you notice that running virtual machines at peak times increases your spend by 20%, factor that into your budgeting.
Step 2: Define Your Budget
Based on your analysis, set a monthly or quarterly budget that aligns with your company's financial targets. For instance, if your average monthly spend was 50,000 pounds, you might set your budget at 55,000 pounds to allow some flexibility, but not so high that it becomes meaningless.
Step 3: Establish Thresholds for Alerts
Next, decide on thresholds to trigger alerts before reaching your total budget. A common practice is to set alerts at 80% and 90%. Using our example, you would set alerts at 44,000 pounds (80%) and 49,500 pounds (90%). When these thresholds are hit, you receive notifications to review or cap spending.
Step 4: Configure Automated Controls
Cloud platforms offer tools to define rules that automatically inform your team or even pause or restrict certain services when thresholds are breached. For Azure, you can configure Budgets in Cost Management + Billing, which sends email alerts once thresholds are crossed and can trigger automated actions through policies.
Step 5: Communicate and Enforce Budget Policies
Ensure your cloud teams and stakeholders are aware of these budgets and thresholds. Clear communication prompts responsible teams to monitor their usage and prioritize cost-efficient service choices. Regular meetings or dashboards tracking spend can reinforce accountability.
Practical Example in Action
Suppose your company makes heavy use of data processing services during certain projects. You set a monthly budget of 60,000 pounds. You define alerts at 80% (48,000 pounds) and 90% (54,000 pounds). When your team receives an alert at 48,000 pounds, they review active resources, identify any idle virtual machines or unused storage, and shut them down. If costs approach 54,000 pounds, the system might automatically temporarily restrict launching new high-cost resources until an assessment is made, preventing excess overspending.
Keeping It Simple and Effective
Set clear budgets based on historical data, with some flexibility.
Use thresholds (80% and 90%) to get early warnings.
Leverage automation tools for alerts and controls.
Share policies and expectations with your cloud teams.
By following these steps, CFOs can transform their cloud cost management from reactive firefighting to strategic control. Remember, the goal is to catch potential overspending early, understand where your money is going, and ensure your cloud investments support your company’s broader financial objectives.
Auditing Your Cloud Environment: Identifying Cost Drivers Post-Pricing Change
As a CFO overseeing large cloud spend, understanding where your money is going is crucial, especially after Microsoft’s recent pricing adjustments. These changes can quickly lead to overspending if you do not actively review and manage your cloud environment. Auditing your usage helps you uncover which parts of your cloud infrastructure are driving costs and where you might be wasting money. In simple terms, think of it as a financial check-up for your cloud resources—spotting unnecessary expenses before they become a problem.
In this section, we'll walk through a clear, step-by-step process to analyze your current cloud environment, identify unnecessary licenses and underused resources, and understand the impact of these costs on your overall budget. This is essential for maintaining control and reducing wastage, so let’s get started with the most basic steps and build up from there.
Step 1: Gather Your Cloud Usage Data
First things first, you need to collect data on your current cloud usage. For Microsoft Online Services, this means logging into your Microsoft Admin Center or use the Azure portal if you are using Azure services. Look for the “Usage” or “Billing” sections. Here, you will find details such as active users, licenses assigned, resource utilization metrics, and billing summaries.
For example, suppose you see that last month your organization used 1,000 Microsoft 365 licenses, but analysis shows only 700 active users. This discrepancy hints that some licenses are underutilized or unnecessary. Gathering detailed, recent usage data is your starting point to understanding what is driving costs.
Step 2: Identify Unnecessary or Underused Licenses
Next, analyze license assignments versus actual usage. Often, companies purchase more licenses than needed because of uncertain growth plans or outdated assumptions. For instance, you might be paying for 1,200 licenses but only 950 are active on average. This extra 250 licenses represent potential wasted expense.
To quantify this, suppose each license costs £10 per month. The overpaid amount per month is: 250 unused licenses x £10 = £2,500, and annually that's £30,000 wasted. Spotting these inactive licenses is a quick way to cut costs and is often overlooked without regular audits.
Step 3: Check for Underutilized Resources and Services
Beyond licenses, check your virtual machines, storage, and other cloud resources. For example, you may find several virtual machines (VMs) running continuously, but during off-hours, CPU utilization drops below 10%. If those VMs are essential 24/7, fine, but if some are only needed during business hours, you could set policies to shut them down outside these times.
Let’s say a VM costs £50 per day to run and is idle 70% of the time. That means you are paying £35 daily for resources that are not being fully used. Over a month, that adds up to £1,050 in unnecessary costs. Identifying these underused resources enables you to optimize your cloud setup, for example by scheduling automatic shutdowns or resizing resources to better match actual needs.
Step 4: Conduct Cost Impact Analyses
For each identified cost driver—be it underused licenses or idle resources—you should estimate the financial impact. This involves multiplying the unused licenses or idle resources by their unit costs. This gives a clear picture of how much money you are losing or could save.
Continuing from the previous example, if you identify 250 unused licenses costing £10 each, you see a potential savings of £30,000 per year. Similarly, if idle VMs are costing £1,050 a month, that's over £12,600 annually. These figures show where you should focus your cost-cutting efforts.
Step 5: Implement Cost Control Measures
After pinpointing the key cost drivers, act on these insights. Remove or reassign unnecessary licenses, shut down idle resources outside working hours, or resize virtual machines to better match their actual workload. Create a process for regular audits to ensure your cloud costs stay aligned with actual usage, reducing surprises when bills arrive.
Quick Example: Practical Cost Saving Calculation
Say your organization spends £50,000 a month on cloud services. After auditing, you find that 10% of licenses are not used, and some VMs are over-provisioned. If removing 10% of unused licenses saves you £5,000 per month, and resizing over-provisioned VMs saves another £3,000, your total monthly savings from this audit could be around £8,000. That’s almost £100,000 saved annually just by actively auditing and optimizing usage.
Summary Tips for CFOs
Regularly gather and review cloud usage data, especially after pricing changes.
Identify and eliminate unused or unnecessary licenses to avoid waste.
Check resource utilization—shut down idle resources and resize where needed.
Calculate the financial impact of your findings to prioritize actions.
Implement ongoing monitoring and automated alerts to catch cost spikes early.
By systematically auditing your cloud usage, you gain control over your spending and prevent costs from spiraling out of hand. Remember, the goal is to create a process that makes cost management part of your regular financial oversight, so you can focus on strategic growth rather than unexpected bills.
Achieving Cloud Cost Visibility and Transparency for Better Governance
As a CFO managing significant cloud spend, understanding exactly where your money goes is essential. When you have clear, real-time insight into your cloud consumption, you can make smarter decisions, catch inefficiencies early, and avoid unexpected costs that can eat into your budgets. Achieving this level of clarity might sound daunting at first, but with the right tools and strategies, it's entirely within your reach. This section will walk you through how to gain full visibility of your Microsoft cloud services, how to effectively report this information to your teams and stakeholders, and how to embed this transparency into your overall IT governance practices.
Why Visibility Matters for Cloud Cost Control
Think of cloud cost visibility like controlling your household expenses. If you don’t regularly check your bank statements, you might overspend without realizing it. Similarly, in the cloud, if you aren't monitoring your usage, costs can spiral out of control quickly. For example, imagine you have a server running continuously for a month, but it only needs to run during business hours. Without visibility, you might be paying for 24-hour operation when a simple schedule could cut your costs significantly.
Gaining this transparency helps you identify which applications, teams, or projects are driving costs, and whether they are using resources efficiently. It also enables you to detect anomalies, such as sudden spikes in billing that can indicate misconfigurations or security issues. Overall, better visibility gives you the control you need as a CFO to keep cloud spending aligned with your company's financial goals.
What You Need to Know
Before diving into specific tools or dashboards, it’s helpful to understand a few core concepts:
Cloud Cost Breakdown: Dividing total expenses into categories like compute (servers), storage, data transfer, and licensing helps pinpoint areas for cost savings.
Resource Usage Data: Continuous data on how much of each resource is used, when, and by whom.
Cost Allocation: Connecting specific costs to departments, projects, or teams ensures accountability.
Now, to implement visibility techniques effectively, here are concrete steps you can take:
Step 1: Enable Cost Management Tools
Most cloud providers, such as Microsoft Azure, offer built-in cost management platforms. For example, Azure Cost Management + Billing provides comprehensive dashboards that visualize your consumption, expenditure, and trends. If you’re managing multi-cloud environments, consider third-party tools like Cloudability or CloudHealth, which aggregate data across providers for a unified view.
Start by activating these tools to automatically gather your usage data. For instance, in Azure, navigate to the Cost Management blade and set up billing exports to continuously collect detailed usage reports.
Step 2: Set Up Custom Dashboards
Create easy-to-understand dashboards highlighting key metrics like total monthly spend, spend by department, and usage spikes. Use color codes (green = under budget, red = over budget) to make it visually clear where action is needed. For example, a dashboard might show that the marketing team’s cloud resources are costing twice as much as expected this month. Recognizing that early allows you to investigate further.
Step 3: Develop Reporting Strategies
Establish regular reporting rhythms, such as weekly or monthly reports sent to stakeholders. These reports should include:
Overall cloud spend summary
Breakdowns by project or department
Noteworthy anomalies or unexpected spikes
Forecast vs. actual expenditure analysis
For example, if your forecast predicted £100,000 for the current month, but actual spend is £120,000, investigate and communicate this discrepancy early to prevent it from escalating.
Step 4: Integrate Cost Transparency into IT Governance
Make cloud cost information a regular part of your IT governance meetings. Encourage transparency by sharing dashboards and reports with IT teams, project managers, and finance. This inclusion ensures everyone understands the financial implications of their cloud choices and encourages responsible usage.
For example, when a new project is launched, evaluate its projected cloud costs during planning, and continuously monitor its actual expenditure against estimates during execution. This proactive approach helps spot issues early and stay within budget.
Remember These Key Points
Use built-in cloud provider tools or third-party platforms to gather detailed consumption data.
Create clear, visual dashboards that highlight critical spending areas and anomalies.
Establish routine reporting to keep all stakeholders informed and accountable.
Embed cost transparency into your IT governance processes to promote responsible cloud usage across your organization.
By following these steps, you will lay a strong foundation of cloud cost visibility that empowers you to control spending, optimize resources, and support strategic growth with clarity and confidence. The next chapter will focus on how to detect and respond to unexpected cost spikes before they become larger issues.
Detecting Anomalies and Setting Alerts to Prevent Unexpected Bills
As a CFO responsible for managing cloud costs, one of your most important tasks is to prevent unexpected bills that could blow your budget and disrupt your organization. Cloud environments are complex, with many factors that can cause costs to spike unexpectedly, such as misconfigurations, unused resources, or unforeseen workload demands. To keep these surprises in check, you need to implement systems that automatically detect unusual activity and alert you before costs spiral out of control.
Understanding the Why Behind Anomaly Detection and Alerts
Imagine you set a monthly cloud budget of 100,000 pounds. Typically, your costs stay around 90,000 pounds. But suddenly, one day, your bill jumps to 150,000 pounds without any major change on your part. Without early detection, you might find yourself facing an unexpected expense that depletes your budget and causes financial strain. Anomaly detection systems help catch such spikes early, so you can investigate and respond before the costs impact your financial health.
What You Need to Know Before Getting Started
To effectively set up anomaly detection and alerts, you should understand the key concepts involved:
Anomaly detection is an automatic process to identify costs that are significantly different from usual patterns.
Alerts are notifications about unusual activity, typically sent via email, messaging apps, or dashboard alerts.
Thresholds are predefined limits set to flag when costs or usage are unusually high or low.
Start by familiarizing yourself with your existing cloud spend patterns. This will help you differentiate between normal fluctuations and true anomalies.
Step-by-Step Practical Actions to Detect Anomalies and Set Alerts
Step 1: Collect Your Baseline Data
Begin by analyzing your historical cloud bills for the past three to six months. Look for patterns in your spending—are there recurring peaks during certain days, weeks, or months? For example, you might notice that your cloud costs tend to rise in month-end due to reporting batch processes.
Use the cloud provider’s native tools or third-party cost management platforms to generate this data. For example, Azure Cost Management and AWS Cost Explorer can visualize your historical costs.
Step 2: Define Clear Cost Thresholds
Based on your baseline, decide what constitutes a significant deviation. For instance, if your typical daily cost is around 3,000 pounds, perhaps you set a threshold at 4,500 pounds, which is 50% higher than usual. This threshold indicates a potential anomaly.
If you want to be more precise, you can set thresholds based on percentage increases or absolute amounts that are meaningful for your business. For example: "Alert me if daily costs exceed our average by more than 50%."
Step 3: Choose or Implement an Anomaly Detection Tool
Many cloud providers offer anomaly detection features. For example, Azure Cost Management has "cost alerts" with anomaly detection capabilities, and AWS Cost Explorer offers anomaly detection insights through Cost Anomaly Detection. Alternatively, you can use third-party solutions like CloudHealth or Cloudability, which provide more customizable monitoring.
Set up the chosen tool to monitor your costs daily or weekly. Configure it to flag any detected anomalies exceeding your predefined thresholds.
Step 4: Configure Real-Time Alerts and Notifications
Once your detection system is set up, configure alerts to be sent instantly when anomalies are found. Notifications can be sent via email, SMS, or even integrated into your existing communication channels like Slack or Teams.
For example, set an alert that says: "Alert: Cloud cost spike detected exceeding 50% compared to baseline, as of today."
This way, your finance or operations team can investigate immediately instead of discovering a surprise bill at the end of the month.
Step 5: Develop a Response Plan
Having alerts is only the first step. Develop a process for responding promptly. For example:
Investigate the source of the anomaly (check recent deployments, unused or orphaned resources, or misconfigurations).
Decide whether to scale down certain resources, postpone non-essential workloads, or follow up with the cloud team for explanations.
Adjust your budgets or thresholds if you find the anomaly was due to expected activity or rapid growth.
Real-World Example
Suppose your daily cloud expenses usually hover around 2,500 to 3,000 pounds. You set an alert at 4,500 pounds, which is 50% above your typical high. One morning, your alert triggers, and you discover that a developer’s script ran a batch process that spun up hundreds of virtual machines unintentionally. Because of your early alert, you shut down the unnecessary resources before your bill reached 7,000 pounds. This quick response saved your organization thousands of pounds and avoided budget overshoot.
Key Takeaways to Remember
Start by analyzing your historical cloud costs to understand normal patterns.
Set thresholds for alerts based on your typical spending and acceptable variance.
Use native or third-party anomaly detection tools to automate monitoring.
Configure timely alerts to notify your team immediately of cost spikes.
Have a clear response plan to investigate and act upon anomalies quickly.
Implementing the FinOps Foundation Framework: Crawl, Walk, Run Phases for CFOs
For CFOs overseeing substantial cloud spending — typically over 50,000 pounds a month — establishing a strong financial governance process is crucial. The FinOps Foundation provides a clear, phased approach to managing cloud costs effectively. Think of it as building a staircase: starting with the Crawl phase, progressing to Walk, and finally reaching the Run phase. This step-by-step method helps ensure that you develop a solid foundation, then expand your capabilities systematically, and ultimately master proactive cost management.
The Importance of a Phased Approach
Many CFOs dive straight into complex cost optimization tools or advanced budget controls without a solid understanding of their current state. This often results in missed opportunities or overlooked costs. Instead, by following this framework, you can start simple, learn from each phase, and gradually improve your processes in a structured way. It reduces risk, enhances accuracy, and builds confidence as you go along.
Overview of the Three Phases
Crawl: Initiate basic cloud cost governance. Focus on understanding what your current costs are and setting initial budgets.
Walk: Develop more refined budgeting, periodic auditing, and ways to optimize spending. Start establishing cost controls and accountability.
Run: Scale up with automated dashboards, anomaly detection, and proactive strategies to keep costs in check continuously.
Crawl Phase: Building Foundations
This is where you keep it simple. First, gather visibility into your cloud expenses. Use cloud provider tools like Azure Cost Management or AWS Cost Explorer to get a clear snapshot of where every pound is spent. At this stage, aim to:
Identify major cost areas: For example, is most of your cloud spend going to virtual machines, storage, or data transfer?
Set initial budgets: Allocate monthly spending limits per department or project. Suppose your overall cloud bill is 100,000 pounds; you might assign 20,000 pounds for your development environment, 30,000 pounds for production, and the rest for other projects.
Establish basic cost governance process: Create simple rules, such as quarterly reviews to compare actuals against budgets.
For example, if you see your development environment exceeding its 20,000-pound quota, investigate which resources are causing the spikes, such as unused virtual machines or over-provisioned storage, and address them.
Walk Phase: Developing Control and Optimization Processes
Once you understand your costs, you can start building processes to control them proactively. Key steps include:
Implementing regular audits: Schedule monthly reviews to identify unused or underutilized resources. For instance, identify virtual machines with low CPU utilization over the last month and consider shutting them down or resizing.
Refining budgets: Use your data to adjust budgets, setting more accurate thresholds based on actual usage patterns.
Optimizing spend: Look for opportunities like reserved instances or savings plans that can significantly reduce costs. For example, committing to a reserved VM for 1 year can cut costs by 30% compared to pay-as-you-go instances.
Introducing alert thresholds: Set alerts when costs approach or exceed budgets to prompt early intervention, such as receiving an email when 80% of the monthly budget is reached.
Imagine your cloud bill for the current month is 80,000 pounds, and your set threshold is 90%. An alert would notify your finance team before overspending occurs, giving you time to take action such as halting non-essential resources.
Run Phase: Scaling and Automating Financial Management
Finally, the Run phase involves automating your cost governance and expanding your oversight to be proactive and predictive. Exercises include:
Deploying dashboards and reporting tools: Use cloud cost management tools like Azure Cost Management + Billing or third-party platforms to visualize expenses in real-time.
Automating anomaly detection: Set up automated alerts for unusual cost spikes that might indicate misconfigured resources or security issues, such as a sudden increase in data transfer costs.
Implementing proactive controls: Use policies that automatically shut down idle resources or switch to cheaper options when thresholds are crossed.
Scaling governance: Incorporate cross-department collaboration, set company-wide policies, and continuously revisit budgets based on evolving projects and usage patterns.
For example, you could automate termination of development resources after working hours, drastically reducing waste. Or, you might use predictive analytics to forecast upcoming costs based on planned projects, enabling you to plan budgets more accurately.
Quick Tips for CFOs to Start Quickly
Begin by creating a detailed inventory of your cloud resources and costs.
Set clear, realistic budgets for each department or project.
Use built-in cloud tools to monitor and generate simple reports monthly.
Schedule regular reviews, ideally monthly, to catch cost anomalies early.
If possible, leverage automation, but only after understanding your baseline and establishing governance procedures.
By carefully progressing through each phase and focusing on concrete, achievable steps, CFOs can develop a strong control framework that grows with their organization, reducing waste and ensuring cloud expenses deliver maximum value.
Action Plan: Next Steps for CFOs to Navigate Microsoft’s Pricing Shift Successfully
For CFOs overseeing corporate budgets that include significant cloud spending, a sudden change in pricing structures can be challenging. This new pricing shift from Microsoft, expected to impact costs starting in 2025, makes it essential to act quickly and strategically. Implementing a clear action plan now not only reduces immediate financial strain but also sets your organization up for sustainable cloud cost management in the future. This chapter will guide you through practical, step-by-step actions that can help you seize quick wins, build a dedicated team for ongoing cost governance, and establish long-term savings strategies.
Start with Quick Wins to Reduce Immediate Cloud Costs
The first step is to identify areas where you can immediately decrease cloud expenses. Look at your recent cloud bills and usage reports. Common quick wins include:
Identifying unused or underutilized resources like virtual machines (VMs) or storage volumes that are accruing costs without delivering value. For example, if your team is leaving test environments running over weekends, shutting them down can save hundreds of pounds each week.
Switching to more cost-effective service tiers or discounts. Microsoft offers reserved instances for VMs, which cost less than on-demand options if you commit to a one- or three-year term. Calculate your current on-demand costs and compare them to reserved options. If your VM runs 24/7, reserving its capacity could reduce your costs by up to 40%.
Reviewing and correcting over-provisioned resources. For instance, if your Azure SQL database has been allocated more storage and processing power than needed, downgrading it can yield immediate savings.
Implement these changes within your cloud platform’s management console. Set a target to reduce your current bill by at least 10% within the first month, and track the impact weekly.
Build a Cross-Functional Cloud Cost Governance Team
Next, creating a dedicated team ensures ongoing management and accountability. This team should include members from finance, IT, and business units that frequently consume cloud resources. A typical setup might be:
A CFO or finance lead to oversee budgeting and cost strategy.
Cloud architects or IT managers responsible for technical optimization.
Business managers who understand the operational needs behind cloud deployments.
Start by appointing a cloud cost champion in your organization, someone who meets weekly with this team. Their task is to monitor expenditures, implement policies, and communicate with stakeholders. This collaborative approach helps in making informed decisions on adjusting resource allocations, negotiating vendor discounts, or terminating unused services.
Implement Continuous Improvement Strategies for Long-Term Savings
Sustainable cloud cost management is a continuous process. Once immediate actions are taken, focus on establishing ongoing practices:
Regular Cost Audits: Schedule monthly reviews of your cloud usage. Use dashboards or reporting tools that provide visibility into costs by department, project, and resource type. For example, Azure Cost Management or Google Cloud’s Cost Management tools can help pinpoint when a spike occurs and why.
Set Budget Thresholds and Alerts: Define spending limits for each team or project, and set alerts to notify you when thresholds are close to being reached. This prevents surprises at the end of the billing cycle.
Develop Cost Allocation and Tagging Policies: Tag resources with relevant business or project identifiers. For instance, label all resources involved in a specific product launch so that costs can be directly attributed and analyzed.
Automate Policy Enforcement: Use cloud platform features or third-party tools to automatically shut down non-essential resources outside business hours or optimize configurations based on usage patterns.
By fostering a culture of continuous improvement, you can adapt quickly to any future pricing changes and maintain control over your cloud expenditure.
Summary
To effectively navigate Microsoft’s upcoming pricing change, focus first on quick wins by optimizing existing resources and cutting unnecessary costs. Build a cross-functional team including finance and technical experts to oversee ongoing governance endeavors. Finally, implement regular audits, set thresholds, and adopt automation to sustain cost savings in the long run. Taking these steps now will ensure you maintain control over cloud expenses and lay a strong foundation for future financial discipline in cloud spending.
