Stage 5 · Platform

Infrastructure as Code on Azure

Cost Optimization Patterns

Right-sizing, auto-shutdown, reservations, and budget guardrails in IaC.

7 min readAzure Cloud EngineeringPlatform

Cost Optimization Overview

Cost optimization in IaC means building cost awareness into your infrastructure definitions. Instead of reviewing costs after deployment, you prevent waste at the source through policies, automation, and architectural patterns.

Right-size at creation — Choose the smallest VM size that meets requirements
Automate shutdown — Stop dev/test resources outside business hours
Use reservations — Commit to 1-3 year terms for steady-state workloads
Enforce budgets — Set spending limits and alert on thresholds
Tag everything — Ensure every resource has cost allocation tags
Monitor continuously — Use Cost Management to identify waste

Right-Sizing

Right-sized VM configuration


variable "environment" {
  type = string
}

# Environment-specific VM sizes
locals {
  vm_sizes = {
    dev     = "Standard_B2ms"
    staging = "Standard_D2s_v3"
    prod    = "Standard_D4s_v3"
  }
  
  disk_sizes = {
    dev     = 64
    staging = 128
    prod    = 256
  }
}

resource "azurerm_linux_virtual_machine" "app" {
  name                = "vm-app-${var.environment}"
  size                = local.vm_sizes[var.environment]
  admin_username      = "azureuser"
  resource_group_name = azurerm_resource_group.main.name
  location            = azurerm_resource_group.main.location
  
  os_disk {
    caching              = "ReadWrite"
    storage_account_type = var.environment == "prod" ? "Premium_LRS" : "Standard_LRS"
    disk_size_gb         = local.disk_sizes[var.environment]
  }
}

Right-sizing reduces costs by 50-70%. Start small and scale up based on actual usage. Azure Advisor provides personalized right-sizing recommendations.

Auto-Shutdown

Auto-shutdown with Terraform


resource "azurerm_dev_test_global_vm_shutdown_schedule" "dev_vm" {
  count              = var.environment == "dev" ? 1 : 0
  virtual_machine_id = azurerm_linux_virtual_machine.app[0].id
  location           = azurerm_resource_group.main.location
  enabled            = true

  daily_recurrence {
    time = "1900"  # 7 PM UTC
  }

  notification_settings {
    enabled = true
    email  = "team@contoso.com"
    time_in_minutes = 30
  }
}

# Bicep version
resource devTestSchedule 'Microsoft.DevTestLab/schedules@2018-09-15' = {
  name: 'shutdown-compute-vms'
  location: location
  properties: {
    status: 'Enabled'
    taskType: 'LabVmsShutdownTask'
    dailyRecurrence: { time: '1900' }
    targetResourceId: vm.id
    notificationSettings: {
      status: 'Enabled'
      emailRecipient: 'team@contoso.com'
      timeBeforeCleanupInMinutes: 30
    }
  }
}

Auto-shutdown saves 65% on dev/test VM costs (14 hours of shutdown per day). It only applies to VMs, not AKS clusters or App Services.

Use Azure DevTest Labs for dev environments

Azure DevTest Labs provides auto-shutdown, cost controls, and claimable VMs for development. It automatically shuts down VMs and enforces maximum cost limits.

IaC Cost Guardrails

Azure Policy for cost guardrails


// Deny VMs larger than Standard_D4s_v3
var allowedVMSizes = ['Standard_B2ms', 'Standard_D2s_v3', 'Standard_D4s_v3']

resource policyDefinition 'Microsoft.Authorization/policyDefinitions@2023-04-01' = {
  name: 'allowed-vm-sizes'
  properties: {
    policyType: 'Custom'
    mode: 'Indexed'
    rules: {
      if: {
        allOf: [
          { field: 'type', equals: 'Microsoft.Compute/virtualMachines' }
          { not: { field: 'Microsoft.Compute/virtualMachines/vmSize', in: allowedVMSizes } }
        ]
      }
      then: { effect: 'deny' }
    }
  }
}

// Enforce auto-shutdown on dev VMs
resource autoShutdownPolicy 'Microsoft.Authorization/policyDefinitions@2023-04-01' = {
  name: 'enforce-auto-shutdown'
  properties: {
    policyType: 'Custom'
    mode: 'Indexed'
    rules: {
      if: {
        allOf: [
          { field: 'type', equals: 'Microsoft.Compute/virtualMachines' }
          { field: 'tags[Environment]', equals: 'dev' }
        ]
      }
      then: {
        effect: 'deployIfNotExists'
        details: {
          type: 'Microsoft.DevTestLab/schedules@2018-09-15'
          existenceCondition: {
            field: 'Microsoft.DevTestLab/schedules/taskType'
            equals: 'LabVmsShutdownTask'
          }
        }
      }
    }
  }
}

Cost guardrails prevent expensive resources from being deployed. Start with Audit, then switch to Deny once the team is aligned.

Reservations in IaC

Terraform reservation resources


# Reserved VM instances for production
resource "azurerm_reserved_vm_instance" "prod" {
  resource_group_name = azurerm_resource_group.main.name
  location            = "eastus"
  name                = "prod-d4s-v3"
  reservation_name    = azurerm_reservation_group.prod.name
  applied_scope_type  = "Shared"
  
  count = var.environment == "prod" ? 3 : 0
}

# Reservation group for the subscription
resource "azurerm_reservation_group" "prod" {
  name                         = "rg-prod-reservations"
  resource_group_name          = azurerm_resource_group.main.name
  location                     = "eastus"
  reservation_order_id         = var.reservation_order_id
}

Reservations are purchased through the Azure Portal or CLI, not Terraform. Define the expected reservation usage in Terraform for documentation and planning.

Cost Monitoring Automation

Automated cost monitoring script


#!/usr/bin/env bash
set -euo pipefail

SUBSCRIPTION="{subscription-id}"
BUDGET_AMOUNT=10000

# Check current month spending
CURRENT_COST=$(az cost management query \
  --type Usage \
  --time-period from=$(date -d "first day of this month" +%Y-%m-%d) \
    to=$(date +%Y-%m-%d) \
  --query "properties.totalCost" --output tsv)

# Calculate percentage
PERCENTAGE=$(echo "$CURRENT_COST / $BUDGET_AMOUNT * 100" | bc -l | cut -d. -f1)

if [ "$PERCENTAGE" -gt 80 ]; then
  echo "WARNING: Cost is ${PERCENTAGE}% of budget ($$CURRENT_COST / $$BUDGET_AMOUNT)"
  # Send alert via Teams webhook
  curl -X POST "$TEAMS_WEBHOOK" \
    -H "Content-Type: application/json" \
    -d "{\"text\":\"Azure costs are at ${PERCENTAGE}% of budget\"}"
fi

Automate cost monitoring with scheduled scripts or Azure Functions. Alert at 80% (warning) and 90% (critical) of budget thresholds.

Cost optimization is not a one-time task

Set up monthly cost reviews, quarterly right-sizing audits, and annual reservation planning. Cost optimization requires continuous attention as workloads evolve.

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