Practical Use of TCO and Pricing Calculator for Cost Management

Maximizing Cost Management with TCO and Pricing Calculators

Total Cost of Ownership (TCO) and Pricing Calculator are effective tools for management of business cost in today's world. They ensure profitability and sustainable growth in businesses. These tools when used accurately help business owners to make more informed financial decisions by providing a comprehensive understanding of all costs associated with acquiring, operating, and maintaining an asset. In this article, we will be using Azure TCO and Azure pricing calculator.

Azure TCO at a Glance

Azure TCO (Total Cost of Ownership) is a calculation tool provided by Microsoft to help businesses estimate the cost savings and benefits of migrating their workloads to the Azure cloud platform. The TCO calculator allows users to compare the costs of running on-premises infrastructure to using Azure services.

The Azure TCO calculator is a valuable tool for businesses considering migrating to the cloud. It provides a detailed comparison of costs, helping them understand the financial implications and potential savings of moving their workloads to Azure. By leveraging Azure TCO, companies can make informed decisions and optimize their IT infrastructure for cost-effectiveness and scalability.

Key Components of Azure TCO

1. Capital Expenses (CapEx):

   • Initial costs of hardware, software licenses, and infrastructure setup for on-premises deployments.
   • For Azure, these costs are significantly reduced or eliminated since infrastructure is managed by Microsoft.

2. Operational Expenses (OpEx):

   • Ongoing costs such as power, cooling, maintenance, IT staff, and data center operations for on-premises infrastructure.
   • Azure operational costs include subscription fees for various services, which are typically more predictable and scalable.

3. Cost Savings:

   • Reduction in hardware and software costs.
   • Lower maintenance and operational costs.
   • Improved efficiency and productivity.

Azure Pricing Calculator at a Glance

The Azure Pricing Calculator is an online cost estimation tool provided by Microsoft to allow users estimate the cost of using Azure services. Users can configure and price a wide range of Azure services tailoring it to their specific needs and providing a detailed cost breakdown. This tool is essential for planning and budgeting cloud deployments, invaluable for anyone planning to use Azure services. It provides a clear and detailed estimate of costs, helping users make informed decisions and optimize their cloud spending.

Key Features of the Azure Pricing Calculator

1. Service Selection:

   • Users can choose from a wide variety of Azure services, including Virtual Machines, Storage, Databases, Networking, and more.

2. Configuration Options:

   • Each service can be customized based on different parameters such as instance type, storage capacity, region, and usage duration.

3. Cost Estimation:

   • The calculator provides a detailed cost estimate based on the selected services and configurations, including monthly and annual costs.

4. Export and Share Estimates:

   • Users can export their estimates to Excel or share a direct link to the configured estimate.

5. Regular Updates:

   • The calculator is regularly updated with the latest Azure pricing and new services.

Practical Implementation of TCO and Pricing Calculator

Use Case Scenario:

Jumia, an e-commerce company struggles with traffic spikes during promo periods like black Fridays. Their on-premises infrastructure cannot handle the load, resulting in slow performance and sometimes crashes. Now the company is considering migrating to cloud but first they want to ensure that they make the most cost-effective decision. Provide practical cost overview with Azure Total Cost of Ownership (TCO) and pricing calculator for the company.

To create a practical Azure Total Cost of Ownership (TCO) and pricing calculator, you can follow these steps:

1. Identify the Requirements:

   • Define the workloads and services you plan to use in Azure.
   • Estimate the size and scale of your deployment (e.g., number of VMs, storage requirements, database sizes, network bandwidth, etc.).

2. Use Azure Pricing Calculator:

   • Go to the Azure Pricing Calculator.
   • Add the services you plan to use (e.g., Virtual Machines, Storage, Databases, Networking).
   • Configure each service according to your requirements (e.g., VM sizes, storage types, database tiers).
   • The calculator will provide an estimate of the monthly cost.

3. Use Azure TCO Calculator to Compare the Cost of Running your Infrastructure on-premises vs. in Azure:

   • Go to the Azure TCO Calculator.
   • Define your workloads.
   • Adjust assumptions.
   • View report. The calculator will provide an estimate of cost savings over a period of time.

Steps to Use the Azure TCO Calculator

1. - Go to the Azure TCO Calculator.
2. Define Your Workload:

• Enter details about your current on-premises setup, including the number of servers, storage, databases and network components. This information will be used to understand your current TCO and recommended services in Azure

  • click add server workload to define the details of your current on-premises server infrastructure.

Change workload1 to any name of your choice and select the other details as applicable to current on-premises server.

 - click add databases 

Enter the details of your on-premises database infrastructure in the Source section. In the Destination section, select the Azure service you would like to use

 - click add storage

After adding storage, select the storage type and enter the remaining details.

 - Under network  enter outbound bandwidth and destination region. 
 - Click next

1. Adjust assumptions: The assumptions in the TCO model are industry averages accredited by Nucleus Research. Adjust these assumption to reflect your situation and click next.

1. View report to Calculate and Compare Costs:
   • The TCO calculator will estimate the costs of running your workloads on-premises versus on Azure.
   • It will provide a detailed comparison, highlighting potential cost savings and benefits.

Example Scenario Using Azure TCO Calculator

Current On-Premises Setup:

• 10 physical servers (average cost $5,000 each)
• 5 TB storage (RAID 10 configuration, cost $2,000)
• 3 SQL Servers (licensing cost $3,000 each)
• Operational costs (power, cooling, maintenance): $2,000/month

Objective: Migrate to Azure to reduce costs and improve scalability.

1. Define Current Infrastructure:

• Servers: 10 (cost $50,000)
• Storage: 5 TB (cost $2,000)
• SQL Servers: 3 (licensing cost $9,000)
• Operational Costs: $2,000/month

2. Specify Azure Deployment:

• Virtual Machines: 10 VMs (D4s v3 instances)
• Storage: 5 TB (Standard HDD)
• SQL Databases: 3 SQL Database Managed Instances (General Purpose tier)
• Networking: VPN Gateway and Load Balancer

3. Calculate and Compare Costs:

• On-Premises Costs:

  • Initial Setup: $50,000 (servers) + $2,000 (storage) + $9,000 (SQL Server licenses) = $61,000
  • Monthly Operational Costs: $2,000

• Azure Costs (Estimated Monthly):

  • Virtual Machines: ~$4,000/month
  • Storage: ~$100/month
  • SQL Databases: ~$1,500/month
  • Networking: ~$250/month
  • Backup and Monitoring: ~$150/month
  • Total Estimated Monthly Cost: ~$6,000

• TCO Comparison:

  • On-Premises Total Monthly Cost: ~$4,500 (considering 3-year amortization of initial setup costs)
  • Azure Total Monthly Cost: ~$6,000

Steps to Use the Azure Pricing Calculator

1. Access the Tool:
   • Visit Azure Pricing Calculator page.
   • click login. This will automatically log you in with your email address.

• To get started, select product, choose example scenarios or open a saved estimate. we will be selecting services according to our identified needs.

1. Select Services:
   • Browse for the Azure services you plan to use. Here, we will be using Virtual Machine Scale Sets, App services, Azure SQL Database, Storage account, virtual network and load balance.

• click add to estimate

1. Configure Services:
   • Customize each selected service based on your requirements. For instance:
     • Virtual Machine scale Sets: Choose the region, operating system, type,tier, category, instance series and instance.

 - **SQL Database:** Select the tier, compute size, and storage capacity.
 - **Storage:** Determine the type of storage and the amount of data.

1. Review Cost Estimates:
   • The calculator will display a detailed cost breakdown for each service, including compute costs, storage costs, and any additional features or options.

2. Total Estimated Monthly Cost: $551.79

3. Adjust and Optimize:

   • Modify the configurations to see how changes impact the overall cost. This helps in optimizing the setup for cost efficiency.

4. Export and Share:

   • Once satisfied with the estimate, you can export it to Excel for further analysis or share a direct link with colleagues or stakeholders.