Direct Cloud Cost Savings By Leveraging Microsoft Tools

Evidence and data. Interviewees told Forrester that their organizations could achieve direct cloud cost savings by using Microsoft’s tools to optimize their Azure usage. These tools included Microsoft Cost Management, Azure Advisor, and the Azure pricing calculator. They explained that using these tools together allowed their organizations to access recommendations, enable resource visibility and optimization, and estimate costs, in addition to other benefits. Although the interviewees explained that these cost savings were highest in the first year depending on their prior environment, there were also ongoing opportunities for savings. They noted that achieving these cost savings helped their organizations not only achieve better financial outcomes but also drove faster migrations, accelerated AI adoption, and empowered business growth.

• Interviewees told Forrester that adopting Azure Advisor enabled their organizations to access recommendations and optimize usage, resulting in cost savings. In addition to cost optimization, Azure Advisor also supported other benefits beyond cost optimization including improved security, improved reliability, improved performance, and operational excellence.⁸

  • The IT director for a retail organization said: “I get the value [of a third-party CCMO solution] with Azure Advisor out of the box. … We can autoscale and shutdown.”
  • The head of technology for a retail organization said: “Azure Advisor knows our workloads and recommends best practices and optimizations in one place. We heavily rely on Azure Advisor.”

• Interviewees told Forrester that by using Microsoft Cost Management, their organizations achieved better resource visibility and optimization. Beyond the cost optimization benefit, interviewees for this and a prior case study noted other benefits including better and easier budgeting and decision-making, identifying workloads best suited for migration, and accelerated cloud transitions.⁹

  • The senior IT director for a manufacturing organization said, “We’re using Microsoft Cost Management to analyze, monitor, and optimize our Azure costs.”
  • The head of technology for a retail organization said: “Microsoft Cost Management significantly contributes to the cost savings. Our team can understand the potential savings and then act.” They continued, “By using Copilot in Microsoft Cost Management, we hope to get [even better insights to help with cost optimization].” They added: “Microsoft Cost Management helps our organization analyze, monitor, and optimize Azure cloud costs including AI deployments. This helps us better understand AI costs.”

• Interviewees explained how the Azure pricing calculator helped their organizations better estimate costs, which facilitated cost optimization when migrating workloads to Azure and starting new projects in the cloud. Interviewees’ organizations valued the ability to estimate costs accurately, which helped them optimize costs by selecting the appropriate services and scale. The IT director for a retail organization said, “Not only is Azure Advisor proving [valuable], but we also estimate costs with the Azure pricing calculator.”

Modeling and assumptions. Based on the interviews, Forrester assumes the following about the composite organization:

• The composite organization had $12.5 million in annual public cloud costs in its prior environment. According to Forrester’s Cloud Survey, 2024, 18% of survey respondents’ organizations with between $1 billion to less than $2 billion in annual company revenue had public cloud spend from $10 million to less than $15 million in the past 12 months.¹⁰

• These public cloud costs grow 5% year-over-year. According to Forrester’s Cloud Survey, 2024, of survey respondents’ organizations with between $1 billion to less than $2 billion in annual company revenue, 38% increased cloud budgets by 1% to 4% between 2023 and 2024, and 30% increased public cloud budgets between 5% and 10%.¹¹

• The composite organization reduces cloud spending by optimizing usage with Azure Advisor, Microsoft Cost Management, and the Azure pricing calculator. It achieves the highest savings in Year 1 and approximately 50% of those cost savings in Years 2 and 3.

Risks. This benefit may vary depending on:

• An organization’s cloud spend in its prior environment as influenced by its size, cloud maturity level, industry, business model, and other factors.

• The growth of an organization’s cloud spend year-over-year.

• Whether an organization chooses to use Azure Advisor, Microsoft Cost Management, and the Azure pricing calculator; its approach to optimizing cloud usage; and how well it can then optimize cloud usage and thereby reduce cloud spending.

Results. To account for these risks, Forrester adjusted this benefit downward by 15%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $4.9 million.

Direct Cloud Cost Savings By Leveraging Azure Strategic Pricing Offers

Evidence and data. Interviewees’ organizations achieved further savings by leveraging Azure strategic pricing offers, including Azure savings plan for compute, Azure reservations, and Azure Hybrid Benefit. The interviewees told Forrester that their organizations consistently applied these strategic pricing offers to their Azure consumption and progressively increased their use as they realized savings. Furthermore, in addition to bolstering the bottom line, these cost savings helped interviewees’ organizations migrate to Azure more quickly and accelerated AI adoption.

• Azure savings plan for compute: Interviewees told Forrester that Azure savings plan for compute was often a critical piece of their organizations’ cost optimization plans, particularly in combination with Azure reservations and Azure Hybrid Benefit. In addition to the cost savings, interviewees’ organizations valued the flexibility of the pricing offer and how they could apply it across select services. They reported savings as high as 63%.

  • The head of technology for a retail organization said: “With the savings plan, we either commit to one year or more and save 30% to 40%. We see the savings upfront.”
  • The vice president of analytics engineering for a financial services organization said, “With Azure reservations and Azure savings plan for compute, we’re saving close to 50%.”
  • The IT director for a manufacturing organization said, “Azure savings plan for compute saves us up to 60% based off at least a one-year commitment.”

• Azure reservations: Interviewees’ organizations used Azure reservations combined with Azure savings plan for compute and Azure Hybrid Benefit to achieve deeper cost savings. The commitments also made budgeting and forecasting easier compared to on-demand pricing. The interviewees reported savings as high as 72%. Additionally, interviewees also explained how their organizations leveraged Azure reservations for AI projects using provisioned throughput units (PTUs) to optimize AI costs and accelerate AI adoption.

  • The senior IT director for a manufacturing organization said, “Azure reservations gives better discounts and more predictability.”
  • The IT director for a healthcare organization said, “Azure reservations [enables] better predictability and planning.” They continued: “The more that you commit, the bigger savings you can get. [We’ve seen] anywhere from 30% to 70% savings.”
  • The CIO for a healthcare organization said, “We get 40% to 60% savings with Azure reservations depending on the length of the commitment.” They added, “The cost savings with Azure reservations for AI projects using PTUs is 25%.”
  • The vice president of analytics engineering for a financial services organization said: “We’re starting to leverage Azure reservations for AI projects using PTUs more. We’re using the Azure OpenAI service for our own model generation, and we’re making one-month reservations. On the longer-term workloads, we’re seeing 40% to 50% savings. We’re seeing savings with our larger AI projects now too.”
  • The IT director for a manufacturing organization said, “Azure reservations save us up to 70%.” They also explained that they saved on AI costs by leveraging Azure reservations for AI projects using PTUs, thereby accelerating AI adoption. They said: “It can reduce the AI cost per token. We have our own internal model that we’ve built on top of the Azure OpenAI service that leverages Azure reservations, and we’re able to save on token costs.”

• Azure Hybrid Benefit: In addition to leveraging Azure savings plan for compute and Azure reservations, interviewees’ organizations further optimized their costs with Azure Hybrid Benefit. According to the interviewees, their organizations used Azure Hybrid Benefit when migrating workloads to the cloud to save on licensing costs, which helped accelerate cloud adoption and empowered business growth. They reported savings as high as 85%.

  • The IT director for a retail organization said: “Being able to use our licenses in the public cloud has been huge for us. … We’re seeing 20% to 25% savings with Azure Hybrid Benefit.”
  • The vice president of IT for a healthcare organization said, “We had Windows licenses and SQL Server licenses, so we were able to use Azure Hybrid Benefit to save 30% to 35%.”
  • The CIO for a healthcare organization said: “The cost savings of Azure Hybrid Benefit is 40% to 50%. That includes SQL Server and Windows licenses. It helps us with the migrations we do from on-premises to Azure.”
  • The head of technology for a retail organization said: “When we were migrating, we used Azure Hybrid Benefit to save costs. For example, we were using SQL Server, and when we migrated, we saved 60% to 70% with Azure Hybrid Benefit.”
  • The senior IT director for a manufacturing organization said: “To move workloads to the cloud more efficiently, … we’ve used Azure Hybrid Benefit. … It saves us between 60% to 70%.”

Modeling and assumptions. Based on the interviews, Forrester assumes the following about the composite organization:

• The composite organization optimizes its cloud usage before optimizing its rates.

• The composite organization reduces cloud spending by optimizing rates with Azure strategic pricing offers. It covers more of its environment with the strategic pricing offers each year, addressing 10% of cloud spending with Azure savings plan for compute, 20% with Azure reservations, and 10% with Azure Hybrid Benefit by Year 3.

Risks. This benefit may vary depending on:

• An organization’s cloud spend in its prior environment as influenced by its size, cloud maturity level, industry, business model, and other factors.

• The growth of an organization’s cloud spend year-over-year.

• How well an organization optimizes its cloud usage before beginning to optimize rates.

• The nature of an organization’s cloud spend including how dynamic its cloud environment is and what Azure services comprise its cloud spend.

• Whether an organization chooses to use Azure savings plan for compute, Azure reservations, and Azure Hybrid Benefit; how it chooses to use them; its approach to optimizing rates with these offers; and how well it can optimize cloud rates to thereby reduce cloud spending.

Results. To account for these risks, Forrester adjusted this benefit downward by 15%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $3.8 million.

Improved Productivity By Leveraging Microsoft Tools

Evidence and data. Beyond direct cost savings, interviewees reported that their organizations’ employees could align and operate more efficiently by leveraging Microsoft tools in their FinOps practices. Consequently, employees saved time when purchasing, managing, and optimizing cloud costs. This increased productivity enabled the interviewees’ organizations to reallocate time to other cost-efficiency or value-driving efforts, including AI initiatives, thereby fostering business growth.

• The IT director for a retail organization said: “Our team is 25% more productive. Azure Advisor recommends actions, like using Azure reservations, that team members may not have had the time to think about before. It’s now easy to get an overview of our cloud spend.”

• The CIO for a healthcare organization said: “Azure Advisor provides automated recommendations. … If we didn’t have these tools, our FinOps team would be double the size.”

• The vice president of IT for a healthcare organization said, “These tools save 25% of the time because we have recommendations [with Azure Advisor].”

• The senior IT director for a manufacturing organization stated, “Out of 12 employees, one to two are now working on other contracts.” They explained, “Microsoft tools have freed up time to focus on our core business.”

• The vice president of analytics engineering for a financial services organization said: “The Microsoft tools help more quickly identify unusual spending patterns without manual oversight due to their reporting, alerts, and notifications. … [I estimate] at least 10% to 15% time savings.” These time savings allowed their team to refocus on more interesting and higher value work, including genAI and innovation. Furthermore, providing the proper tools to employees contributed to better experiences and thereby improved retention.

• The IT director for a healthcare organization said, “We’re saving our FinOps resources up to 25% of their time doing administrative work.” They explained that this time was saved on reviews and audits with business units on their cloud spend. As a result of this productivity gain, the IT director said, “We’ve been able to assign them to different focuses for SaaS management, for license management, and for pricing optimization.” They further added, “We’re able to focus them on our AI efforts and initiatives now too.”

Modeling and assumptions. Based on the interviews, Forrester assumes the following about the composite organization:

• It dedicates six employees to cloud purchasing and optimization decisions before adopting the Microsoft tools.

• Each employee spends 115 hours per year on cloud purchasing and optimization decisions in the prior environment. This grows 5% year-over-year as cloud costs increase.

• By adopting Azure Advisor, Microsoft Cost Management, and the Azure pricing calculator, the composite organization reduces its cloud purchasing and optimization effort by 16% in Year 1. This reduction increases to 19% in Year 2 and 24% in Year 3 as the composite further streamlines its processes and gains proficiency with the Microsoft tools.

• The average fully burdened hourly rate for a cloud administrator is $78.

• The individuals engaging in these activities recapture 50% of the time savings for productive work.

Risks. This benefit may vary depending on:

• An organization’s prior state, including its scale, FinOps team size, and the resulting number of employees previously dedicated to cloud purchasing and optimization decisions.

• The number of hours each employee spends on cloud purchasing and optimization decisions in an organization’s prior environment.

• An organization’s ability to use the Azure solutions for cost efficiency successfully and reduce the labor required for cloud purchasing and optimization.

• The fully burdened hourly rate for an employee, varying by role, seniority, and location.

• The ability of these employees to recapture time savings for productive work.

Results. To account for these risks, Forrester adjusted this benefit downward by 10%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $12,000.

Unquantified Benefits

Interviewees mentioned the following additional benefits that their organizations experienced but were not able to quantify:

• Increased cloud insights and visibility. Interviewees reported that leveraging Azure Advisor and Microsoft Cost Management enhanced their organizations’ visibility and insights into Azure. These tools enabled interviewees’ organizations to track and monitor cloud spend in detail, providing opportunities to visualize trends, detect anomalies, and gain valuable insights. The IT director for a manufacturing organization stated, “[As a first step, our team ran reports with] Microsoft Cost Management that helped get better visibility around Azure.” Similarly, the head of technology for a retail organization mentioned, “Microsoft Cost Management gives visibility and transparency.”

• Improved cloud budget predictability and forecasting. Interviewees highlighted that Microsoft Cost Management and the Azure pricing calculator improved their organizations’ budgeting and forecasting capabilities. They noted that these Microsoft tools provided a clearer understanding of costs before starting projects, allowed for setting cloud spend limits and alerts, and enabled expense tagging or allocation across business units or projects. Additionally, the ability to export data further enhanced forecasting accuracy. Azure strategic pricing offers also offered greater predictability than pay-as-you-go pricing. The senior IT director for a manufacturing organization explained: “We use the Azure pricing calculator to understand costs when pricing new instances. … Creating and maintaining a forecasted budget has improved [with the Azure pricing calculator and Microsoft Cost Management].” The IT director for a retail organization noted: “We do extensive manufacturing and R&D in Asia Pacific with different demands and service levels. The Azure pricing calculator helps us estimate annual costs by region and requirements, providing scenario-based pricing.” The head of technology for a retail organization concluded, “[These Microsoft tools] have 100% improved both budgeting and forecasting, increasing visibility and transparency between the technical and financial teams.”

• Improved cloud accountability and governance. Forrester recommends including cost optimization, budgets, and billing integration within the scope of cloud governance.¹² Interviewees explained that their organizations met this recommendation by adopting Azure Advisor, Microsoft Cost Management, and the Azure pricing calculator. They discussed creating budgets, allocating or tagging costs, and creating governance policies or guardrails to drive better accountability. For example, the vice president of IT for a healthcare organization explained, “Azure Advisor’s governance recommendations are very important because we are able to identify gaps.” Similarly, the head of technology for a retail organization added, “We are using [Microsoft solutions] to build cost control governance.”

• Accelerated cloud adoption and migration. Interviewees reported to Forrester that leveraging Microsoft tools and strategic pricing offers accelerated their organizations’ cloud adoptions and migrations. Specifically, Azure Hybrid Benefit enabled organizations to maximize their previous investments and reduce costs when migrating and modernizing, thereby speeding up the entire journey. The IT director for a healthcare organization noted: “[The Microsoft tools and Azure strategic pricing offers] have accelerated and improved [our cloud adoption and migration.] … That is a huge win.”

• Accelerated AI adoption and innovation. Interviewees reported that their organizations adopted AI more quickly and accelerated innovation with AI by leveraging Microsoft’s tools and strategic pricing offers. These Azure solutions enabled cost savings, which organizations reinvested into AI initiatives. Specifically, they saved on Azure OpenAI Service costs by leveraging Azure reservations using PTUs. The vice president of analytics engineering for a financial services organization said: “Yes, [the Azure solutions have accelerated our AI journey]. … By efficiently allocating funds to AI model training and compute, we can save budget and reallocate it. That’s a win.” Similarly, the IT director for a manufacturing organization said: “We’re using Azure for AI, and we get discounts. The proper controls and strategic pricing offers will save costs as we grow our AI initiative.” They further elaborated, “The right controls and cost savings have enabled more workloads and new innovation around AI.”

Flexibility

The value of flexibility is unique to each customer. There are multiple scenarios in which a customer might implement Azure solutions that enhance cost efficiency and later realize additional uses and business opportunities, including:

• Empowering business growth and maximizing business value. Interviewees told Forrester that adopting Microsoft tools and strategic pricing offers empowered business growth and maximized the value of their organizations’ cloud spend. By operating more efficiently, the interviewees’ organizations reinvested cloud cost savings into high-impact projects, including AI, realizing more value per dollar spent. The CIO for a healthcare organization explained: “The Azure solutions help the business run more efficiently, which impacts the bottom line. We can use those resources for other purposes.” Similarly, the vice president of IT for a healthcare organization noted: “We are growing and adding new business. [Due to the cost savings,] we can add new applications without incurring additional cost.” Echoing these sentiments, the head of technology for a retail organization said, “The Azure tools and offers allow us to keep the same amount of budget while supporting the expansion of the business.”

• Positive sustainability impact. Maximizing cloud efficiency not only lowers costs but also reduces carbon emissions, according to Forrester.¹³ Interviewees supported this view, noting that although their organizations’ primary goal wasn’t environmental impact, using the Azure solutions analyzed in this study led to more sustainable operations. The IT director for a retail organization stated: “We hit our sustainability goals by scaling more into the public cloud. We don’t want to use more resources than needed, and part of our environmental, social, and governance strategy is to scale down unneeded and overprovisioned resources.” Similarly, the vice president of analytics engineering for a financial services organization added, “We’re being smart and efficient by shutting down unused virtual machines, so that reduces our costs and environmental impact.”

Flexibility would also be quantified when evaluated as part of a specific project (described in more detail in Total Economic Impact Approach).