Virtual Hosters Part 3: Reduce Azure Costs to Beat Traditional Hosting

Related:
* Virtual Hosters: 10 Ways to Find Success Beyond Datacenters
* Virtual Hosters Part 2: Why Azure Lighthouse Is a Gift to Microsoft Partners

The monthly cost for a traditional hosting provider is on average about $50 per virtual machine (VM) without management of the software layer. The cost can be either higher or lower depending on the focus of your hosting business, but this is fairly representative for hosters with mixed workloads.

To get to a similar price point with Azure as a virtual hoster, you need to be a little bit clever.

First, let's cover the obvious steps:

1. Don't oversize VMs. Instead, you should optimize the resources (cores, RAM, storage, etc.) so that they are the right size. You can easily expand later if you need to.
2. Snooze VMs when they are not being used.
3. There are price differences between Azure regions, and sometimes they can be significant. If the choice of Azure region is not important to a customer, pick a region that gives you a cost advantage.
4. Make a three-year commitment because this will save you lots of money. You can compare this with traditional hosting in which you always made your investment with a multi-year horizon. You can exchange as needed or cancel with only a 12% cancellation charge, which is nothing compared to how much you have saved.

The choice of operating system, Linux or Windows Server makes only a small difference in traditional hosting but the difference can be significant in Azure for certain VM types.

Here comes my super-secret tip, which will save you up to 64% of the cost for a VM running Windows Server and on average 1/3 of the cost of all VM types. This is a true game changer that will seal the deal for the business case as your cost for virtual hosting in Azure will be now be on par with being a traditional "brick and mortar" hoster. To make this even better, my bet is that the cost for Azure will continue to go down, which will make your business case even better over time.

The way to make this happen is to use something called Azure Hybrid Benefit for Windows Server and now the cost for a VM with Linux, becomes the cost for all your VMs in Azure regardless of operating system.

When you use this benefit, you provide the license for Windows Server separately and not embedded in a VM through Azure. The best licensing program for a virtual hoster is CSP (Cloud Solution Provider) and here you can also get Windows Server licenses separately at competitive prices. The CSP licenses are for up to eight cores each. When you get two eight-core licenses, you can assign them to two different VMs if each has no more than eight cores. Or you can assign them to one VM with a maximum of 16 cores. There is no need for any CALs when you run Windows Server in Azure, and this saves you money compared to when you use CSP for VMs that are installed elsewhere.

There are several other ways to do it, and they are documented here. This is not as difficult as it looks, and a CSP Indirect Provider will be able to walk you through it if you have questions.

But Azure is not just about cost. You will soon discover that you can do things that you were not able to do before, and you will now be able to help your customers with new scenarios where you can help them meet more complex scenarios.

I also want to say a few words about migrations, which comes up for hosters all the time.

Azure gives you the opportunity to not just migrate VMs as they are, but instead gives you the opportunity to take responsibility for a major modernization where the number of VMs can be reduced and replaced with different services (like SQL as a service). The modernized setup will increase agility, performance and user satisfaction.

I think that the preferred approach is to take the opportunity and convince your customer to do a refresh with a new setup, but your customer needs to pay for the modernization project. Unless the customer is prepared to pay for the major refresh you should seek approval to migrate VM by VM "as is" and be prepared to do it for free. This is still far better than doing nothing -- and you can always do the refresh later.

Posted by Per Werngren on June 10, 2020