Challenge 6: Optimise

Challenge Snapshot

Field	Value
Duration	45 minutes
Type	Whiteboard Design Session
Points	—
Deliverable	Cost optimization and governance design with hybrid strategy

Objective

Design a cost optimization and governance strategy for your migrated environment, including hybrid management with Azure Arc.

The Business Challenge

Contoso Bakery’s Finance Manager wants to know:

How much will this cost? — Monthly and annual projections
How can we save money? — Reserved Instances, right-sizing, hybrid benefit
What about the servers we can’t migrate? — Hybrid management strategy
How do we govern this? — Policies, compliance, management groups

The migration will only be approved if the business case is solid!

Prerequisites

Before starting this challenge, ensure:

Challenges 3-5 completed
Assessment cost estimates available
GDPR requirements incorporated (from Challenge 5)

Your Tasks

Part A: Cost Estimation (15 min)

Build a complete cost picture for Contoso Bakery:

Direct Migration Costs

Category	One-Time	Monthly	Annual
Azure Migrate tooling	$0	$0	$0
Data transfer (egress)	Estimate	$0	—
Network connectivity	Setup	Ongoing	Annual
Subtotal

Running Costs (from Assessment)

Server	Azure VM Size	Compute/Month	Storage/Month	Total/Month
ArcBox-Win2K22	[from assessment]	$	$	$
ArcBox-Win2K25	[from assessment]	$	$	$
ArcBox-SQL	[from assessment]	$	$	$
ArcBox-Ubuntu-01	[from assessment]	$	$	$
ArcBox-Ubuntu-02	[from assessment]	$	$	$
Total IaaS				$

Additional Services

Service	Purpose	Monthly Cost
Azure Monitor	Monitoring & alerts	$
Log Analytics	Log storage	$
Backup vault	VM backups	$
Key Vault	Secrets management	$
Total Platform		$

Total Monthly Cloud Spend: $________

Part B: Cost Optimization Strategies (15 min)

Identify savings opportunities:

Azure Hybrid Benefit

If Contoso Bakery has Windows Server licenses with Software Assurance:

Benefit	Savings	Applicable To
Azure Hybrid Benefit (Windows)	Up to 40%	Windows VMs
Azure Hybrid Benefit (SQL)	Up to 55%	SQL Server

Question: Does Contoso Bakery have eligible licenses?

Reserved Instances

Commitment	Discount	Risk
1-year RI	~20-30%	Low commitment
3-year RI	~40-60%	Higher commitment

Question: Which workloads are stable enough for 3-year commitment?

Right-Sizing

Review assessment recommendations:

Server	Assessed Size	Recommended Size	Monthly Savings
[Server]	D4s_v5	D2s_v5	$
…

Other Optimizations

Strategy	Description	Potential Savings
Auto-shutdown	Dev/test VMs off at night	50-70%
Spot instances	Fault-tolerant workloads	60-90%
Azure Advisor	Recommendations engine	Varies
Cost Management	Budgets and alerts	Visibility

Deliverable: Whiteboard showing optimization strategy with projected savings

Part C: Hybrid Management with Azure Arc (10 min)

Not everything may migrate to Azure. Design a hybrid strategy:

Hybrid Scenarios

Scenario	Solution
Servers that can’t migrate (legacy apps, compliance)	Azure Arc-enabled servers
SQL databases staying on-prem	Azure Arc-enabled SQL Server
Kubernetes clusters on-prem	Azure Arc-enabled Kubernetes
Data services on-prem	Azure Arc data services

Azure Arc Benefits

Capability	Description
Single pane of glass	Manage Azure + on-prem from Azure portal
Azure Policy	Apply governance across hybrid estate
Azure Monitor	Unified monitoring
Microsoft Defender	Security across environments
Azure Update Manager	Centralized patching

Design Exercise:

If some servers must remain on-premises:

Which servers would stay? (e.g., latency requirements, regulations)
How would you manage them alongside Azure?
What policies would apply to both environments?

Deliverable: Hybrid architecture showing Azure + Arc-managed on-prem

Part D: Governance Design (5 min)

Design the governance structure:

Management Group Hierarchy

Root Management Group
├── Platform
│   ├── Identity
│   ├── Management
│   └── Connectivity
└── Landing Zones
    ├── Production
    │   └── Contoso-Prod (Subscription)
    └── Non-Production
        └── Contoso-Dev (Subscription)

Key Azure Policies

Policy	Scope	Effect
Allowed locations	Landing Zones	Deny non-EU regions
Allowed VM SKUs	Production	Deny expensive/burstable
Require tags	All	Deny resources without cost center
Enable backup	Production	DeployIfNotExists
Enable Defender	All	DeployIfNotExists

RBAC Assignments

Role	Scope	Assigned To
Owner	Subscription	IT Admin team
Contributor	Resource Group	Migration team
Reader	Subscription	Finance/Audit
Security Reader	Management Group	Security team

Deliverable: Governance structure on whiteboard

Expected Deliverables

Add to your whiteboard:

✅ Cost Summary
- Monthly/annual estimates
- Before and after optimization
✅ Optimization Strategy
- Hybrid Benefit applicability
- Reserved Instance recommendations
- Right-sizing opportunities
✅ Hybrid Architecture
- What’s in Azure, what’s Arc-managed
- Single pane of glass approach
✅ Governance Structure
- Management groups
- Key policies
- RBAC design

📸 Final whiteboard photo!

Success Criteria

Criterion	Verification
Cost summary completed	Monthly and annual totals are documented
Optimization plan defined	Savings actions are realistic and prioritized
Governance and hybrid strategy aligned	Policy, RBAC, and Arc approach are clearly described

💡 Tip

💡 Hybrid Benefit is often forgotten — Big savings if licenses exist

💡 Start with Pay-as-you-go — Commit to RIs after usage patterns stabilize

💡 Right-sizing is iterative — Use Azure Advisor ongoing

💡 Azure Arc isn’t just for non-migrated servers — Consider for future acquisitions

💡 Governance prevents cost surprises — Policies save money!

Reference: Azure Cost Management Tools

Tool	Purpose	When to Use
Pricing Calculator	Pre-migration estimates	Planning phase
TCO Calculator	Compare on-prem vs Azure	Business case
Cost Management	Track actual spend	Post-migration
Azure Advisor	Optimization recommendations	Ongoing
Budgets & Alerts	Spending limits	Governance

Reference: Well-Architected Framework - Cost Optimization

Key principles:

Plan and estimate costs — Before deployment
Provision with optimization — Right-size from start
Use monitoring and analytics — Track spending
Maximize efficiency — Optimize continuously
Use governance — Enforce standards

Bonus Points Opportunity! (+5)

Impress the judges with advanced cost optimization:

Detailed TCO comparison (on-prem vs Azure)
Savings plan analysis
Tagging strategy for cost allocation
Showback/chargeback model

⚠️ Watch out

Underestimating governance can erase savings through sprawl and misconfiguration.
Commit discounts should follow observed usage patterns, not assumptions.

Reflection Questions

What surprised you about the cost estimates?
How does governance impact cost management?
Would you recommend Azure Arc for Contoso Bakery’s hybrid strategy?

Next Step

Prepare for Challenge 7: Presentation — Time to present your complete migration strategy!