Managing Cloud Infrastructure Costs

At Microsoft, we've developed a business model to help manage costs, capacity, and our investments. We also use it to influence behavior which I'll come to shortly. But first, when we look at costs, we're really looking at the costs to deliver our cloud infrastructure, where the accountability lies, and the components that comprise our cost allocation model.  When we look at capacity, we're really looking at the resources that are currently being consumed versus what's available.  And finally, when we look at our investments, we're really looking at where we invest and how to optimize those investments to get the greatest return. 

In terms of costs, there's the cost of the infrastructure that our online services use to run their service.  This includes data center services, bandwidth, networking, storage, and incident management costs. Missing from this are things like lead time capacity for future growth which is what GFS is accountable for.  They are also responsible for bringing down our infrastructure costs over time.  Then there are the direct costs incurred by our properties or online service, e.g. dedicated servers and services.  The properties themselves are accountable for things like rated kW and online services direct costs.    

Our costs are based on granular rates that have been adjusted by service and location making the costs as fair and equitable as possible.  As I alluded to earlier, GFS is accountable for scaling mixed adjusted rates while consistently driving their rates down year over year. 

The idea behind the rate structure and our cost allocation model is to drive convergence of platforms and infrastructure and deliver an SLA that drives reliability into the software instead of the underlying infrastructure.