Azure Cost Optimization Skill

Required Tools:

• Azure CLI installed and authenticated (az login)
• Azure CLI extensions: costmanagement, resource-graph
• Azure Quick Review (azqr) installed - See Azure Quick Review for details

Required Permissions:

• Cost Management Reader role
• Monitoring Reader role
• Reader role on subscription/resource group

Verification commands:

az --version
az account show
az extension show --name costmanagement
azqr version

Step 1: Load Best Practices

Get Azure cost optimization best practices to inform recommendations:

// Use Azure MCP best practices tool
mcp_azure_mcp_get_azure_bestpractices({
  intent: "Get cost optimization best practices",
  command: "get_bestpractices",
  parameters: { resource: "cost-optimization", action: "all" }
})

Step 1.5: Redis-Specific Analysis (Conditional)

If the user specifically requests Redis cost optimization, use the specialized Redis skill:

📋 Reference: Azure Redis Cost Optimization

When to use Redis-specific analysis:

• User mentions "Redis", "Azure Cache for Redis", or "Azure Managed Redis"
• Focus is on Redis resource optimization, not general subscription analysis
• User wants Redis-specific recommendations (SKU downgrade, failed caches, etc.)

Key capabilities:

• Interactive subscription filtering (prefix, ID, or "all subscriptions")
• Redis-specific optimization rules (failed caches, oversized tiers, missing tags)
• Pre-built report templates for Redis cost analysis
• Uses redis_list command

Report templates available:

• Subscription-level Redis summary
• Detailed Redis cache analysis

Note: For general subscription-wide cost optimization (including Redis), continue with Step 2. For Redis-only focused analysis, follow the instructions in the Redis-specific reference document.

Step 1.6: Choose Analysis Scope (for Redis-specific analysis)

If performing Redis cost optimization, ask the user to select their analysis scope:

Prompt the user with these options:

1. Specific Subscription ID - Analyze a single subscription
2. Subscription Name - Use display name instead of ID
3. Subscription Prefix - Analyze all subscriptions starting with a prefix (e.g., "CacheTeam")
4. All My Subscriptions - Scan all accessible subscriptions
5. Tenant-wide - Analyze entire organization

Wait for user response before proceeding to Step 2.

Step 2: Run Azure Quick Review

Run azqr to find orphaned resources (immediate cost savings):

📋 Reference: Azure Quick Review - Detailed instructions for running azqr scans

// Use Azure MCP extension_azqr tool
extension_azqr({
  subscription: "<SUBSCRIPTION_ID>",
  "resource-group": "<RESOURCE_GROUP>"  // optional
})

What to look for in azqr results:

• Orphaned resources: unattached disks, unused NICs, idle NAT gateways
• Over-provisioned resources: excessive retention periods, oversized SKUs
• Missing cost tags: resources without proper cost allocation

Note: The Azure Quick Review reference document includes instructions for creating filter configurations, saving output to the output/ folder, and interpreting results for cost optimization.

Step 3: Discover Resources

For efficient cross-subscription resource discovery, use Azure Resource Graph. See Azure Resource Graph Queries for orphaned resource detection and cost optimization patterns.

List all resources in the subscription using Azure MCP tools or CLI:

# Get subscription info
az account show

# List all resources
az resource list --subscription "<SUBSCRIPTION_ID>" --resource-group "<RESOURCE_GROUP>"

# Use MCP tools for specific services (preferred):
# - Storage accounts, Cosmos DB, Key Vaults: use Azure MCP tools
# - Redis caches: use mcp_azure_mcp_redis tool (see ./references/azure-redis.md)
# - Web apps, VMs, SQL: use az CLI commands

Step 4: Query Actual Costs

Get actual cost data from Azure Cost Management API (last 30 days):

Create cost query file:

Create temp/cost-query.json with:

{
  "type": "ActualCost",
  "timeframe": "Custom",
  "timePeriod": {
    "from": "<START_DATE>",  
    "to": "<END_DATE>"
  },
  "dataset": {
    "granularity": "None",
    "aggregation": {
      "totalCost": {
        "name": "Cost",
        "function": "Sum"
      }
    },
    "grouping": [
      {
        "type": "Dimension",
        "name": "ResourceId"
      }
    ]
  }
}

Action Required: Calculate <START_DATE> (30 days ago) and <END_DATE> (today) in ISO 8601 format (e.g., 2025-11-03T00:00:00Z).

Execute cost query:

# Create temp folder
New-Item -ItemType Directory -Path "temp" -Force

# Query using REST API (more reliable than az costmanagement query)
az rest --method post `
  --url "https://management.azure.com/subscriptions/<SUBSCRIPTION_ID>/resourceGroups/<RESOURCE_GROUP>/providers/Microsoft.CostManagement/query?api-version=2023-11-01" `
  --body '@temp/cost-query.json'

Important: Save the query results to output/cost-query-result<timestamp>.json for audit trail.

Step 5: Validate Pricing

Fetch current pricing from official Azure pricing pages using fetch_webpage:

// Validate pricing for key services
fetch_webpage({
  urls: ["https://azure.microsoft.com/en-us/pricing/details/container-apps/"],
  query: "pricing tiers and costs"
})

Key services to validate:

• Container Apps: https://azure.microsoft.com/pricing/details/container-apps/
• Virtual Machines: https://azure.microsoft.com/pricing/details/virtual-machines/
• App Service: https://azure.microsoft.com/pricing/details/app-service/
• Log Analytics: https://azure.microsoft.com/pricing/details/monitor/

Important: Check for free tier allowances - many Azure services have generous free limits that may explain $0 costs.

Step 6: Collect Utilization Metrics

Query Azure Monitor for utilization data (last 14 days) to support rightsizing recommendations:

# Calculate dates for last 14 days
$startTime = (Get-Date).AddDays(-14).ToString("yyyy-MM-ddTHH:mm:ssZ")
$endTime = Get-Date -Format "yyyy-MM-ddTHH:mm:ssZ"

# VM CPU utilization
az monitor metrics list `
  --resource "<RESOURCE_ID>" `
  --metric "Percentage CPU" `
  --interval PT1H `
  --aggregation Average `
  --start-time $startTime `
  --end-time $endTime

# App Service Plan utilization
az monitor metrics list `
  --resource "<RESOURCE_ID>" `
  --metric "CpuTime,Requests" `
  --interval PT1H `
  --aggregation Total `
  --start-time $startTime `
  --end-time $endTime

# Storage capacity
az monitor metrics list `
  --resource "<RESOURCE_ID>" `
  --metric "UsedCapacity,BlobCount" `
  --interval PT1H `
  --aggregation Average `
  --start-time $startTime `
  --end-time $endTime

Step 7: Generate Optimization Report

Create a comprehensive cost optimization report in the output/ folder:

Use the create_file tool with path output/costoptimizereport<YYYYMMDD_HHMMSS>.md:

Report Structure:

# Azure Cost Optimization Report
**Generated**: <timestamp>

## Executive Summary
- Total Monthly Cost: $X (💰 ACTUAL DATA)
- Top Cost Drivers: [List top 3 resources with Azure Portal links]

## Cost Breakdown
[Table with top 10 resources by cost, including Azure Portal links]

## Free Tier Analysis
[Resources operating within free tiers showing $0 cost]

## Orphaned Resources (Immediate Savings)
[From azqr - resources that can be deleted immediately]
- Resource name with Portal link - $X/month savings

## Optimization Recommendations

### Priority 1: High Impact, Low Risk
[Example: Delete orphaned resources]
- 💰 ACTUAL cost: $X/month
- 📊 ESTIMATED savings: $Y/month
- Commands to execute (with warnings)

### Priority 2: Medium Impact, Medium Risk
[Example: Rightsize VM from D4s_v5 to D2s_v5]
- 💰 ACTUAL baseline: D4s_v5, $X/month
- 📈 ACTUAL metrics: CPU 8%, Memory 30%
- 💵 VALIDATED pricing: D4s_v5 $Y/hr, D2s_v5 $Z/hr
- 📊 ESTIMATED savings: $S/month
- Commands to execute

### Priority 3: Long-term Optimization
[Example: Reserved Instances, Storage tiering]

## Total Estimated Savings
- Monthly: $X
- Annual: $Y

## Implementation Commands
[Safe commands with approval warnings]

## Validation Appendix

### Data Sources and Files
- **Cost Query Results**: `output/cost-query-result<timestamp>.json`
  - Raw cost data from Azure Cost Management API
  - Audit trail proving actual costs at report generation time
  - Keep for at least 12 months for historical comparison
  - Contains every resource's exact cost over the analysis period
- **Pricing Sources**: [Links to Azure pricing pages]
- **Free Tier Allowances**: [Applicable allowances]

> **Note**: The `temp/cost-query.json` file (if present) is a temporary query template and can be safely deleted. All permanent audit data is in the `output/` folder.

Portal Link Format: