As organizations increasingly rely on Azure to power their digital transformation, managing and understanding cloud costs becomes a critical priority. This is especially true for large enterprises that centrally manage Azure services or resources, while different internal departments or business units consume them. The centrally managing team often wants to reallocate the cost of the shared services back out to the internal departments or organizational business units who are actively using the services.

This is where Azure Cost Allocation comes in. Cost Allocation in Azure Cost Management allows you to reassign or distribute the costs of shared Azure services. You can assign costs from subscriptions, resource groups, or tags to other subscriptions, resource groups or tags in your organization. This helps you manage and show cost accountability from one place to another.

Here’s how you can leverage Azure Cost Allocation to gain better visibility and accountability over your cloud costs:

Create Cost Allocation Rules

To get started, you’ll need to meet the following prerequisites:

  • Have a Microsoft Customer Agreement (MCA) or an Enterprise Agreement (EA)
  • Be an Enterprise Administrator for EA or a Billing Account owner for MCA

Once you’ve met the prerequisites, you can create cost allocation rules in the Azure portal:

  1. Sign in to the Azure portal and navigate to Cost Management + Billing > Cost Management.
  2. Under Settings > Configuration, select Cost allocation.
  3. Select +Add to create a new cost allocation rule.
  4. Provide a descriptive name for the rule.
  5. Select the sources (subscriptions, resource groups, or tags) whose costs you want to distribute.
  6. Select the targets (subscriptions, resource groups, or tags) to receive the allocated costs.
  7. Configure the allocation percentage - you can distribute costs evenly, proportionally by total cost, compute cost, storage cost, or network cost, or set custom percentages.
  8. Review and create the rule.

The allocation rule will start processing, and within 24 hours, the selected source’s costs will be allocated to the specified targets.

Verify and Manage Cost Allocation

You can view the impact of the cost allocation rules in several ways:

  • In the Azure portal, go to Subscriptions, select a target subscription, and view the cost breakdown in Cost analysis.
  • For resource groups and tags, follow a similar process in the Cost analysis section.
  • Download the Usage Details file or exported data - the costAllocationRuleName column will show the applied cost allocation rules.

If needed, you can also edit existing cost allocation rules to modify the sources, targets, or allocation percentages.

Considerations and Limitations

While Cost Allocation provides valuable visibility and accountability, there are a few things to keep in mind:

  • Cost Allocation doesn’t affect your billing invoice - it’s primarily for internal chargeback purposes.
  • Certain Azure services and purchases (like reservations) are currently not supported for cost allocation.
  • Cost allocation data may not be available in all reporting tools, like the Cost Management Power BI app.

To learn more about cost allocation and how to optimize your cloud investment, check out the Cost Management + Billing FAQ and the Cost Management best practices guide.

Source: Allocate Azure costs