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  • Jonathan Works

Tag Inheritance: Streamline your Azure cost management tagging

Welcome to my ongoing series on FinOps cloud financial management in Azure.


Here's a look at a brand new Azure preview feature called "Tag Inheritance" and how it helps you track and report your Azure costs using best practices based on Microsoft cloud adoption and "Well Architected Framework" cost optimization.


Tag Inheritance is a new feature only available for customers with an Enterprise Account (EA) or a Microsoft Customer Agreement (MCA) account. Tag Inheritance allows you to assign tags to resources at a higher level in your resource hierarchy. These tags will then be automatically applied to all resources underneath them.


One of the primary benefits of Tag Inheritance is that it makes it easier to allocate costs to specific departments or business units. By assigning tags to resources, you can create custom cost allocation rules that allow you to track and attribute costs to specific departments or business units. It's super helpful for corporations with lots of resources spread across different departments or business units. Having this information makes it easier to report on and allocate costs for consumption charges back to budget owners.


In addition to helping with cost allocation, Tag Inheritance can make it easier to understand and optimize your cloud costs. By applying tags to your resources, you can create custom reports and dashboards to see how much each department or business unit is spending on cloud resources. This can help you identify areas where you may be able to optimize your costs, such as by identifying underutilized resources or by migrating workloads to more cost-effective services.


Enabling Tag Inheritance is a breeze! You enable the Tag Inheritance setting from the Azure portal. You can apply the setting to the EA billing account, MCA billing profile, or subscription scope. After the setting is enabled, all resource group and subscription tags are automatically applied to child resource usage records. To enable Tag Inheritance, follow these simple steps:

1. Head on over to the Azure portal.

2. In the Azure portal, navigate to Cost Management + Billing.

3. Select a billing scope.

4. In the left menu under Settings, select either Manage billing account or Manage subscription, depending on your scope.

5. Under Tag inheritance, select Edit.

Azure Tag Inheritance Enable

6. In the Tag inheritance (Preview) window, select Automatically apply subscription and resource group tags to new data.

Azure Tag Inheritance Automatically Apply new usage data

Once you've enabled the feature, you can start assigning tags to your resources. Just navigate to the resource you want to tag, click on the "Tags" blade, enter the name and value of the tag, and click "Save." It's that easy!


After the Tag Inheritance setting is enabled, it takes about 8-24 hours for the child resource usage records to update with subscription and resource group tags. The usage records are updated for the current month using the existing subscription and resource group tags.

For example, if the Tag Inheritance setting is enabled on December 28, child resource usage records are updated from December 1 using the tags that existed on December 28. Similarly, if the Tag Inheritance setting is disabled, the inherited tags will be removed from the usage records for the current month.


When using Tag Inheritance, a resource tag will match the resource group or subscription tag being applied, with the resource tag applied to its usage record by default. You can change the default behavior to have the subscription or resource group tag override the resource tag. You can change the default behavior to have the subscription or resource group tag override the resource tag.


You can change this behavior and choose between resource and inherited tags:


1. From Cost Management | Manage bill account

2. Open the Tag Inheritance window

3. Change the option for "When the resource has a tag with the same name"

o "Keep the resource tag"

o "Use the subscription or resource group tag"

Azure Tag Inheritance use subscription or resource group

But wait, there's more! You can also create custom cost allocation rules to track and attribute costs to specific tags or groups of tags. Just follow these steps:

  1. Navigate to the "Cost management settings" blade.

  2. Scroll down to the "Cost allocation" section.

  3. Click on the "Add rule" button.

  4. Enter the rule's name and select the tags you want to include in the rule.

  5. Click on the "Save" button.

Features like Tag Inheritance can assist you to more easily track and allocate costs to specific projects, teams, or business units by assigning relevant tags to your resources. This level of granularity is essential for making informed decisions about where to allocate resources and where to cut costs. One of the pillars of cloud financial management is resource tagging.


But tags are about more than just cost allocation. They can also help with resource management and organization. For example, you can use tags to group resources that belong to the same application or to identify resources owned by a particular team. This makes tracking and managing your resources easier, especially as your cloud environment grows and becomes more complex.


So why are tags so critical? In a word, accountability. If everyone knows their resources are being tracked, they'll be more conscious of how they use them. Your organization gets better at using its resources, so it saves them money.


For example, if your company is launching a new web app called "Unicorn," you can add a tag called "unicorn-powered" for these particularly magical resources, or maybe some beta R&D cloud-native services being tested could be tagged "pineapple-on-pizza" for some stuff that's controversial?


Tags are essential for cost allocation and FinOps financial management in the cloud. By leveraging the power of resource tagging, you can make informed decisions about allocating resources and optimizing your cloud spending costs.


With tagging management, you'll know exactly how much each department or business unit spends on Azure resources. If you use this info, you can figure out your budget for resource consumption, identify costs you can cut, and save a lot of money in the long run. With this Tag Inheritance feature, you'll be on your way to improving your cloud financial management. So not only will you be saving money, but you'll also be a better financial management rockstar!


For more information, check out the Tag Inheritance feature on the Microsoft Learn site.

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