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Challenge 2: Monitor with Application Insights

Time: ~20 minutes

Objectives

By the end of this challenge, you will have:

  • ✅ GenAI tracing enabled for your Foundry agents
  • ✅ Agent interactions visible as traces in Application Insights
  • ✅ Understanding of how to debug agent behaviour in production

monitor

Context

Your agents work — but how do you know they're working well? What if an agent gives a bad answer? What if latency spikes? What if a tool call fails silently?

Application Insights with GenAI tracing gives you:

  • Full trace of every agent interaction (user message → model call → tool calls → response)
  • Token usage per request
  • Latency breakdown (network, model inference, tool execution)
  • Error tracking and alerting

Why Monitor?

AI agents behave differently from traditional software. A conventional API either returns the right data or throws an error — you can test it deterministically. An agent's output is probabilistic: the same input can produce subtly different responses on each run, tool calls can succeed but return unexpected data, and failures can be silent (the agent responds confidently but incorrectly). Without observability, these issues are invisible until a user reports them.

Monitoring serves three critical functions for AI agents:

  • Reliability — Detect when agents stop working (tool call failures, timeouts, empty responses) before users do
  • Performance — Track latency and token usage over time, catch regressions when you update a system prompt, and right-size your deployments for cost efficiency
  • Debugging — When something goes wrong, distributed traces give you a complete record of what the model reasoned, what tools were called, what they returned, and exactly where the chain broke

For production AI systems, monitoring is the foundation that makes improvement possible. You can't fix what you can't see.

For TireForge specifically: a false negative from the Anomaly Detection Agent — reporting CP-003 as healthy when pressure is drifting toward failure — could mean a curing press breakdown mid-production run, scrapping an entire batch of tires. Traces show you exactly which sensor values the agent saw, what check_thresholds returned, and why the agent concluded "normal" — so you can fix the prompt or thresholds before it happens again.

Portal or SDK?

Microsoft Foundry gives you two ways to monitor agents. The Foundry portal (ai.azure.com/nextgen) has a built-in Tracing view where you can browse agent interactions, inspect individual spans, and see token usage and latency — no code required. Application Insights (via the Azure portal) gives you deeper analytics: Kusto queries, custom dashboards, and alerting rules.

In this challenge we use the SDK — monitor.py instruments your agents so every interaction is automatically captured as a distributed trace. Once the script runs, you'll explore those traces using both portal options, seeing how each one presents the same data differently.

Prerequisites

Make sure your .env has: 

AZURE_EXPERIMENTAL_ENABLE_GENAI_TRACING=true
OTEL_INSTRUMENTATION_GENAI_CAPTURE_MESSAGE_CONTENT=true
APPLICATIONINSIGHTS_CONNECTION_STRING=InstrumentationKey=xxx;...

Connect Application Insights to the Portal

The deploy script automatically links Application Insights to your Foundry project. To confirm it worked, open the Microsoft Foundry portal, navigate to your project, and click Tracing in the left sidebar — you should see the Application Insights resource already connected.

If you see a "Create or connect an App Insights resource to get started" banner, the automatic connection was blocked by a tenant policy. Fix it in one click: click Connect, select the foundry-hack-insights-<suffix> resource from the dropdown, and confirm. You only need to do this once.

Get Started

Open monitor.py and review the tracing setup.

cd factory/challenge-2-monitor
python monitor.py

Once the script finishes, your traces are live. Use either portal to explore them.

Option A: Microsoft Foundry Portal

  1. Go to foundry.microsoft.com → open your project
  2. Left sidebar → Tracing
  3. You’ll see a list of recent traces — click any row to open it
  4. Inside a trace you can see:
  5. Each agent turn as a span (input → output)
  6. Tool calls (check_thresholds, etc.) as child spans with inputs/outputs
  7. Token usage and latency per span
  8. The full model prompt and completion if OTEL_INSTRUMENTATION_GENAI_CAPTURE_MESSAGE_CONTENT=true
  9. Use the timeline view to spot slow spans, and the details panel to inspect individual messages

Option B: Azure Portal — Application Insights

  1. Go to portal.azure.com → search for Application Insights → open foundry-hack-insights-<suffix>
  2. Left sidebar → Investigate → Transaction search
  3. Set the time range to Last 30 minutes and click Search — you’ll see individual trace events
  4. For a richer view: left sidebar → Investigate → Performance
  5. Shows operation durations, percentiles, and outliers
  6. For end-to-end traces: click any operation → Drill into → End-to-end transaction details
  7. This renders the full Gantt chart of spans for a single agent run
  8. To write custom queries: left sidebar → Monitoring → Logs
  9. Try this starter query to see all GenAI traces: 
    traces
| where timestamp > ago(1h)
| where message contains "gen_ai"
| project timestamp, message, severityLevel, customDimensions
| order by timestamp desc

Success Criteria

  • [ ] You can see at least one agent trace in Application Insights
  • [ ] The trace shows the full conversation flow (user → agent → tool → response)
  • [ ] You understand where to look when an agent misbehaves