The AWS Cost Problem

Amazon Web Services offers tons of different services and ways to set them up, giving businesses the flexibility to scale and adapt as needed. However, this flexibility can make AWS's pricing pretty complicated. Costs can change based on how much you use a service, how long you use it, and any extra features you add like better security.

To keep your AWS costs under control, it's important to really get how AWS pricing works, smartly choose the best payment plan for your needs, and use the right tools to keep track of everything. Getting this right means you're spending your money wisely, making sure it's actually helping your business grow.

How much does AWS Cost?

The cost of AWS varies widely based on the services used, the scale of operations, and specific usage patterns. AWS operates on a pay-as-you-go pricing model, which means businesses only pay for the services they consume without any upfront costs or long-term commitments.

The first step to Cloud Cost Optimization lies in tracking and accountability. When getting estimates of exactly where your money is going in the cloud, you can attribute expenditure to business output, and prioritize the processes with maximum yield. Hence, knowing what makes up your AWS costs is crucial towards improving it.

AWS Services Costs and Pricing Table

Here is a table that encapsulates various AWS cost components and what they mean, along with an example of specific charges or service pricing, and pricing estimates based on common usage scenarios. This should help you get a rough overview of your cloud expenditure.

How do I calculate my AWS Costs?

To get an accurate estimate of what your AWS expenditure will look like, check out the official AWS Pricing Calculator, a useful tool that provides users with a detailed forecast of their potential costs.

5 Ways Businesses Can Save AWS Costs

Here are 5 strategies and methods that take advantage of AWS’ varied pricing models to help you optimize your resources, gain visibility into your operations, and reduce your overall costs.

1. AWS Cost Allocation Tags For Resource Organization

With the use of smart cost allocation tags, you can easily track and control your AWS usage by allocating particular charges to particular projects or business units.

Companies can use cost allocation tags to fully understand where their funds are being spent and make more educated decisions regarding AWS consumption.

How do they work?

When you create a cost allocation tag, you assign a specific key-value pair to a resource or a group of resources. These tags can be applied to a wide range of AWS services, including EC2 instances, Elastic Block Store volumes, and S3 buckets. Once the tag is applied, the associated costs will be grouped together and can be viewed in the AWS Cost Management Console.

How to utilize a Cost Allocation Tag?

Cost allocation tags allow you to assign specific costs to specific projects or business units.

• To create a cost allocation tag, you’ll need to go to the AWS Cost Management Console and select “Tags” from the menu.
• From there, you can select “Tags” from the menu and create a new tag. When creating a tag, you’ll need to provide a key and a value. The key is a label for the tag and the value is the specific project or business unit that you want to assign the costs to.

• Once you’ve created your tags, you can start applying them to your resources. You can do this by selecting the resources that you want to tag and then selecting the “Add/Edit tags” option. You can also use Tag Editor to apply tags to multiple resources at once.

2. Using AWS Trusted Advisor

AWS Trusted Advisor is a diligent assistant that is designed to provide you with crucial insights and recommendations drawn from a vast pool of AWS users.

The service operates as a comprehensive auditor, conducting a meticulous examination of your AWS environment. It employs the insights gathered from serving countless AWS customers, and applies these proven best practices to your unique setting.

By identifying opportunities, it offers recommendations for saving money, enhancing system performance and availability, and fortifying security.

• Whether you have a Basic or Developer Support plan, or a Business, Enterprise On-Ramp, or Enterprise Support plan, you can harness the capabilities of the Trusted Advisor console to various extents.
• While the first gives you access to all checks in the Service Limits category and six checks in the Security category, the latter allows you to tap into all Trusted Advisor checks via both the console and the AWS Support API.

Service Quota Manager

Service quotas represent the upper limit of resources that you can create in your AWS account. These are implemented to ensure a reliable service for all customers and to prevent unintentional over-spending. Trusted Advisor will alert you when you are nearing 80% of a service quota, allowing you to manage resources effectively, either by deleting unnecessary resources or requesting a quota increase.

3. AWS Cost Explorer - Cost Monitoring and Management

AWS Cost Explorer is a fully managed service that can help you visualize, understand, and manage your AWS costs. With this tool, you can create custom reports, analyze data over custom time periods, and forecast future costs.

It offers a comprehensive overview of your AWS usage, enabling you to make informed decisions about how to allocate your resources. It also has a variety of helpful reports that users can utilize.

Types of Reports Available on AWS Cost Explorer

One of the key benefits of using AWS Cost Explorer is the ability to generate a wide range of reports that provide detailed insights into an organization’s AWS usage and spending patterns. Here are the most common types of reports available:

Cost and Usage Reports

The Cost and Usage report is one of the most commonly used reports in AWS Cost Explorer. This report provides a detailed breakdown of all the costs associated with an organization’s AWS usage, including charges for EC2 instances, S3 storage, and data transfer. With this report, organizations can gain insights into their spending patterns over time and make more informed decisions about how to optimize their AWS usage.

Savings Plans Report

The Savings Plans Report is a newer feature in AWS Cost Explorer that provides insights into an organization’s Savings Plans usage. Savings Plans are a pricing model for AWS that offer significant cost savings compared to on-demand pricing. With this report, organizations can track their Savings Plans usage over time and identify opportunities for additional cost savings, as well as maintain lifecycle policies.

Monthly Spend Report

The Monthly Spend report provides a high-level overview of an organization’s AWS spending for each month. This report is useful for monitoring overall spending trends and identifying opportunities for cost optimization over longer periods of time.

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4. Choosing the Right Resource Commitment Discounts

Choosing the right discount model can significantly cut down your AWS costs. AWS offers two primary discount methods: Reserved Instances (RIs) and Savings Plans.

• AWS Savings Plans are a flexible cost-optimization solution. Users commit to a certain usage level over a one or three-year term, and in return, they enjoy discounted rates on their AWS usage, up to 72% compared to on-demand prices.
  • There are different types of savings plans, such as Compute Savings Plan, EC2 Instance Savings Plan, and SageMaker Savings Plan, allowing for adaptability in usage. Savings plans also offer predictability in costs and are simple to manage via AWS Management Console or AWS CLI.
• On the other hand, Reserved Instances provide a capacity reservation for Amazon EC2 and Amazon RDS at a discounted price. They are a cost-effective solution for organizations with predictable usage patterns that can commit to using instances for an extended period.
  • Reserved instances can be used in a variety of scenarios, such as web servers, web applications, testing and development environments, non-variable workloads, batch processing tasks, big data analytics, and machine learning workloads.

AWS Savings Plan vs Reserved Instances (RIs)

The choice between Savings Plans and Reserved Instances often depends on your specific needs and usage patterns. Here's a guide to help you decide:

How do I calculate my AWS Savings Plans Costs?

Our AWS Savings Plan Calculator can help you get accurate estimates to plan your FinOps strategy. simple enter your Instance Type, Region, Number of Instances, and Instance usage (in days) to view your costs for on -demand, 1 year and 3 year commitment pricing models.

5. Best Practices for Reducing AWS Services Cost

Each AWS service is operated and priced using different usage parameters. Following the best practices specific to each service in your environment helps you save on each building block within your AWS environment.

Reduce AWS Elastic Block Storage (EBS) Cost

Our guide on AWS EBS Pricing and Cost Optimization helps you get an overview of EBS cost factors, and how to reduce them. Here is a brief preview-

Choose the right EBS volume

AWS EBS offers a variety of volume types such as General Purpose SSD, Provisioned IOPS, Throughput Optimized HDD, and Cold HDD. Each has varying performance capabilities and pricing structures. Choosing a volume type that aligns with your workload needs prevents you from paying for unnecessary performance.

For instance, if your application involves frequent small file operations, a high-performance Provisioned IOPS SSD might be a good fit. However, for a static website with infrequent updates, a lower-cost General Purpose SSD or a Throughput Optimized HDD is optimal. For data that is rarely accessed, consider using Cold HDD volumes.

Use Compute Optimizer Recommendations

AWS Compute Optimizer offers valuable insights and recommendations to help you optimize the cost of your EBS volumes. Opt-in to AWS Compute Optimizer and enable “Right-sizing for EBS Volumes” to generate recommendations to optimize your EBS volumes. Remember to consider historical data and projected future growth when evaluating these recommendations.

Utilize Amazon Data Lifecycle Manager

Amazon Data Lifecycle Manager (DLM) is a valuable tool for managing the lifecycle of your Amazon EBS volumes. Amazon DLM lifecycle rules allow you to automate the entire lifecycle of your snapshots by defining criteria for creation, retention, and deletion, streamlining your workflow, and eliminating the need for any manual intervention.

How to Reduce AWS EC2 Costs?

Amazon Elastic Compute Cloud (EC2) is a part of Amazon Web Services (AWS) that provides secure, resizable compute capacity in the cloud. EC2's simple web service interface allows you to obtain and configure capacity with minimal friction.

EC2 provides virtual servers, known as instances, for compute capacity. Users can choose the size, power, memory capacity, and number of instances to suit their needs. To begin Ec2 Cost Optimization, it’s important to understand the direct and indirect costs associated with it.

AWS Elastic Compute Cloud (Ec2) Pricing

AWS free tier enables its customers to explore the AWS services for free, up to a certain limit. This includes 750 hours of Linux and Windows instances of type t2.micro for one month up to one year. You can use t3.micro in regions where t2.micro is unavailable. It also includes 750 hours of public IPv4 addresses free per month for EC2 instances (for any instance type).

EC2 Free Tier Limits

Once you exceed the free tier limit, standard EC2 pricing will be applicable based on your resource consumption. AWS follows a pay-as-you-go model and you pay only for what you use. Based on your workload and resource requirements there are four types of EC2 pricing models based on your instances.

EC2 On-demand Instances Pricing

On-demand instances are the default EC2 instances for which you pay only for the capacity you use. The compute capacity is billed by the hour or second based on the instance type you use. With On-demand instances, there is no need for any up-front payments or long-term commitments. The compute capacity can also be resized based on your requirements.

The pricing for an on-demand instance includes the cost of running your public or private AMIs on a specific operating system. For example, the pricing table below explains the price of a few EC2 instance types based on Linux and Windows operating systems in the US East (Ohio) region.

AWS Cost Management Tools

Recognizing the challenge of managing expenses within its ecosystem, AWS offers several native tools designed to help organizations monitor, analyze, and optimize their cloud spending. These tools are essential for businesses aiming to control their AWS costs effectively and avoid overspending.

AWS Cost Explorer

AWS Cost Explorer is a robust service that provides detailed insights into your AWS spending and usage patterns. This tool offers an intuitive interface that helps users navigate their financial data, allowing them to visualize, understand, and manage their AWS costs over time. Cost Explorer offers comprehensive reports that include up to 12 months of historical data and forecasts for the next three months, enabling strategic planning and budgeting.

AWS Budgets

AWS Budgets allows organizations to set custom budgets that alert them when they are about to exceed their predetermined expenditure limits. This tool is crucial for maintaining financial control, as it helps users proactively manage their cloud spending by providing real-time alerts and detailed forecasts based on their usage patterns.

AWS Trusted Advisor

AWS Trusted Advisor is an online resource that helps users reduce cost, increase performance, and improve security by optimizing their AWS environment. It provides real-time guidance to help users adhere to best practices for AWS, covering areas such as cost optimization, performance, security, and fault tolerance.

Open Source AWS Cost Management Tools

For organizations looking for flexible and budget-friendly solutions, open-source AWS cost management tools offer an alternative to proprietary software. These tools often benefit from community support and can be tailored to meet specific organizational needs.

Third-Party AWS Cost Management Tools

In addition to native and open-source options, there are numerous third-party cloud cost optimization tools available that provide advanced features for managing AWS costs.

Choosing the Right AWS Cost Management Tool

Here is a brief guide to keep in mind when selecting your Cloud Cost Management tools. Each of these parameters listed below are crucial features that your solution must have.

1. FinOps Vendor Reputation and Reliability

Let’s start with the basics. You need a Vendor with a track record for consistency and innovation. Browse through customer reviews and seek testimonials that emphasize reliability, consistent updates, and long-term support. A vendor’s financial stability is equally crucial; you want to partner with someone committed to evolving with your needs.

2. Tool Functionality and Ease of Use

When it comes to tools, “more” doesn’t always mean “better.” The tools should offer a robust set of features like cost allocation, budgeting, and forecasting, but should also be user-friendly. Check for customizable dashboards, intuitive interfaces, and data-drill-down capabilities.

3. Scalability Matters

As your business grows, so will your cloud operations. Ensure that the tool you choose can scale with you. Will the tool continue to operate seamlessly as your cloud complexity expands? A scalable solution will save you the headache of future migrations and financial recalibrations.

4. Compliance and Security

In today’s environment, data protection is non-negotiable. Ensure that the tools and vendors you opt for adhere to industry-standard compliance requirements. Are they GDPR compliant? Do they support two-factor authentication? Your vendor should treat security as a priority.

5. Pricing and Value for Money

In FinOps, the phrase “you get what you pay for” is especially relevant. While pricing should be competitive, what really counts is the ROI. Look for tools that offer not just cost-cutting recommendations but also ways to improve resource utilization and enhance performance.

6. Customer Support and Training

Ongoing support can make or break your FinOps experience. How quickly does the vendor respond to issues? Do they offer training sessions, documentation, or tutorials to help you get the most out of the tool? Good customer support is a strong indicator of a vendor’s overall reliability.

7. Reviews and Testimonials

Lastly, don’t underestimate the power of community feedback. Detailed reviews can provide insights into how the tool performs in real-world scenarios. These reviews often discuss the challenges faced and how the tool helped overcome them, offering a more nuanced understanding of its capabilities.

How Economize Can Help with High Cloud Costs

Economize stands out in the cloud cost management space by offering a dynamic and effective solution for organizations struggling with high cloud costs across AWS, GCP, and Azure environments. Here are a few ways it can help cut down your costs:

Ridiculously Beautiful Cost Reports

Gain a holistic view of your cloud costs by bringing together all spend data from different cloud environments into one place, making it easier to track and manage your costs. With our aggregated view, you can get a complete picture of your cloud financial health and make informed decisions. Always stay on top of your cloud costs and pilot it like a pro.

Slice and dice your complex cost data

Flexibility for you to focus on the area that matters the most to you — whether that be at the organization, project, billing account, or even tag level. Export the reports and share them with your team and stakeholders. Obtain a bird’s-eye view of your entire organization’s costs and drill down to an organization, or a project, a billing account, or as granular as a tag. Promote transparency and accountability and align everyone on a shared FinOps goal.

Cloud Visibility. Financial Stability.

Empower your developers with cloud cost visibility allows them to understand the financial impact of their decisions and take ownership of their costs. Foster a culture of cost awareness and accountability to achieve long-term financial stability. Analyze cost patterns and consumption trends and predict future costs to perform budgeting and financial planning.