In 2021, Amazon Web Services (AWS) revenue accounted for 74% of Amazon’s $24.8 billion in operating profit. While this is great news for Amazon, for organizations using AWS, cost management and cost optimization are vital.
By using the right AWS cost management tools to continually optimize how your company uses AWS resources, you can keep your cloud costs at a minimum without negatively impacting performance.
Below, we’ll cover what to know about optimizing your cloud spend on AWS, including how AWS cost management works, its benefits, and the best practices for delivering maximum cost savings.
How does AWS cost management work?
Let’s take a look at some of the broader elements that make up an AWS cost management strategy:
AWS pricing model
AWS offers numerous pricing models for companies to choose from, and choosing the right model for each specific workload is a key part of AWS cost management.
The most straightforward (and most expensive) pricing model Amazon offers is On-Demand pricing. With On-Demand pricing, you pay for resources as you need them rather than having to pay in advance or commit to long-term usage.
AWS offers several other pricing plans designed to help companies save by buying AWS resources upfront. This includes highly popular discount instruments like Savings Plans (which can save you up to 72% compared to On-Demand pricing) and Amazon EC2 Reserved Instances (which can save you up to 72% compared to On-Demand pricing).
To capitalize on AWS’s cost-saving plans, you’ll have to carefully monitor your workloads and compute resources needed to ensure you’re using the right pricing model for each workload.
AWS Cost Explorer
In AWS Cost Explorer, you’ll find detailed metrics and cost data broken down by cost categories, business units, instance types, and more (based on the custom reports you create).
You can use this data to gain insights into your company’s spending patterns, identify cost optimization opportunities, and track your expenses over time. Cost Explorer uses graphs that help visualize what the data tells you at a glance.
You can configure AWS Budgets to send a notification anytime your spending starts to approach the preset threshold. This helps keep your cloud costs within your planned budget and helps you spot and address any anomalies driving up your AWS costs.
AWS Cost and Usage Reports
By integrating AWS Cost and Usage Reports with a solution like ProsperOps, you can drill deeper into your data to identify even more opportunities for cost savings.
ProsperOps works upstream of reporting, with our work appearing directly within Cost Management Tools as reduced spend. Native tools often lead to delayed information, whereas ProsperOps works in real time to ensure coverage, utilization, and discounts are optimized.
AWS Cost Allocation Tags
AWS Cost Allocation Tags allow you to categorize and label your AWS resources, making it easier to understand and allocate costs across different projects, departments, or cost centers.
Cost Allocation Tags can integrate with several AWS cost management tools, including AWS Cost Explorer, AWS Budgets, and AWS Cost and Usage Reports, to provide more granular cost tracking at the resource level.
Key benefits of AWS cost management
Here’s how a proactive approach to AWS cost management can benefit your business:
Flexible pricing options for every workload
AWS offers numerous pricing options—but they’re only beneficial when you choose the right one for each workload (something that needs ongoing monitoring and analysis).
AWS cost management provides the transparency you need to choose the appropriate pricing model for each of your company’s workloads. This lets you take full advantage of the various discount instruments AWS offers.
Enhanced efficiency in resource utilization
Effective resource utilization is the heart of AWS cost management. AWS allows you to scale resources up or down in real-time to prevent overprovisioning and ensure you only purchase the exact resources you need.
But, similar to choosing the best pricing models, optimizing your resource utilization requires careful monitoring and complete transparency in your AWS spending.
AWS cost management helps identify areas of waste and inefficiency so you can maintain a high level of service without incurring unnecessary costs.
Adaptable resource allocation to meet fluctuating demand
For most companies, AWS resource usage is highly dynamic, regularly dropping and spiking based on several factors. These fluctuations in resource demand aren’t an issue when you use On-Demand pricing.
However, this inability to predict resource needs can be problematic for companies trying to save money by using AWS pricing models that require them to purchase or commit to resources in advance.
Improved cost-effectiveness with AWS’s custom-made chips
AWS has recently introduced custom-made silicon chips that can have a big impact on cost management. With the AWS Graviton and Graviton2 processors, companies running in Amazon EC2 can enjoy better performance at lower costs compared to traditional x86 processors.
Increased visibility for IT and finance teams
Traditionally, these teams often operate in silos, making it hard to align technology investments with budgetary constraints.
Adopting an AWS cost management helps bridge this gap by providing visibility into spending and usage patterns, giving IT and finance teams visibility to make informed decisions that align with business goals.
Best practices in AWS cost management
Accelerate your learning and begin to maximize your savings by following these best practices:
Use the optimal technology tools
AWS native tools, services, and reports like AWS Cost Explorer, AWS Budgets, and AWS Cost and Usage Reports are excellent entry points to understand and optimize your AWS spend. But these tools alone likely aren’t enough.
To really take control of your AWS spending, you need smart automation software that automatically monitors and optimizes your spending in real time. This is where an advanced AWS cost management solution like ProsperOps can help.
With ProsperOps, cloud companies can leverage automation and machine learning to analyze their AWS usage around the clock and continually optimize for peak cost efficiency. Evaluate build versus buy using ProsperOps, and allow the algorithms to maximize your AWS discounts.
Without the right tools, AWS cost management is a time-consuming game of trial and error. However, with a powerful platform like ProsperOps, you can autonomously and reactively manage discount instruments in real time with no additional effort or time commitment for your team.
To learn more about how ProsperOps revolutionizes AWS cost management, sign up for a free ProsperOps demo today!
Implement proper monitoring and reporting
AWS cost management is an ongoing process. To see if your cost reduction efforts are working and to continually fine-tune them for better results, you’ll need to implement a monitoring and reporting system that provides clear and up-to-date information on your AWS spend.
Good data is what fuels AWS cost management. With the right system for monitoring and reporting, you can ensure your company has the data it needs to make informed cost management decisions.
Create an AWS budget and follow it
Effective resource allocation is key for AWS cost management. First, you’ll need to determine how to allocate your AWS budget most effectively. From there, you can identify any cost anomalies straining your AWS budget to avoid overspending.
Find out how you can easily manage your AWS costs with ProsperOps
For any company that relies on AWS services, AWS cost management is an important process. Thankfully, it’s a process that ProsperOps makes much easier and more effective.
Automate your AWS cost management strategy with ProsperOps to ensure you’re continually optimizing all your processes and discount instruments. Try our free demo and see how ProsperOps can help your company easily and more effectively manage AWS costs!