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AWS Cost Optimization: Everything You Need to Know

aws cost optimization tools

Amazon Web Services (AWS) is an unrivaled cloud computing platform. Yet the costs of utilizing all the tools and resources that AWS offers can quickly skyrocket without the right cost optimization strategies and tools. 

Let’s consider the fact that Apple reportedly spends about $30 million per month on AWS—so it’s easy to see that there truly is no cap on AWS cloud costs.

For any company using AWS, effective cloud cost optimization is vital. In this ultimate blog on AWS cost management, we’ll cover important topics you need to know to maximize your AWS cost savings and cost-optimization strategies.

What is AWS cost optimization?

AWS offers a wide range of cloud services and pricing models, and the services—and pricing model you choose can have a huge impact on how much you ultimately spend. 

Therefore, AWS cost optimization is the process of optimizing how you use AWS resources and services in order to reduce your cloud spend without having to cut corners and negatively impact performance.

Benefits of AWS cost optimization

Investing in AWS cost optimization tools and developing a more cost-effective approach to how your company uses cloud resources can provide several key benefits:

Reduced costs

Let’s start with the most impactful (and most obvious) benefit of AWS cost optimization: lower costs. 

AWS cost optimization strategies are designed to optimize a company’s cloud infrastructure and how they utilize AWS services and resources to reduce AWS spend. Importantly, the most effective AWS cost optimization tools and strategies are designed to achieve this goal without reducing performance.

Increased efficiency

One of the ways that AWS cost optimization lowers AWS spend is by ensuring that you’re using the resources you purchase in the most efficient way. This has the direct benefit of lowering your AWS costs, but it can also improve your cloud infrastructure’s overall efficiency and performance.

Following principles like the AWS Well-Architected Framework can go a long way toward helping build high-performing and efficient cloud applications, and AWS cost optimization can boost their efficiency and performance even further.

Improved budgeting and forecasting

Visibility is one of the core objectives of AWS cost optimization. After all, if you don’t know how much your company is spending on cloud resources (and why), cost optimization will be tough.

Along with helping you spot opportunities for cost optimization, visibility into your AWS spend can also improve the reliability of your budgeting and expense forecasting initiatives.

Cost allocation and accountability

The visibility provided by AWS cost optimization allows you to see how your budget is allocated across different teams, projects, and departments. These insights can be highly useful for ensuring you allocate your budget strategically.

It also creates a culture of transparency and accountability, ensuring that the teams and departments within your company are using their resources effectively.

Understanding AWS pricing models

Choosing the pricing model optimized for your company’s needs and usage patterns is a central part of AWS cost optimization. Here are the five different AWS pricing models that you can choose from:

On-Demand 

On-Demand pricing is the most straightforward pricing option offered by AWS—it’s also the most flexible. With On-Demand pricing, companies pay for the resources that they use as they use them with no long-term commitments or upfront costs.

On-Demand instances are best suited for workloads with fluctuating or unpredictable usage patterns. However, it’s not usually the most cost-efficient option.

Savings Plans

AWS Savings Plans (SPs) are a popular choice for companies with steady or predictable workloads and can save you as much as 72% compared to On-Demand Pricing.

Savings Plans offer significant discounts in exchange for you committing to using a specific amount of compute resources for either a one-year or three-year term. However, accurately predicting your usage over the contract term is key to making Savings Plans a cost-effective option. Without accurate forecasting, Savings Plans might cause you to pay for more resources than you need.

Reserved Instances

Like Savings Plans, Reserved Instances (RIs) are another cost-effective pricing option for companies with predictable usage patterns. With RIs, you’ll be required to make an upfront commitment for a specific EC2 instance type, operating system, and term length.

RIs are available for certain AWS services, like Amazon EC2 and Amazon RDS, and allow you to invest in reserved compute capacity. Compared to On-Demand Pricing, purchasing RIs can save companies up to 75%.

Spot Instances

Spot Instances allow companies to take advantage of unused EC2 capacity in the AWS cloud at a discounted rate of up to 90% compared to On-Demand pricing. 

But there’s a catch. Spot Instances can be interrupted when the spot price exceeds your bid price or the capacity is needed by either RIs or On-Demand users. Since Spot Instances don’t guarantee availability, they are best suited for workloads with flexible start and end times.

Dedicated Hosts

Dedicated Hosts is an AWS pricing model that offers physical EC2 servers that are specifically designated for an individual customer’s use. This model is best suited for organizations that are required to store instances on dedicated hardware due to compliance or regulatory requirements.

Which AWS service provides cost optimization recommendations?

AWS offers several native tools that allow you to track cloud spend metrics and access cost optimization recommendations. On their own, these tools are typically too limited to serve as the foundation for an AWS cost optimization strategy. However, they can still be useful—and best of all, they’re free to use.

Here are all the tools and services provided by AWS that can assist with cost optimization:

AWS Cost Explorer

AWS Cost Explorer is a data visualization tool that allows companies to visualize and analyze their AWS spend and usage patterns. It provides insights into cost drivers, allowing companies to identify cost-saving opportunities and enabling improved forecasting.

AWS Trusted Advisor

AWS Trusted Advisor uses machine learning to provide companies with basic cost-optimization recommendations. It functions a lot like a virtual assistant that specifically focuses on cost optimization. 

AWS Trusted Advisor performs a range of automated checks, such as identifying idle resources, recommending the use of RIs, and highlighting opportunities for resource rightsizing.

AWS Billing Conductor

AWS Billing Conductor uses automation to streamline a company’s cost allocation and reporting processes. This tool helps companies accurately track and allocate costs across different departments and projects.

AWS Compute Optimizer

AWS Compute Optimizer analyzes your company’s EC2 instance usage patterns to provide cost-optimization and performance recommendations. 

Using machine learning algorithms, AWS Compute Optimizer can analyze historical instance usage and provide basic recommendations such as rightsizing instances, changing instance families or types, or using cost-saving options like RIs or Spot Instances.

AWS Budgets

AWS Budgets allows you to set customized cost and usage budgets for your AWS resources. When you approach or exceed the budget thresholds that you set, AWS provides automated alerts. This allows companies to more easily monitor and control AWS costs and avoid unexpected overspending.

AWS Cost and Usage Report (CUR)

AWS CUR is a comprehensive and customizable report that can provide helpful insights into your AWS costs and usage and deliver billing reports to an Amazon S3 bucket that you own. It also allows you to analyze your cost and usage data using external tools and services for even more in-depth insights and analysis.

13 effective strategies for AWS cost optimization

Companies can take several useful approaches to reduce their AWS spend without negatively impacting performance. Here are 13 of the most effective AWS cost optimization strategies:

1. Automatically reduce your AWS costs with ProsperOps

Optimizing costs on AWS is a goalpost that is constantly moving. Companies can boost savings by ensuring that they use the right pricing model for the right workloads at the right time, but tracking and making these adjustments manually is simply too much for large companies to keep up with.

This is why autonomously optimizing your AWS costs with ProsperOps is one of the simplest and most effective ways to lower AWS spend. With ProsperOps, you can autonomously build, manage, and optimize a portfolio of Savings Plans and RIs that are updated every hour to align with your usage needs.

ProsperOps eliminates the need to manually manage discount instruments such as RIs, Spot Instances, and Savings Plans, giving time back to your team while also ensuring that these instruments are optimized continuously. This empowers companies to take a passive approach to reducing costs on AWS and leverage automation to perform continuous, real-time cost optimization.

Key features of ProsperOps:

  • Automated, real-time cost optimization
  • Cost anomaly detection and alerts
  • Provides right-sizing recommendations based on historical usage patterns
  • Provides real-time cost visibility and comprehensive cost/usage reports
  • Enables cost optimization simulations for assessing the impact of different cost-saving strategies

2. Use AWS native tools

On their own, AWS native tools can be somewhat limited, providing more limited reporting and functionality and more basic insights compared to leading cost-optimization tools such as ProsperOps. However, these tools are user-friendly and free to use, so there’s no reason not to take advantage of them.

When combined with other more advanced tools and the right optimization strategy, AWS native tools such as AWS Budgets, AWS Cost Explorer, and AWS Trusted Advisor can offer a lot of cost-saving insights and capabilities. 

As you create your company’s AWS cost optimization strategy, learning how to make the most of these tools is one of the first steps you should take.

3. Choose the right pricing model

Pricing models such as RIs and Savings Plans can offer considerable discounts compared to On-Demand Pricing. Unlike most products and services, however, choosing the most cost-effective pricing model on AWS isn’t as simple as finding the model that fits your budget and sticking with it.

The most cost-effective way to purchase resources from AWS will depend on various ever-changing factors. This requires cost-conscious companies to utilize a range of pricing models and continually update which ones they use for different workflows.

While it’s complicated when done manually, ensuring that you always use the appropriate pricing model for each workload is one of the biggest keys to lowering AWS spend without reducing performance. This is why ProsperOps is especially beneficial for larger companies that cannot keep up with managing discount instruments manually.

4. Right-size your resources

Along with choosing the right pricing models for your workloads, the second major key to AWS cost optimization is ensuring that you are only paying for the exact amount of resources you need.

Right-sizing resources means adjusting the size and capacity of AWS resources such as EC2 instances, RDS databases, and storage volumes so that they match your actual usage needs. 

By tracking usage patterns and accurately assessing your workload performance requirements, you aren’t purchasing more resources than you will actually use. This is especially important for pricing plans such as RIs and Savings Plans that require you to purchase resources upfront.

5. Develop a culture of cost-conscious developers

The developers building your cloud applications will have a bigger role than just about anyone else in determining how efficient and cost-effective those applications are. You can instruct developers to prioritize cost-effectiveness, but creating a company culture that prioritizes cost-conscious development is a better long-term strategy.

By raising awareness about the financial impact of your developers’ decisions, you can encourage developers to use cost-effective practices like using efficient code, optimizing resource utilization, and leveraging serverless architectures.

6. Increase elasticity

Increasing elasticity means introducing adaptability into your applications, enabling them to use resources only as needed and discontinuing these resources during periods of non-use. 

Dynamically scaling resources based on demand will prevent you from purchasing more resources than your applications actually need—scaling up to meet demand during peak periods and scaling down during periods of lower demand to avoid overprovisioning.

Services like AWS Auto Scaling and AWS Elastic Beanstalk allow you to automate resource scaling based on the metrics or policies you define. This allows you to automatically optimize the resources you purchase to match demand.

7. Monitor and track service usage

Monitoring and tracking your AWS service usage provides visibility into your company’s resource utilization and helps you identify potential areas of waste and inefficacy. 

The more visibility you have into your service usage, the more data-driven your cost optimization decisions will be. Monitoring your service usage is also vital for ensuring that you can spot cost anomalies that may have otherwise gone unnoticed.

Thankfully, there are several tools that can provide the type of reporting and insights needed to track and monitor AWS service usage. ProsperOps allows you to track total savings, coverage, utilization, and effective discounts in real time​. Tools like Amazon CloudWatch and AWS Cost Explorer can also provide helpful insights regarding usage patterns and performance trends.

Using these tools to continually track service usage and regularly analyze the data you collect can help you understand usage trends, identify underutilized resources, and make more effective cost-saving decisions.

8. Age out old data that is not being used

Storing data isn’t free, and there’s no reason to continue paying to store data your company no longer uses or needs. Reviewing your data storage regularly and aging out any old, unused data can help you reduce the amount of storage you have to pay for.

You may also want to consider creating data retention policies for your company based on compliance requirements and business needs. These documents will serve as guidelines for determining which data to keep and which data to get rid of.

9. Manage demand and supply resources

AWS spend is optimized when the supply of resources you purchase is perfectly aligned with the demand of your cloud applications. However, when you commit to purchasing resources in advance, this alignment can be tricky to achieve.

Analyzing historical usage patterns allows you to more accurately forecast future resource needs, which allows you to proactively adjust resource provisioning. You can use forecasting and monitoring tools to anticipate workload trends and adjust resource allocations accordingly so that resource supply and resource demand are always kept at a near-equal balance.

10. Employ cheaper microarchitectures

Employing microarchitectures that provide better cost-efficiency is an effective way to reduce your overall AWS spend. For example, ARM-based instances such as AWS Graviton can provide a lot of savings compared to traditional x86 instances. This is because ARM processors provide improved power efficiency and are designed to optimize performance per watt.

Similarly, choosing AMD processors within the x86 architecture as opposed to Intel can also provide significant cost savings. AMD processors have gained popularity for offering performance that is comparable to Intel processors at a reduced price point, and AWS offers numerous instance families that utilize AMD processors. By choosing these instance families, you’ll be able to enjoy lower costs without noticing a drop in performance.

11. Instance and VM modernization

Current generation instances offer improved performance compared to older generation instances. This means that by modernizing your EC2 instances and virtual machines (VMs), you can take advantage of newer and more cost-efficient options.

AWS frequently releases new instance types and VM families that offer improved performance, enhanced features, and better cost-efficiency. You can benefit from better cost efficiency and improved performance by continually migrating to these new instances and VM families.

12. Have a high-priority strategy

Making AWS cost optimization a high-priority strategy within your company is crucial for long-term, sustainable results. This starts with identifying unit metrics internally and measuring unit costs over time. Tracking these KPIs allows you to continually fine-tune your overall cost optimization strategy in a data-based way.

Going back to the importance of developing a culture of cost-conscious developers, educating and engaging your team on AWS cost optimization is another key to making cost efficiency a high priority for all team members.

Be sure to establish clear cost-efficiency goals and communicate them across your entire organization. Regularly track your progress toward these goals, provide feedback, and recognize achievements to make AWS cost optimization something your entire company prioritizes.

13. Measure overall efficiency and optimize over time

AWS cost optimization is not a process you do once and never worry about again. At its most effective, AWS cost optimization is something that’s continually monitored and optimized over time.

The ability to track your AWS savings and the results of your cost-saving strategies is one key to improving cost optimization over time. ProsperOps provides these reporting and analytics capabilities in addition to cost optimization simulations that allow you to gauge potential optimization strategies without actually committing to implementing them.

Using tools such as ProsperOps to measure the overall efficiency and results of your AWS cost optimization strategies will enable you to adopt a process of continuous improvement and ensure that your cost-saving efforts are always kept up to date with your company’s evolving needs.

Automate your AWS savings with ProsperOps

ProsperOps takes the guesswork and the hassle out of AWS cost optimization by automatically implementing cost-saving measures in real time. 

If you want a simple, straightforward, and guaranteed effective way to reduce your AWS spend, ProsperOps is one of the most capable and effective solutions on the market today.

Optimizing AWS spend is one of the most vital keys to success for any company that utilizes a large amount of cloud resources.

To get started using ProsperOps to automate your AWS savings and position your company for success, sign up for a free demo today!

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