Maximizing AWS Cost Optimization: A Comprehensive Guide

The public cloud is an increasingly important part of IT infrastructure for many organizations. Cloud services offer scalability and flexibility, but those benefits can be costly. According to the Flexera State of the Cloud Report for 2023, 82% of organizations report managing cloud spending as one of their top challenges. Cost optimization can help lower total AWS spending and make bills more predictable from month to month.

What Is AWS Cost Optimization?

AWS cost optimization is the concept of managing your AWS deployments effectively. How? By choosing the right instances for your use case, rightsizing workloads, freeing up unused resources, and following other best practices to reduce unnecessary expenditure.

Using spot instances can offer savings of up to 90%, and AWS Savings Plans can be 72% cheaper than on-demand offerings. These savings can add up to significant amounts of money if you’re running a lot of instances. Knowing how to optimize AWS costs puts you in a good position to stay in control of your cloud computing budget, avoiding unpleasant surprises due to runaway instances, or the accidental loss of eligibility for a Savings Plan discount.

AWS Cost Management

When running a large number of instances, it can be difficult to keep track of your usage or understand which resources are generating most of the charges. The AWS Cost Explorer offers useful charts to show metrics such as past AWS spending over time, projected future spending, and reserved instance utilization.

Administrators can view information grouped by instance type, region, availability zone, or usage type and get a breakdown of how much of their expenditure relates to each group. The cost explorer can also be used to set up reserved instance recommendations.

Amazon also provides a tool to help administrators set spending limits. AWS Budgets can be used to set daily and monthly cost budgets. It can also be used to receive alerts, act if utilization goes above a set level, or if your usage for a Savings Plan or Reserved Instance falls below the required threshold.

Note that AWS Budgets only updates three times per day. Each update typically comes between eight and 12 hours after the previous update. Alerts can be sent to up to 10 email addresses and one SNS topic. There are two kinds of alerts: actual alerts, which are sent out only once per period when a budget reaches the threshold, and forecast-based alerts, which may be sent out more than once if forecasted usage fluctuates.

To use forecasted alerts, AWS needs around five weeks of usage data on which to base its forecasts. Configuring forecast alerts without that data is possible, but AWS won’t send out alerts until enough data is available to produce a forecast.

Using Cost Explorer for historic data and AWS Budgets for frequently updated snapshots of your current usage enables you to investigate issues with your instances and see which resources are consuming the most from your cloud computing budget.

Information from those tools can then be used with the Cost Estimator to compare costs across other instance types and billing options to see how your average monthly bill might change if you switched to a different tier, changed regions, or used a different instance type.

Learn more about these tools and how to get better visibility into your cloud spending with our guide to AWS Cost Management.

Understanding AWS Billing

AWS offers five different pricing models:

On-demand Instances: This is a simple pay-as-you-go option where users pay a fee (typically hourly) for the computing resources they use. On-demand instances are convenient, easy to use, and popular for small-scale deployments. However, they’re also the most expensive option.
Spot Instances: These instances are similar to on-demand instances, but they’re discounted by up to 90% because the instance can be terminated at any time. This option is an affordable way to run fault-tolerant workloads.
Dedicated Hosts: You can pay a fee per dedicated host, regardless of how many instances you run on that hardware. This option is popular with organizations that have existing application licenses based on processor sockets/cores or VMs.
Reserved Instances: Receive a discount of up to 72% by making a long-term (1- to 3-year) commitment. Customers can modify the instance during the commitment period but are required to pay for it regardless of whether it’s used.
Savings Plans: Like Reserved Instances, users choose the computing capacity they need and make a 1- to 3-year commitment for that capacity. Savings plans can be applied to a variety of resource types. However, if usage exceeds the committed capacity, it will be billed at on-demand rates.

When choosing a pricing model, consider your organization’s typical usage habits and the workload running on the instance. For a more detailed look at each of the pricing options and their pros and cons, see our detailed article on AWS Billing options.

AWS Cost Monitoring

Monitoring large and complex cloud deployments isn’t easy. AWS Trusted Advisor is a useful tool for large-scale deployments. It continuously monitors and evaluates AWS environments and can offer suggestions to help improve security, increase performance, and optimize costs.

Among the cost-related issues that Trusted Advisor can identify are:

Underutilized Amazon Elastic Compute Cloud (Amazon EC2) Instances
Issues with reserved instance utilization or lease expiration
Underutilized Amazon Elastic Block Store (Amazon EBS) volumes
Idle DBs or load balances
Unassociated IP addresses

The tool can highlight these issues and provide recommendations to remedy them.

Not all resource utilization issues will be picked up by AWS Trusted Advisor. Discover more ways to explore your resource usage and costs in our AWS Cost Monitoring Guide.

AWS Reserved Instances

If you have predictable Amazon EC2 or Amazon Relational Database Service (Amazon RDS) workloads, investing in Reserved Instances could reduce the costs associated with those instances by up to 75%. Amazon offers three payment options for Reserved Instances:

All Up-Front (AURI)
Partial Up-Front (PURI)
No Up-Front (NURI)

The larger the up-front payment, the bigger the discount offered.

Cost savings are just one of the benefits of Reserved Instances. Reserving compute capacity also makes it easier to manage your cloud budget and reduces some of the risks associated with spot instances.

A Reserved Instance must be paid for, regardless of whether it’s used for the whole commitment period. After purchasing, it’s possible to reconfigure some aspects of a Reserved Instance. We cover the benefits and limitations of Reserved Instances in-depth in our AWS Reserved Instances article.

Reserving instances is a good way to get a discount on the computing resources you use on a regular basis. If your usage needs are more unpredictable, you may need to consider other ways of optimizing your costs.

Best Practices for Optimizing AWS Costs

Consider the following best practices when optimizing your AWS costs:

Embrace elasticity: Take advantage of the ease with which resources can be turned off and reactivated. Turn off resources when they aren’t required, keeping wasted computing power to a minimum. Consider using schedules to turn off unused instances or setting up Amazon EC2 Auto Scaling Groups to dynamically manage your infrastructure.
Rightsize your instances: Provision only the CPU, storage, memory, and network resources required for the job at hand. Unlike traditional server farms, it doesn’t make sense to over-provision hardware in the cloud. Dynamically expanding the available resources is easy to do on AWS.
Optimize your storage: Consider the intended use case of any storage you provision. For example, Amazon offers Amazon Simple Storage Service (Amazon S3) Glacier storage class for low-cost, long-term data storage, as well as more costly Amazon EBS options, such as gp2 volumes, for use cases where the higher performance of an SSD would be beneficial.
Reduce data transfer costs: Consider using an Amazon CloudFront CDN to cache web content that’s frequently served to your users. This could significantly cut data transfer costs associated with serving data from AWS to the public internet. Learn the pricing rules for transferring data across regions and configure your network to minimize charges.
Choose the right pricing models: Learn the differences between on-demand pricing, spot instances, and Reserved Instances. Use AWS Cost Explorer to better understand your usage habits and AWS Pricing Calculator to test different configurations to determine if long-term savings are available.

The above are just a few of the best practices to follow when managing AWS costs. Explore this detailed guide for more AWS cost management strategies. Once you’ve set up your cloud environment, be sure to sign up for the AWS Cost and Usage Report for updates on your cloud spending at predefined intervals.

Case Studies and Success Stories

Media giant Discovery uses Amazon EC2 and Amazon S3 instances for its playout infrastructure and considers the migration to AWS to have been a success. It runs around 1,000 EC2 instances, storing 15PB of content. The broadcast company uses Reserved Instances to keep the cost of its Amazon EC2 resources to a minimum and Amazon S3 Intelligent Tiering to automatically move less frequently accessed data to storage tiers with lower fees. It also takes advantage of volume discounts to get the best prices.

These strategies helped Discovery cut costs by 61% compared to its previous on-premises infrastructure, as highlighted in a TCO analysis published by AWS Cloud Economics.

Gaming enthusiast hardware company Razer has more than 175 million users on its Synapse cloud platform. The company found it challenging to manage the high traffic volumes the platform saw daily, especially given the cyclical nature of the traffic. Reserved instances didn’t make sense for Razer, as it needed the ability to scale up during peak hours and shut instances down during quieter periods.

As part of its cost management strategy, it used a mixture of Amazon EC2 Reserved Instances and Savings Plans for its predictable workloads and Amazon EC2 spot instances for discounted resources during peak times. It also employed Amazon EC2 Auto Scaling to dynamically adjust the number of available instances based on the traffic it saw at the time. Finally, it chose AWS Graviton Processors for some workloads. These ARM processors offer good price/performance for workloads that don’t need simultaneous multi-threading.

By combining these approaches, Razer was able to save 70-90% on its Amazon EC2 costs while still delivering a stable, performant service for its Synapse users.

Optimize Your AWS Costs With Veeam

AWS cost management is a vital task for any organization with a significant volume of workloads deployed to the cloud. Amazon provides numerous tools to help administrators monitor their spending, manage their budgets, and dynamically adjust their deployments based on demand.

Through rightsizing and auto-scaling, organizations can limit their cloud usage to only the resources they need at that exact moment. By choosing the right instance type or storage tier, they can ensure they’re getting the best prices for those instances. Explore the AWS cluster articles and the white papers below to learn more about AWS Cloud cost management strategies and best practices.

A data protection and disaster recovery plan is another essential part of ensuring a sustainable cloud infrastructure. Veeam’s AWS Backup & Recovery offerings help organizations control and optimize their cloud backup costs through automation, compression, tiering and forecasting capabilities to name a few. Download a free trial today or contact us to learn more.