AWS cost reduction: a guide to lowering your cloud bill
Managing AWS costs is crucial for any cloud-reliant organisation. In this guide, we’ll cover actionable strategies for AWS cost reduction, including resource right-sizing, storage optimisation, and reserved instances. By the end, you’ll have practical tips to efficiently minimise your AWS expenses.
Key takeaways on AWS cost reduction
- AWS Cost Explorer and various pricing models, such as on-demand pricing, savings plans, reserved instances and spot instances, play important roles in effectively managing and optimising cloud costs.
- Implementing strategies like right-sizing, storage optimisation, and auto-scaling can lead to significant reductions in AWS expenses.
- Common mistakes, including over-provisioning resources and failing to terminate unused instances, can drive up costs.
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What is AWS cost reduction, and why is it important?
Understanding AWS costs is vital for any organisation using cloud services. The complexity of AWS bills and extensive Cost and Usage reports can make budget management difficult, often leading to unexpected expenses.
AWS offers several services to help organisations implement FinOps practices and optimise cloud costs effectively e.g. AWS Cost Explorer, AWS Budgets, Amazon EC2, Amazon RDS, AWS Elastic Beanstalk, AWS CloudWatch or AWS Cost and Usage Report (CUR).
Reports such as monthly costs by service and linked account breakdowns are invaluable for identifying the top services and accounts incurring costs, enabling targeted optimisation efforts.
Additionally, the API and detailed reports guide users in making informed decisions about resource allocation and savings opportunities.
At its core, AWS cost reduction involves optimising your cloud usage and resources to minimise costs while maintaining performance.
Listen to my conversation with Adam Grabek, as we explain how companies often lose money in the cloud due to inefficient management practices:
What are the most effective ways to reduce AWS costs?
Lowering AWS costs involves employing a mix of strategies suited to your particular needs.
An effective technique is right-sizing, which involves adjusting AWS resources to match actual usage and avoid over-provisioning. Tools like AWS Compute Optimizer aid in right-sizing by recommending optimal configurations for workloads, contributing to AWS cost optimisation.
Another powerful method is monitoring and tagging resources. Use AWS tools like Cost Explorer and implement resource tagging to track and analyse usage patterns. Proper tagging provides visibility into cost drivers and helps allocate budgets more effectively, ensuring unnecessary resources are identified and removed.
Storage optimisation is also crucial. Utilising lower cost storage tiers like Amazon S3 Infrequent Access can significantly reduce your storage costs and data transfer costs. Reviewing storage access patterns regularly and transferring infrequently accessed data to cheaper storage options is a simple yet effective cost-cutting strategy.
Auto-scaling ensures applications use only the resources needed based on demand, preventing the costs of over-provisioning. Regular monitoring and adjustments, combined with these strategies, can yield substantial AWS savings and a more efficient cloud environment.
Looking for additional information on how to reduce cloud costs?
- Cloud cost optimisation: how to reduce your cloud expenses and maximise ROI?
- FinOps: best practices and tips to manage Cloud costs
- FinOps assessment 101: aligning cloud usage with business value
What is the impact of licensing costs on AWS spending?
Reducing software licenses and utilising AWS-native solutions can lower these fees and overall AWS costs. For instance, AWS offers a range of services that can replace traditional licensed software, often at a lower cost.
Carefully managing software licenses and exploring AWS-native alternatives can lead to significant savings. This approach not only reduces licensing fees but also streamlines your operations, as AWS-native solutions are typically better integrated with the AWS environment.
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Many of our clients see a return on investment within the two-week assessment, with savings of up to 70% on cloud costs thanks to our AWS Partner statuses.
How to choose the right AWS pricing models?
AWS offers several pricing models, each with its own benefits and use cases. Opting for on-demand pricing, reserved instances, savings plans, or spot instances based on your workload and usage patterns can result in significant savings.
The following subsections will delve into each pricing model in detail.
On-demand pricing
On-demand pricing lets you pay for AWS resources by the minute or hour, providing flexibility without long-term commitments.
It’s ideal for pre-production workloads, testing, or seasonal demands where long-term commitments are impractical. The pay-as-you-go nature means you only pay for what you use, making it a convenient option for unpredictable workloads.
However, this flexibility comes at a higher cost. On-demand instances are usually the most expensive option for AWS resources due to their flexibility. Costs can quickly accumulate, especially when scaling applications without proper budgeting.
Therefore, using a small percentage of on-demand instances strategically for fluctuating workloads can be beneficial, allowing for cost savings when demand increases.
Reserved instances
Reserved instances offer significant cost savings for long-term, predictable workloads. Committing to a one- or three-year term can offer discounts of up to 75% compared to on-demand pricing. It’s perfect for steady-state applications with accurate usage forecasts.
A key advantage of reserved instances is tracking expirations, prompting the purchase of new reserve instances to avoid higher on-demand rates. Reserved instances also offer various payment options, including all upfront, partial upfront, and no upfront payments, providing budget flexibility.
However, reserved instances require a commitment. If your needs change and you need to scale down, getting rid of reserved instances is not easy. Scaling up will require using on-demand resources, which come at a higher cost.
Therefore, carefully planning your usage and commitments is crucial to maximise savings.
Savings Plans
Savings Plans provide flexibility in reducing costs while maintaining predictable pricing.
They offer up to 72% savings on AWS compute usage, making them a powerful cost optimisation tool. Savings Plans apply to various AWS services, including AWS Lambda, AWS Fargate, and Amazon EC2 instances.
Compute Savings Plans, in particular, can reduce costs by up to 66% and apply to EC2 usage across various configurations. This flexibility lets you switch between instance types, regions, and operating systems without losing your discount, offering a significant advantage over reserved instances and helping you save costs.
For specific instance families, EC2 Instance Savings Plans offer substantial discounts, reaching up to 72%. These plans are ideal for users with predictable workloads who commit to consistent usage over a one- or three-year term, ensuring maximum savings.
Spot instances
Spot Instances are an excellent way to leverage unused AWS computing capacity at a fraction of the cost.
They enable bidding on spare computing resources, potentially saving up to 90% compared to on-demand prices. This makes them suitable for fault-tolerant tasks, big data processing, containerised applications, CI/CD, web servers, and development/testing environments.
However, Spot Instances can be interrupted with as little as two minutes’ notice if AWS needs the capacity back for reserved or on-demand customers. If the spot price exceeds your maximum bid, your instance may be interrupted.
Overall, Spot Instances offer significant cost-saving opportunities but require careful management to fit within your workload’s tolerance for interruption.
Are there any AWS cost management tools specifically designed for cost optimisation?
AWS offers several tools specifically designed for cost optimisation.
AWS Cost Explorer is a powerful tool that offers insights and recommendations to help understand your AWS usage and identify cost-saving opportunities. It helps visualise costs and usage patterns, making it easier to reduce spending.
AWS Trusted Advisor is another valuable tool. It identifies low-utilisation EBS volumes, inactive load balancers, and unassociated Elastic IP addresses that may be accruing unnecessary costs. Addressing these recommendations can optimise resource usage and effectively reduce costs.
Additionally, Amazon S3 offers several cost optimisation features. S3 Analytics analyses storage access patterns and provides recommendations for storage cost reduction. S3 Intelligent-Tiering automatically moves objects to the most cost-effective storage tier based on access patterns, ensuring you don’t overpay for storage.
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What are the common mistakes businesses make that increase AWS costs?
Despite good intentions, many businesses make common mistakes that lead to higher AWS costs. A frequent error is over-provisioning resources. Without proper monitoring and right-sizing, businesses often allocate more resources than necessary, resulting in unnecessary costs.
Another common mistake is leaving unused EC2 instances running. Unused instances continue to incur costs, so it’s crucial to regularly review and terminate any that are no longer needed.
Similarly, neglecting orphaned snapshots and volumes can result in accumulating storage costs. When instances are terminated, deleting associated EBS volumes and snapshots is crucial to avoid unnecessary costs.
Lack of cloud automation in resource management also leads to higher costs. Manual processes can result in inefficiencies and missed cost-saving opportunities. Automating tasks like resource provisioning, scaling, and termination ensures optimal resource utilisation and cost savings.
Misconfigured auto-scaling groups can also lead to over-provisioning, so configuring them correctly to match workload demands is vital.
Reduce AWS costs with Future Processing
In conclusion, AWS cost reduction is a multifaceted process that requires a blend of strategies and tools.
By understanding your AWS costs, leveraging the right pricing models, and utilising AWS’s cost management tools, you can achieve significant cost savings. Avoiding common mistakes and continuously monitoring your usage are also critical components of effective cost management.
As an AWS Advanced Tier Services Partner, we leverage funding programs and discounts to pass on savings to clients while offering advanced cloud solutions that keep them competitive.
We are also an AWS Cloud Operations Competency Partner – one of just 9 in Poland and 43 in the world. This status allows us to provide specialised cloud financial management solutions that reduce waste and optimise cloud infrastructure for our clients. We provide expert guidance on AWS cost management, have access to AWS’s Migration Acceleration Program (#MAP), and add value through AWS resale discounts, making us a top choice for both partnership and AWS reselling.
If you’re ready to implement these strategies that will not only reduce your AWS bill but also optimise your cloud environment – contact Future Processing!
Frequently Asked Questions
What is right-sizing in AWS, and how does it reduce costs?
Right-sizing in AWS refers to the process of optimising cloud resources by adjusting their capacity to match actual workload requirements. It involves analysing usage patterns and performance metrics to ensure that instances, databases, and storage are neither over-provisioned nor underutilised.
By selecting the most appropriate instance types and sizes, right-sizing helps reduce costs by eliminating wasted resources, improving efficiency, and ensuring that businesses only pay for what they actually need.
How can we identify unused or underutilised AWS resources?
To identify unused or underutilised AWS resources, you can leverage AWS tools such as AWS Cost Explorer, AWS Trusted Advisor, and AWS CloudWatch. These tools provide insights into resource usage, helping to detect instances, volumes, and other services that are running at low utilisation or remain idle.
Additionally, enabling AWS Compute Optimizer can provide recommendations based on historical usage patterns to optimise performance and cost. Regular audits and automated tagging strategies can further assist in tracking resource consumption and opportunities to downsize or terminate unnecessary resources.
How do reserved instances and savings plans help lower AWS costs?
Reserved Instances (RIs) and Savings Plans help lower AWS costs by offering significant discounts compared to on-demand pricing in exchange for a commitment to a specific usage level over a period of one or three years.
Reserved Instances provide cost savings for specific instance types and regions, making them ideal for predictable workloads.
Savings Plans, on the other hand, offer more flexibility by applying discounts to a broader range of AWS services based on committed usage, regardless of instance family, region, or operating system.