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AWS Cost Optimization Guide

Picture of Monika Radeva
Monika Radeva
DevOps and Cloud Engineer
09.06.2023
Reading time: 7 mins.
Last Updated: 03.01.2024

Table of Contents

Why are we looking into AWS cloud cost optimization?

Amazon Web Services (AWS) is a leading cloud computing platform and lots of companies are choosing it for moving their infrastructure to the cloud. Cloud computing offers many perks related to scalability, flexibility, and reliability, but can also lead to concerns related to cost, especially if not managed properly.

This is where an efficient cost optimization strategy is introduced. It involves finding ways to lower your expenses while maintaining the same level of performance and functionality. It is about identifying areas where you can reduce costs without negatively impacting your operations, so you can get the most value from your AWS investment.

In this blog post, we’ll go over the best practices related to cost optimization in AWS, as well as the variety of services available to help us understand our costs and how to manage them.

What AWS cost optimization tools can we use to help us understand and manage our costs?

There are a variety of tools developed to help users manage their costs. Below you will find an explanation for each of them as well as details of the benefits they offer.

A necessary requisition before you start using the tools:  

  • If you want to access the billing from a different user/role you will need to enable it via the root account. You can find this option under Account -> IAM User and Role Access to Billing Information -> Edit -> Activate IAM Access -> Update (full AWS tutorial can be found here).
aws cost optimization  Account -> IAM User and Role Access to Billing Information -> Edit -> Activate IAM Access -> Update
  • Keep in mind that to access the tools mentioned below (if you’re not using the root account), you will need specific permissions – details in this regard can be found in the AWS documentation.

1. AWS Cost Explorer 

AWS Cost Explorer is a tool that can be used to thoroughly analyze the cost. AWS recommends it in most use cases since it may provide different information based on tagged resources. The available data is for the last 12 months, and you may also obtain an exemplary forecast for the next 12 months. Before utilizing it or receiving any relevant data from the service, you must activate it. Furthermore, you may explore the user guide to AWS Cost Explorer

aws cost explorer aws cost optimization tools

2. AWS Cost Explorer – Reports

By default, when cost explorer is enabled by AWS, you are given default reports that can be utilized to better understand your costs. Of course, you can use it to create your custom report based on the requirements you have.

aws cost explorer reports aws cost optimization tools

3. AWS Budgets

AWS Budgets is a very helpful feature that can be used for monitoring your cost and usage. It also provides you with the possibility of receiving alerts once the usage exceeds the defined threshold. You may explore the best practices for setting up a budget. Below you can see what one budget looks like:

aws budgets aws cost optimization tools
aws cost optimization tools aws cost explorer

4. AWS Cost Anomaly Detection 

It is a feature of the AWS Cost Management service which uses machine learning models to detect patterns and anomalous patterns. It can be integrated with Amazon Simple Notification Service (SNS) for alerting and notification. Keep in mind that the service is free, but if you integrate it with SNS, you will incur charges for it.

AWS Cost Anomaly Detection aws cost optimization tools

5. Rightsizing recommendations feature

This feature of Cost Explorer helps you to spot EC2 instances that can be scaled down or even terminated. All of these recommendations you’ll receive from this feature are based on usage. 

6. AWS Savings Plan

AWS Savings Plan offers flexible pricing options for reducing the price value for EC2, Fargate, and Lambda in return for a commitment to a consistent amount of usage over a period of time(1-3 years). There are different savings plans available depending on the needs.

aws savings plan aws cost optimization tools

7. AWS Trusted Advisor 

It gives recommendations, based on best practices, related to several categories – cost optimization is the one in which we’re interested. This service can be used for the identification of cost-saving opportunities such as the elimination of unused resources, rightsizing of computing resources, and purchasing reserved instances. 

Keep in mind that Trusted Advisor with the basic plan provides only security checks and service quotas, therefore if you decide to use it for cost optimization you’ll need at least the AWS Business Support plan. You also need to have it enabled to use it as expected.

aws trusted advisor aws cost optimization tools

8. AWS Compute Optimizer 

The AWS Compute Optimizer uses machine learning to inspect the configuration and utilization of your compute resources (EC2 instances, Autoscaling Groups, EBS volumes, Lambda functions, and ECS services on Fargate). This ends up in recommendations for cost improvement. Another great thing to mention regarding this service is that it’s free and you’ll be paying only for your computing resources which are already running.

aws compute optimizer aws cost optimization tools

9. AWS Billing Console

In this console, you will see a breakdown of all the services you’re using, allowing you to analyze and understand where your costs are coming from.

aws billing aws cost optimization tools

10. Cost and Usage Reports 

The Cost and Usage Reports follow the usage of AWS services and prove reports that break down the costs depending on your preference. These reports can be directly sent to S3, you can then use Amazon Athena to further analyze the data using standard SQL. Explore its user guide here

11. Cost Allocation Tags 

The Cost Allocation Tags is a feature provided by the AWS billing console which allows separation between the costs based on tags. A tag is a label, containing key and value, which is assigned to your deployed resources. This is a great way to separate your infrastructure based on different criteria. This provides a way to organize and track your AWS infrastructure and usage based on specific categories that are meaningful to your organization. The tag needs to be activated to be used for further analysis.

cost allocation tags aws cost optimization tools

After a tag is activated it can be used in the Cost Explorer service for example. 

Just keep in mind that sometimes it might take up to 24 hours for a tag to become active for usage in the Cost Explorer filtering. This will allow you to understand and track your usage better. Based on communication with AWS I can also confirm this is the most effective approach they always suggest.

aws cost allocation tags aws cost optimization tools

12. AWS Config

AWS Config monitors how services in your account are set up. This service is not specifically made for cost optimization purposes, but for sure can be used in that direction if needed. Find out more about AWS Config here

Additional tips on your road to cost optimization in AWS:

  1. Unused resources can continue to accrue charges, leading to unnecessary expenses. Using the tools provided above you will be able to effectively manage costs. It’s important to keep track of your infrastructure and go through its usage periodically. A good point here would be that you can set up alerts that can keep track or at least remind you to do that.
  2. Use the correct instance purchasing options based on your needs. Use reserved instances whenever you know that your workload will be long-term and can leverage using them. Use spot instances when you are not worried about your workload getting interrupted.
  3. If you’re using Autoscaling Groups you can leverage their possibility of creation for scaling policies. This way the scaling will happen based on the demand of the service and the policy you’ve configured. These policies can be based on various metrics such as CPU utilization, network traffic, or custom application-specific metrics. For further optimization of the costs, you can also work with various instance purchasing options in your autoscaling group.
  4. Based on the third point the ECS service can also have scaling policies configured for your containerized applications. Allowing the services to respond to changes in demand. The policies which can be configured there are CPU utilization, memory usage, Application Load Balancer request count (for this you need to have ALB configured with the service), and custom Cloudwatch Metric.
  5. In regards to the S3 service, you can leverage it by using Amazon S3 Storage Lens. This allows you to gather more insights into object-storage usage and activity. With this service, you’ll be able to identify cost-optimization occasions. This is paid Amazon service so make sure to estimate the cost before continuing further with it. 
  6. You can reduce costs by using VPC Endpoints. These endpoints allow you to communicate with AWS services without leaving the AWS internal network, therefore avoiding further costs related to NAT Gateways. They’re not free to use but are way cheaper than NAT Gateway. 
  7. Data transfer costs, which can be quite tricky to pin down. You can leverage the AWS calculator here in understanding the data transfer costs better. A good way to minimize your data transfer costs is by following a strategy that would match your needs – minimizing traffic between Availability zones and regions, optimizing the use of public IP addresses, and using Cloudfront to AWS for HEAD/GET requests.

Here are our top-rated AWS cost optimization best practices:

  1. A great way to be able to plan and estimate your cost is via the AWS Pricing Calculator. Using the calculator you can explore in depth the pricing of certain resources based on the requirements you have. This will help you make a decision on which services are appropriate for your setup.
  2. Setting up alerts will help you understand and track your costs better. This way you can reduce expenses based on significant cost spikes.
  3. Reviewing your infrastructure regularly to identify your usage and potentially optimize your costs. Using the methods and services mentioned above you can identify underutilized resources and resize them based on demand.
  4. Cleanup stale resources is an important part of the whole process. Unused resources can continue to accrue charges, leading to greater expenses than anticipated. 
  5. Don’t forget that AWS offers a variety of tools that can be used to help you out in this journey. Some of them are free, so don’t forget to create the habit of working with them.

To wrap it up

By following the above tips, you will unlock the power of cost optimization while maximizing performance and reliability in your cloud-based services. Take charge of your expenses with our expertly crafted tips, enabling you to achieve unparalleled efficiency without compromising on quality. 

Lower your AWS bill today!

Experience the ultimate balance between cost-effectiveness and top-tier service delivery as you embrace the cloud revolution.

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