How to Manage AWS Cloud Costs: A Complete Guide

What Are the Costs of the AWS Cloud?

By using effective AWS cloud cost management tools and following best practices, you can build a robust cloud environment while ensuring that your costs reflect the value you obtain from it. But before you learn how to manage AWS costs more effectively, you need to know exactly what those costs are.

AWS offers several different pricing models for its standard cloud platform and Amazon EC2 (Amazon Elastic Compute Cloud). Whichever model you choose, your overall AWS cost will depend on your computing, storage, and data transfer usage over the course of each month. Since Amazon EC2 is one of the most commonly-used services, we are going to look at it more closely; however, we encourage you to keep in mind that the principles mentioned can also be applied more widely across all AWS cloud services.

The four pricing models for Amazon EC2 are:

1. On-demand instances — The basic on-demand pricing model enables you to pay for the services and resources you use by the hour or by the second, with minimum billing periods of 60 seconds. This model involves no long-term contract, so it’s flexible but has the highest unit costs.
2. Savings plans — If you are willing and able to commit to a specific usage every month, you can take advantage of the lower unit prices that AWS savings plans have to offer.
3. Spot instances — Only available for Amazon EC2, it is possible to request spare computing capacity at discounted rates, as and when needed. If you are running fault-tolerant services and applications, this can be an excellent way to lower your overall AWS cost.
4. Reserved instances — You can reserve AWS instances for as long as three years in advance in exchange for significant discounts. However, if you do not need the instances that you reserve, there is no way to cancel them. This pricing model is, therefore, most suitable for organizations with predictable cloud computing requirements.

As mentioned above, for all of these pricing models, your total AWS cost every month will depend on overall computing, storage, and data transfer usage. In order to reduce cloud costs for your organization and ensure that you only pay for what you really need, you need to follow best practices at all times.

AWS Cloud Cost Management Best Practices

There are a number of steps you can take to manage your AWS cloud costs more effectively. By following best practices, you will not only have the opportunity to reduce your overall spend but also ensure you are never taken by surprise when your monthly bill arrives.

Use cost visibility tools

Whether you use the tools provided by AWS or you opt to use more advanced cloud cost management tools from a third-party platform, you need to be able to see exactly where your money is going every month. You need to know which resources are consuming your cloud budget, and you must be able to spot abnormal spikes in your costs as soon as they occur.

Build an effective AWS tagging strategy

AWS gives you the ability to assign metadata labels to all of the resources you consume. Building an effective tagging strategy that clarifies which departments and organizations are actually consuming the resources in question will allow you to manage your costs far more efficiently.

Generate AWS cost allocation reports

Assuming you have an effective tagging strategy in place, it will be easy to generate cost allocation reports by department and by individual user accounts. These reports will help you implement an efficient cost allocation and chargeback system that ensures all resource usage is billed correctly.

Create separate production and development AWS accounts

When deciding which and how many AWS accounts to create, a good guideline to follow is to create as many as you need to achieve your goals and no more. Every account you create should make sense for your business, both in the present and in the future, as you are envisioning. Whatever you decide, having separate production and development accounts is good practice and definitely an approach every business should adopt from the get-go. Not only does it make managing each environment easier, but it also allows for detailed cost control.

Employ effective AWS cost optimization strategies

All of the data that you can collect and analyze through the creation of tagging, the use of separate accounts, and the visibility tools provided by AWS and third parties will be of little use if you do not act on the results of your analyses. In the next section, we will look at practical ways to optimize your monthly AWS cost and ensure that you use the most suitable resources for your specific requirements.

By following best practices and optimization strategies, you could achieve a significant monthly cloud cost reduction, which you can either reinvest into your cloud system or allocate to other ICT needs.

Methods to Manage and Optimize AWS Costs

Once you are following AWS cloud cost management best practices, you will be in a position to actively optimize your resource consumption and make real savings.

Use the right instances for each use case

AWS offers many different types of EC2 instances, which are designed to meet the needs of different use cases. By making sure that you use the right instances, you can optimize your resource allocation and consequently reduce your overall costs. You will find memory-optimized, compute-optimized, and storage-optimized instances, as well as accelerated computing and general purpose instances in the AWS ecosystem. Each instance offers specific features and resources.

Allocate costs accurately

By implementing an effective tag policy and utilizing tools such as Stax Tag Policy to encode these tagging rules for regular reporting, you will be able to use chargebacks to ensure that all costs are allocated to the correct organizations, departments, and individuals. Holding every user accountable for the resources they are consuming and the cost of these resources is one of the most effective ways to ensure that your monthly spending accurately reflects the benefits you enjoy.

Use daily and weekly reports to avoid surprises

With the ability to generate detailed reports at any time, there’s no reason to wait until the end of the month to see how your money is being spent. Either directly reading the AWS Cost and Usage Reports (CUR) or by taking advantage of services like our Stax Cost and Compliance module that compiles the AWS billing data into visual insights and user-friendly reports, you can ensure that individual usage and overall AWS costs remain in line with your expectations.

Use the right pricing model for your business

It's an obvious tip but one that bears repeating. It's crucial to select the most suitable pricing model for your actual usage, and this is not a set-and-forget scenario. If your cloud activities and consumption patterns change in the future, you may need to revisit your choice of pricing model and revise it accordingly. To determine whether this is the case, you need to make sure you are looking at the cost report on what you have been paying for, not just the default cost report on what you have paid and used. All the cost optimization strategies you can apply to the AWS platform will be of little consequence unless you select the right pricing model and review it at regular intervals.

Identify underutilized EC2 instances

Using the AWS Cost Explorer, you can generate a Resource Optimization report. This report will highlight EC2 instances that are either idle or underutilized. Once you have identified such instances, you can either eliminate them or replace them with smaller instances that will meet your resource requirements at a lower cost.

Delete or relocate older snapshots

Data that is stored on Amazon EBS volumes can be backed up with Amazon S3 snapshots, providing a straightforward way to implement an effective disaster recovery strategy. However, good housekeeping dictates that you delete older versions that are no longer relevant or, if the data they hold is required for compliance purposes, move these snapshots to a more economical storage facility. It’s important to note that deleting a single snapshot may not result in a reduction in your costs: it is only when all snapshots relating to a particular set of data are removed that your storage costs will be reduced.

Effective AWS cost optimization strategies will go a long way toward helping you to control and reduce your overall spend. For best results, we recommend using specialized cloud cost management tools, such as those included in our native AWS cloud management and automation platform.

Stax’s Cloud Cost Management Tools

When you start with a strong foundation, you'll find it much easier to manage your AWS costs. Our management and automation platform, which is the only native cloud management platform available for AWS, will provide you with the tools you need to take full control of your AWS environment and manage your costs effectively.

Total Visibility Enables Total Control

As noted earlier, it is essential to see where you are spending money and who is responsible for the spending if you want to control your AWS budget and extract maximum value from every resource you consume. Stax gives you total visibility across the entire platform, enabling you to take AWS cost management to the next level.

• Accounts — See exactly how much each AWS account is costing you every month. With separate accounts for several business units or development teams, you can quickly identify who is actually responsible for different features or cost centers within your business. This way, you can analyze a short-term spike in costs in relation to the activity that caused it and know if it’s justified or the first symptom of an ongoing problem in your regular production usage. Using individual accounts and our platform will ensure that you can easily identify the true source of future cost increases.
• Resources — The ability to view your monthly, weekly, or daily AWS cost in terms of the resources being used will make it much easier to spot problems that stem from the use of unsuitable instances as well as those that are caused by making the wrong long-term storage choices. It is also an invaluable aid to individual departments when attempting to identify the cause of cost spikes that are limited to one specific area of your business.
• Actual spend snapshots — See how much you have actually spent in any specific time period. If you want to find out the effect of changes in strategies and business activities, actual spend snapshots give you the ability to home in on the relevant time periods that you need to analyze.
• Predicted spend snapshots — You can also view snapshots of anticipated costs, which can be used to identify and eliminate unnecessary resources before they have a major impact on your budget.
• Detailed data on credits, savings plans, RI purchases, tax, and more — You will never be at a loss to explain where your money is being spent with access to detailed information on all areas of your AWS environment.
• Wastage — From overprovisioning instances to paying for infrastructure or storage that’s not being used and many more scenarios, it’s easy to waste money in the AWS cloud without even knowing it. With the Stax Wastage Report, you will have access to a simple-to-read and visual summary of your wastage in only 10-15 minutes. This is an excellent way to reduce cloud costs without making any sacrifices or cuts to your active instances.

If you would like to eliminate accidental AWS costs that are leading you to spend too much, contact us now to find out exactly how we can help.