AWS Cost Optimization: Reduce Cloud Costs for Your Organization

AWS cost optimization can be challenging, with many companies exceeding their cloud budgets and not achieving the financial results they want.

AWS cost management

And with five different AWS plans, finding the right pricing model and package is difficult. How do you know if you really need that extra computing power or other features? 

In this article, we will discuss AWS cost optimization to set you on the right path towards cloud savings so you spend less on AWS cloud services while still achieving great results.

Why should you care about AWS cost optimization?

No business wants to exceed their cloud computing bill. However, it happens all too often. Usually, it’s the result of poor budgeting, using the wrong plan, or underestimating the resources required for a project.

AWS cost optimization allows you to get the same amount of work done for less, cutting down your cloud bill and allowing you to re-invest in other services (or put the money back into your business).

How does AWS pricing work?

Before we go ahead and tell you how to reduce your AWS bill, first, let’s provide a quick rundown of the pricing system.

There are five main payment options available to AWS customers:

  • On-demand instances – only pay for the resources you use (pay-as-you-go).
  • Reserved instances – a long-term commitment to specific resources of 1-3 years with a discount.
  • Savings plans – commit to a level of resource usage over 1 or3 years to get a discount.
  • Spot instances –  bid on unused resources for up to 90% discounts, but beware of limited availability (servers can be shut down with as little as a 2-minute notice).
  • Dedicated host – a physical server dedicated to your business, an expensive solution.

How to reduce your AWS bill 

Reducing your AWS bill is no easy feat. You need an eye for detail and patience of a saint, but a little time spent here and there will help you slash costs and improve gross margins for your business.

To better understand where you’re investing your money, you need to pick your bill apart. To get started, you can use the AWS Cost Explorer tool. It will get you a full run down, providing you with a transparent overview of how your budget is currently allocated.

Tip: Group report on costs by specific attributes (e.g., service or region) for a better understanding of your usage.

Once you’ve done some manual digging – which, let’s face it, is the most time-consuming part – you can start exploring the AWS cost optimization tool suite.

AWS cost optimization tools 

There are three main AWS cost management tools that will help you  manage and understand your cloud bill better:

  1. AWS Cost Explorer
  2. AWS Budgets
  3. AWS Cost & Usage Report

AWS Cost Explorer

AWS Cost Explorer lets you create custom reports for data analysis, detecting any cost anomalies or other high-cost drivers.

Once you’ve looked through your bills manually, the Cost Explorer tool is next on the list – helping you understand how you use your data and how much you’re actually spending.

AWS budgets

Budgets are important in any business – so, why not set one for your AWS account?

With AWS Budgets, you can set custom budgets, receive alerts when nearing the threshold, and update your budget if you exceed the limit.

Setting a budget ensures you remain on track, not spending a penny more than planned. It’s also a great tool for determining how much you actually spend on your cloud services (thanks to the real-time notifications).

AWS cost & usage report

Finally, you’ll want to use the AWS Cost & Usage Report.

Similar to the Cost Explorer, the Cost & Usage Report is an overview tool that comes with additional metadata, reserved instances, savings plans, and AWS pricing.

Basically, it lets you organize costs further, using cost allocation tags and categories to gain a more granular understanding of your costs and service use.

Optimizing  Kubernetes costs

If you use Kubernetes within AWS, costs can quickly become confusing. For example, calculating shared costs is no easy task; containers are very dynamic, and autoscaling somehow leads to further confusion…

So, how do you allocate Kubernetes costs to save money?

First, you want to assess your cloud bill and allocate resources properly – if you’re not using resources, then you don’t need them (don’t forget that you’re being charged whether you use them or not). 

Related: 8 Best Practices to Reduce Your AWS Bill for Kubernetes

Second, ensure you’re using container classes and breaking down costs for labeling and tagging to better understand where your money is going. If you don’t know how your cash is going, then comprehending this is the best way to find new ways to better optimize costs.

Finally, count in cluster costs beyond the core – consider management and operational costs (usually charged per hour) to calculate a more accurate budget and cost estimation.

Related: Keep Your AWS Kubernetes Costs in Check with Intelligent Allocation

AWS cost optimization made easy

AWS cost optimization can seem daunting at first, but spending a few hours digging into your bills and services, and taking advantage of the basic cost optimization tools is a great way to reduce your cloud costs.

It’s no secret that AWS is expensive. But the more money you can save by picking the right plan and actually using your allocated resources, the more cash you can invest into new resources or back into your business.

There’s something else you can do to optimize your AWS bill. The industry is now turning to automated cloud optimization solutions that find the most cost-effective cloud resources and constantly adjust them to application demands in real-time. 

Take a look at this article to learn more about the value automation brings to optimizing AWS costs: Why AWS Cost Explorer Isn’t Enough to Seriously Reduce Your Cloud Expenses


What is cost optimization in AWS?

Cost optimization in AWS refers to cutting costs and optimizing your budget, all while maximizing resource use and application performance.

What is cost optimization?

Cost optimization is all about reducing costs while optimizing the existing resources. It’s all about driving prices down without creating any negative impact on application performance. In the cloud, cost optimization focuses on choosing the right pricing model, the most cost-effective resources, and the best ways to keep costs in check. Since cloud usage is dynamic, many organizations rely on automated cloud cost optimization solutions to get the best results.

Why is cost optimization important?

Cost optimization allows you to tailor your cloud computing services to your budget, not vice versa. Taking control of your spending allows you to save money while seeing results, whether that means creating scalable applications or optimizing data storage.

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