The Basics of AWS Cost Optimization

AWS cost optimization isn’t easy, and it’s more of a journey than a destination. The good news is, with careful planning and implementation, you can maximize your return on investment (ROI) in the cloud and implement the most cost-effective and efficient processes for your business without sacrificing performance or security. 

How do you know if you are getting the most value from your cloud infrastructure? Read on to review the best practices and tools you need to implement for a strong cost management practice.
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3 Common AWS Cost Optimization Benefits

Reducing expenses isn’t the only benefit of optimizing your AWS costs. The goal of optimization is to increase your operational efficiency, which can also lead to improved performance and scalability. This gives your team more time to focus on other projects and initiatives while taking advantage of new opportunities. Here are three common AWS cost optimization benefits.
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Capitalizing on Every Cost Opportunity

The economic benefits are an obvious advantage of AWS cloud cost optimization. The process can help you identify the most cost-effective purchasing options, such as reserved instances (RI) and savings plans. A continuous cost optimization process can also help you identify Amazon EC2 instances with low utilization and save you money by stopping or rightsizing those instances. When you optimize AWS costs, you reduce expenses and are more likely to identify architectural, operational, and financial opportunities that drive further savings.

Reducing Compliance and Maintenance Headaches

Compliance and maintenance are critical, but they’re also time-consuming. Imagine what you could accomplish without worrying about cloud operations, maintenance, and security monitoring. AWS cost optimization uses resource and cost-allocation tagging to make it easier to track and manage your resources and expenses. The net result is fewer concerns about compliance and maintenance.

Accelerating Your Growth

Finally, AWS cost optimization improves operational efficiency while providing cost-saving opportunities. This means you regain time and money for growing your business. When you can focus on growth opportunities, you’re more likely to identify and prioritize high-impact initiatives, devise better strategies and cultivate innovation. AWS cost optimization also helps you increase or decrease your resources to meet demand, so it’s ready to scale with your business. 
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3 Common AWS Cost Optimization Challenges

While the cloud offers numerous benefits, including self-service, on-demand access, and consumption-based pricing, many businesses struggle to optimize costs effectively because of poor cost containment, lacking governance strategies, and other issues. Here are some of the most common AWS cost optimization challenges.
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Lack of Visibility 

You can’t optimize your costs if you can’t effectively track and analyze usage. Many companies struggle to achieve spending visibility. Not only do you need the right tools in place, but you also need team members who can effectively analyze and interpret results. Cloud environments can also change often, so you need to maintain a comprehensive, up-to-date view of your costs and usage.
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Unreliable  Forecasting

One of the biggest benefits of the cloud is its ability to scale resources on demand, but these adjustments can also make it more difficult to forecast costs. Typically, forecasting tools are based on historical usage, but external factors such as seasonality or other demand changes can lead  to inaccurate predictions. 
  

Poor Architecture

Poorly-architected processes and applications can lead to critical issues, including crashes and data loss, and can further complicate AWS cost optimization efforts. Your architecture might include security vulnerabilities that leave you vulnerable to cyberattacks and other issues that disrupt operations. The time, cost and additional resources needed to resolve these unexpected issues can outweigh the potential benefits of AWS cost optimization.
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4 Stages of the AWS Cost Optimization Journey

In addition to overcoming these challenges, it’s important to leverage programmatic, strategic cost management techniques to avoid creating additional issues. Users often continue to provision new resources without properly accounting for or sunsetting them using the available financial instruments. 

Many organizations react to overspending with reactive, temporary solutions, such as one-time or once-a-year RI purchases. The impact of these measures is typically short-lived because they're not programmatic or strategic processes. 

A long-term solution to spiraling costs is to focus on driving programmatic, continuous cost optimization. Ideally, you’ll want to see a steady recurring monthly cost and have visibility into any other relevant factors.

To understand cost optimization from a holistic perspective, think of it as a life cycle. Each cycle consists of four general stages: analysis, cost optimization, cloud governance, and usage and cost monitoring. Across each stage are actionable steps, such as tracking usage and costs, right-sizing, cost allocation, and automation. 

Below we walk through each step in an AWS cost optimization model.
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1. Analysis
Begin the four-stage optimization journey by analyzing your current state of spending. Once you do this, you can begin to identify potential quick wins, such as unused Amazon EBS volumes or unused reservations. In this review stage, look for unused or overprovisioned resources. But don’t forget to review elements such as self-managed workloads, accounts, and your company tagging policy. 
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2. Cost Optimization
Next, start exploring other AWS financial tools. Amazon’s on-demand prices are the default pricing model, but the company suggests that models such as savings plans, dedicated hosts, or reserved instances if your EC2 instances typically require more than 70 hours each week. For example, compute savings plans can reduce the cost of EC2 instances, services on AWS Fargate and Lambda functions. 

Those aren’t your only options during this cost optimization phase. Consider tools such ‌as AWS Auto Scaling, which tracks your usage and automatically adjusts capacity, AWS Cost Explorer, which helps you understand and manage your costs and usage over time. 

Use RI and savings plans to further reduce your costs where it makes sense, but avoid making large purchases reactively. Instead, be strategic and focus on well-known steady-state workloads running on newer AWS instance types. If you have legacy instance types that you plan to change, focus on compute savings plans rather than RI.
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3. Cloud Governance
Assessing your current state and taking initial optimization steps are important parts of this life cycle. But you need to measure the performance of these changes regularly to achieve governance. There are many platforms, tools, and processes that can help you improve governance. Mission’s partner, CloudHealth by VMware, for example, offers a leading cost manager platform which connects to your AWS account and provides management, recommendation, and optimization capabilities. 

Other features to look for at this stage include in-depth, customized reporting, robust alerts, and post-deployment visibility to help you get a handle on costs and actionable next steps. 

It’s also important to review business aspects, such as your high-level goals, the metrics you’re tracking, forecasting, budget reporting, and automation. Incorporating those factors into your governance efforts will prepare you to quickly make adjustments, as needed, before you enter the usage and cost monitoring stage. 
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4. Usage and Cost Monitoring
Once you have governance and visibility in place, set up any necessary alerts. Continue to track usage and cost on a defined reporting schedule so you can assess and refine as needed. Meanwhile, start having conversations internally that are design-related and strategic for your business. 

Each journey is unique, and you should approach cloud optimization as an ongoing process rather than a one-time project. You want to achieve continuous refinement and improvement while establishing the AWS cost optimization best practices that matter most to your organization. 

Excelling in each stage of the AWS cost optimization life cycle helps you develop a thoughtful and strategic way to grow as your business needs change.

Cost Optimization Best Practices

Remember that cost optimization is an ongoing process. While the steps above should be included as part of your regular workflow, following best practices can further improve your cost optimization process. 

One suggestion is to embrace the consumption-based pricing model offered by AWS. It allows you to scale resources up and down based on demand, and you’ll only pay for what you use. This means you don’t need to leave idle resources running full-time, which can create significant costs.

When possible, take advantage of AWS discount opportunities such as RIs and savings plans. Though they require commitment and planning, you can save up to 75% compared to on-demand instances. AWS also offers volume and partner discounts for select services, as well as programs and credits available for startups and entrepreneurs. Occasionally, AWS offers promotional credits for some customers, so it’s important to research what’s available.   

Another best practice is to develop a tagging process to help monitor costs. Visibility is one of the most important factors in creating an effective cost management practice. Take advantage of AWS cost allocation tags, unique identifiers you can use to track your AWS costs on a detailed level. These tags allow for enhanced visibility and greater control over your environment, such as determining which resources are deployed and why. 

The on-demand and self-service nature of the cloud can often lead to cloud sprawl, which occurs when a business has more cloud instances, services or providers than it needs. Having governance policies in place can help you understand your cloud footprint and react before it gets out of control. 

Cost Optimization for AWS Requires Long-Term Planning

You can drive substantial savings and optimization by understanding the importance of AWS cost optimization, embracing each life cycle stage, focusing on continuous improvement and using the right technology. These tools are most effective when your team retains a trusted adviser with a deep understanding of how to use the system, make optimization recommendations and drive meaningful improvements. You’ll also need systems in place to maintain those optimizations over time.

Cost optimization is an ongoing process. You’ll need to set cadences for analyzing and understanding your spending, implementing strategies to reduce costs, establishing governance policies and tracking usage and costs. When you follow these AWS cost optimization best practices, you can optimize your costs without sacrificing performance or security. 

While optimization takes time, there are opportunities for you to see immediate results. For example, our Mission Instant Discount Program (IDP) is designed to save up to 5% off your AWS bill immediately for 12 months, with no long-term commitment required. 

Lower your AWS bill today

FAQ

1. How can organizations effectively measure the return on investment (ROI) from their AWS cost optimization efforts?

Organizations can measure the ROI from their AWS cost optimization efforts by comparing the cost savings achieved against the investment in optimization activities. This involves analyzing historical data to establish a baseline and then tracking changes in AWS spending after implementing optimization strategies. Key performance indicators, such as reduced costs per workload, improved utilization rates, and the total cost of ownership, help quantify efficiency gains. Additionally, aligning these financial metrics with business objectives, such as enhanced performance or scalability, provides a comprehensive view of the value derived from optimization initiatives.

1. Are there specific tools or services within AWS that help automate the cost optimization process?

AWS offers several tools to automate cost optimization, such as AWS Cost Explorer for analyzing and identifying savings opportunities, AWS Budgets to set custom budget alerts, and AWS Trusted Advisor to provide recommendations on cost savings. These services streamline the optimization process by highlighting underutilized resources and suggesting adjustments.

1. Beyond the initial setup and optimization, what are some common ongoing challenges companies face in maintaining cost efficiency on AWS?
2. Maintaining cost efficiency on AWS post-optimization presents its set of challenges, chiefly around the continuous evolution of AWS services and pricing models. As AWS introduces new features and updates, organizations must regularly review and adjust their deployments to avoid unnecessary costs. Additionally, the dynamic nature of business demands can lead to fluctuating resource usage, requiring ongoing attention to scaling policies and cost-monitoring practices to ensure that optimizations remain effective over time. One way to get support monitoring and optimizing your AWS environment is through Mission Cloud's managed service offerings. 
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