AWS Cost Reduction: 5 Discount Models and 10 Cost Cutting Strategies

What Is AWS Cost Reduction? 

 

Amazon Web Services (AWS) cost reduction involves identifying cost-effective solutions and using AWS features or dedicated tools to optimize cloud spending. By adopting cost-reduction strategies, businesses can maintain operational capabilities while minimizing waste and unnecessary spending.

The core principle of AWS cost reduction is maximizing the output from every dollar spent on Amazon cloud services. Achieving this requires a thorough understanding and planning of resource allocation, usage patterns, and periodic review of AWS billing. Various tools, pricing models, and discount strategies are available to assist companies in optimizing their consumption. With careful planning, organizations can scale right-size services to lower costs without impacting performance.

In this article:

• AWS Cost Saving Models
• 10 Best Practices to Reduce Your AWS Costs

1. 1. Identify EC2 Instances with Low Utilization and Stop or Rightsize Them
   2. Identify EBS Volumes with Low Utilization and Snapshot then Delete Them
   3. Analyze Amazon S3 Usage and Leveraging Lower Cost Storage Tiers
   4. Review Networking and Delete Idle Load Balancers
   5. Review and Modify EC2 AutoScaling Groups Configuration
   6. Choose the Right AWS Region for Each Workload
   7. Reuse or Sell Underutilized RIs
   8. Analysis of Amazon DynamoDB Usage and Cost Reduction
   9. Upgrade Instances to the Latest Generation
   10. Utilize AWS Cost Optimization Tools

AWS Cost-Saving Models 

 

1. AWS Free Tier

The AWS Free Tier allows users to explore AWS resources at no cost for a limited period. This model gives customers access to services free of charge, up to a particular limit. The Free Tier benefits beginners who aim to familiarize themselves with the AWS ecosystem without incurring expenses. This approach is perfect for testing purposes or small-scale applications and includes options like Amazon EC2, Amazon S3, and more.

However, users should be cautious of exceeding Free Tier limits, as additional usage incurs charges. Monitoring usage regularly is key to ensuring costs do not accidentally escalate. It is also essential to understand the distinction between the types of free offers – always free, 12 months, and short-term trials – to avoid unexpected costs.

2. Reserved Instances (RIs)

AWS Reserved Instances (RIs) are a pricing model that provides discounts of up to 72% compared to on-demand pricing in exchange for a long-term commitment to use AWS services. They are ideal for workloads with predictable and steady usage. Users can reserve instances for one or three years and decide to pay some of the amount upfront to increase their discount.

RIs require a thorough understanding of workload patterns. Committing to long-term usage means accurately predicting needs to avoid under- or over-allocation, which can negatively affect costs. For example, purchasing five servers to run a web application could be a waste if application demand reduces during the term and the web application requires only three servers. On the contrary, committing to only three servers instead of five, when the application really needs five, would result in reduced cost savings. Evaluating usage data and analyzing consumption trends helps make informed decisions about the right type and quantity of RIs to purchase.

Related content: Read our blog on AWS Savings Plans vs. Reserved Instances

3. Spot Instances

Spot Instances offer an economical way to use unused Elastic Compute Cloud (EC2) capacity at reduced rates, sometimes as low as a tenth of the on-demand price. This cost-saving model suits flexible applications that can handle interruptions, such as big data jobs, CI/CD pipelines, and batch processing. By bidding on unused capacity, users can significantly reduce costs.

While the cost savings can be significant, the unpredictable nature of Spot Instances requires preparation. AWS can terminate these instances with only 2 minutes’ notice, demanding architectures that can gracefully handle disruptions. Implementing self-balancing and fault-tolerant systems helps ensure applications remain operational even when instances are interrupted.

 

4. Savings Plans

Savings Plans offer another way to optimize AWS costs by providing flexible pricing in exchange for a commitment to a consistent amount of usage (measured in $/hour) for a one or three-year term. Unlike RIs, Savings Plans apply discounts across all AWS service usage, including EC2 and AWS Lambda. This flexibility makes them an attractive option for businesses seeking cost efficiency without being tied to a specific instance type or region. For example, an organization could commit to $2,000 per hour for the term of the Savings Plan, and if it needs fewer servers on EC2, it could switch the spending to storage services or container services.

Choosing the right Savings Plan requires understanding usage patterns to achieve the best cost outcomes. This involves analyzing past consumption data to determine future needs accurately. The plan’s flexibility allows businesses to adapt to changes in workloads without losing out on savings.

5. Volume Discounts

Volume Discounts on AWS occur when increased usage leads to lower per-unit costs, applicable to certain services like data transfer or storage. This model benefits businesses that scale operations, as the more resources are consumed, the lower the cost per unit.

Realizing benefits from volume discounts requires foresight and strategic planning. Understanding when and how resource consumption crosses into a higher discount tier is essential in planning the scale-up of service use. This approach to cost-saving encourages businesses to optimize and manage their resource use strategically.

Related content: Read our guide to AWS cost management

 

10 Best Practices to Reduce Your AWS Costs 

 

1. Identify EC2 Instances with Low Utilization and Stop or Rightsize Them

Identify underutilized Amazon EC2 instances to optimize costs. This process involves analyzing the CPU, memory, and network usage of instances. If an instance’s resources are consistently below the required threshold, stopping or resizing the instance can result in significant savings. It’s crucial to have a clear view of usage metrics and patterns to make effective decisions.

Once you’ve identified low-utilization instances, consider stopping them during off-peak hours or migrating them to a size that matches their actual usage needs. AWS offers tools like Cost Explorer and AWS Trusted Advisor, which provide insights and recommendations.

 

2. Identify EBS Volumes with Low Utilization and Snapshot, then Delete Them

Monitoring the utilization of Amazon Elastic Block Storage (EBS) volumes managed hard drives attached to EC2 instances helps achieve cost efficiency. Volumes that are infrequently accessed yet incur monthly charges should be identified and assessed. By creating snapshots of these volumes for future potential uses and deleting the underused ones, businesses can reduce unnecessary storage costs without losing critical data.

Snapshotting EBS volumes ensures that the data is preserved, enabling reconstruction if needed while removing the perpetual costs associated with inactive storage. Employing lifecycle policies can automate this process, regularly reviewing the utilization of storage resources.

 

3. Analyze Amazon S3 Usage and Leveraging Lower Cost Storage Tiers

Reducing Amazon S3 storage costs involves analyzing usage patterns and adapting storage strategies accordingly. AWS provides different storage classes, each with varying costs and retrieval speeds, including:

• S3 Standard
• S3 Intelligent-Tiering
• S3 Glacier

Companies can substantially lower their storage expenses by storing data seldom accessed in archival classes like Glacier.

Regularly reviewing data access patterns is essential to effectively leveraging lower-cost storage tiers. For instance, moving infrequently accessed data to cheaper tiers such as S3 Infrequent Access or S3 Glacier can slash costs. Automated tools like S3 Intelligent Tiering can dynamically move data between access tiers based on usage patterns.

 

4. Review Networking and Delete Idle Load Balancers

Inefficient network management can lead to unnecessary charges, especially with idle load balancers that incur hourly fees. It’s important to regularly audit load balancers within your AWS architecture to identify redundant or underused ones. Removing these idle load balancers can help reduce costs.

Beyond deleting idle load balancers, optimizing their configuration is crucial. Implementing proper load balancing policies such as session stickiness and optimizing routing algorithms can improve network efficiency. Regular audits and adjustments ensure the network infrastructure is correctly scaled to the workload demands.

 

5. Review and Modify EC2 AutoScaling Groups Configuration

Fine-tuning EC2 AutoScaling Groups can be pivotal in cost management. AutoScaling allows for dynamic adjustment of the number of instances to match current demand, potentially reducing waste by minimizing over-provisioning. Reviewing and modifying these configurations ensures resources are scaled in alignment with usage patterns.

Effective scaling requires setting appropriate parameters, such as scaling thresholds and cooldown periods. Analyzing usage data and traffic patterns helps set these parameters and adjust resources accurately.

 

6. Choose the Right AWS Region for Each Workload

Choosing an optimal AWS region can reduce latency and significantly save on costs. Prices and services differ between regions, influencing cost structure extensively. Selecting a region that aligns with user base proximity and service availability can cut network costs and improve application performance.

Regional selection is influenced by various factors such as data residency requirements, service offerings, and cost considerations. Analyzing these factors to determine the most suitable region is crucial for achieving efficiency. By strategically positioning resources, companies can reduce AWS expenses while maintaining high performance and compliance with local regulations.

 

7. Reuse or Sell Underutilized RIs

Repurposing or reselling underutilized Reserved Instances (RIs) can recover costs associated with unused resources. AWS Marketplace facilitates the sale of unused RIs, allowing businesses to regain some expenses. Instead of letting these instances expire without use, reselling them ensures financial resources are not wasted.

Repurposing RIs may involve reallocating them to workloads that match their configuration and performance capabilities. This requires a periodic review of resource usage and forecasting demand to align with capacity.

 

8. Analysis of Amazon DynamoDB Usage and Cost Reduction

Evaluating Amazon DynamoDB usage is essential for discovering cost-saving opportunities. AWS provides tools to analyze DynamoDB utilization patterns and helps users optimize provisioned throughput, reducing costs. Identifying tables with underutilized resources and fine-tuning the read/write capacity units based on actual demand are two more ways to cut costs.

Implementing on-demand or auto-scaling capacity modes allows DynamoDB to adapt to varying traffic, optimizing resource allocation. By adjusting configurations to usage patterns, organizations can manage cloud expenditures effectively.

 

9. Upgrade Instances to the Latest Generation

Utilizing the latest generation of AWS instances typically results in improved performance at similar or reduced costs. Newer instance families often incorporate the latest hardware advancements, offering better efficiency and cost-effectiveness. Upgrading to these instances can enhance workload performance and lower per-unit processing costs. It should be noted that upgrades are not automatic, and users need to migrate their instances to the next generation manually.

Updating instances requires evaluating compatibility and resource requirements to maximize benefits. AWS’s pricing structures often make newer instances more appealing, providing an opportunity for cost savings while gaining performance improvements. By strategically planning upgrades, businesses benefit from technological advancements.

 

10. Utilize AWS Cost Optimization Tools

Native cost optimization tools like AWS Cost Explorer, Trusted Advisor, and AWS Budgets provide insights into spending patterns, resource usage, and offer recommendations for improvement.

In addition, dedicated cloud optimization tools can enable more in-depth analysis of usage and optimization recommendations. By using these tools, businesses can refine their cloud strategies, ensuring financial efficiency and maximizing return on investment in AWS services.

Learn more in our detailed guide to AWS cost optimization 

 

Optimizing AWS Costs with Anodot

 

There are more ways to optimize your AWS spend than binding yourself to a one—or three-year agreement. Third-party cloud cost management platforms like Anodot can help you save up to 40% on cloud spend through data analysis alone. Our platform is designed to be an AWS integration offering so you can simplify your FinOps toolset.

 

With Anodot’s cloud cost management platform, you can get comprehensive dashboards showing data down to the hour. That, plus retention periods of up to 18 to 24 months and AI-powered budget projects, means you can finally invest in a tool that your finance, DevOps, and FinOps team can agree upon. Another feature that will benefit all your teams is accessing all your multicloud spending and Kubernetes data in one place instead of handling managing multiple dashboards.

Save on AWS Functions pricing with our intelligent cost optimization platform:

• Real-time Anomaly Detection Dashboards: Customizable dashboards to help you visualize your DevOps cost-savings and identify unusual cloud cost spikes.
• AI-Powered Recommendations: Provides actionable AI-powered recommendations to improve cost reductions and resource utilization.
• Personalized Alerts: Tailored alert systems that offer massive improvements to response times.
• Next-Gen Forecasting: Predictive analyses for accurate future cloud spending and budgeting.

Anodot simplifies AWS cost management for FinOps teams by preventing overspending and reducing management overhead. Our AI-powered support and ML algorithms make cloud cost reduction easy, and our user-friendly dashboards provide clear insights into cloud spend, for AWS or any other major cloud provider that you utilize for FinOps practices.

Learn more about Anodot