AWS Cost Optimization: Tips & Best Practices (2023)

If you’ve felt like you had a handle on your Amazon Web Service tools, but you’d like to improve your management of public cloud bills and expenses, it’s likely your organization could benefit from cloud cost optimization.

Perhaps the configuration you had worked in the past, but now, you’re needlessly paying for resources you don’t use. It’s important to stay on top of your cloud usage and cloud environments to prevent surprise bills. Fortunately, there are a few common perpetrators that can drive up costs, and we know where to find them. We’ll cover AWS cost optimization, best practices for keeping costs low to promote cost savings, and how AWS recommends you go about it.

What is AWS Cost Optimization?

AWS cost optimization is a practice focused on identifying waste, building cloud-friendly architectures that benefit from cloud scaling based on demand, and improving cost efficiency.

Why optimize cost on AWS?

Companies cannot, and should not, take a “set it and forget it” approach when it comes to public cloud. To ensure true AWS cost optimization, organizations need to regularly reassess their AWS architecture, instance usage, and related spend to confirm they are using their resources efficiently.

Many tools can be used with AWS to optimize spend. For example, AWS Cost Explorer can identify rightsizing opportunities and idle instances, as well as provide termination recommendations. There are also third-party cloud cost optimization tools that deliver more advanced reporting capabilities, deeper insights into AWS usage through consolidated dashboards, and recommendations for cost-saving opportunities. The ideal tools should provide cost and usage data, optimization recommendations. Third-party tools can also have multicloud capabilities for companies wanting a single dashboard for multicloud scenarios.

Oftentimes, businesses do not have someone on staff who can manage and monitor cloud spend. They may lack either the bandwidth or internal skillset to proactively monitor and regularly reassess spend to achieve truly beneficial cost optimization. This is where a managed cloud service provider can lend a hand. TierPoint’s AWS engineers and architects leverage powerful cost management tools. With our expert advice, we can help companies maximize their AWS investment, from purchasing RIs and rightsizing instances, to eliminating cloud waste, and so on.

Main contributors to high costs on AWS

If you’ve ever been surprised by a higher-than-expected spend, one or several of these factors may have been the culprit.

• Unchecked resources: Idle instances and resources that aren’t actively being used but still incurring costs can be a minor or major source of additional spend, depending on the size of the instances. Leaving resources to collect dust while they’re driving up your bill is the opposite of optimized.
• Choosing the wrong pricing model: You may have started your AWS license agreement believing you needed a certain level of resources, only to find that you are consistently below or above that mark, overpaying for on-demand or recurring capacity. Pricing models can easily work in your favor, but only if you’ve taken the proper time to plan and scope out what you need.
• Unoptimized applications: Sometimes, the problem stems from an application that’s using resources in a way that isn’t optimized, which could include heavy utilization of storage (disk space) or memory, or SQL statements being carried out in a less-than-optimal way.
• “Cloud-flation”: Inflation has impacted many sectors, and the cloud is not immune. Cloud availability and resources have been affected by inflation, and AWS has provided guidance and resources for companies to cut cloud spend in response to mounting concerns. Depending on how long talk of inflation and recession is in the air, this guidance may not be enough.

Reducing costs from these contributors isn’t always cut and dry – they need to be balanced in a way that doesn’t cause risk to your business or slow down productivity.

How should you design for AWS cost optimization, according to AWS?

Amazon Web Services suggests optimizing costs by following five best practice areas:

Practice cloud financial management

Taking a financial management approach to the cloud includes aligning your organization with unifying financial objectives that efficiently meet priorities. AWS provides tools such as Cost Explorer and Cost and Usage Reports (CUR) to monitor spend in your cloud environments. IT leaders can even set up notifications for usage and cost with AWS Budgets.

Expenditure and usage awareness

The more you can attribute costs to particular teams and projects, the more clearly you’ll be able to see opportunities for cloud optimization. Focus on profitable projects and determine where to allocate budget based on usage and ROI.

Improved usage awareness can be helped along with AWS Organizations, AWS Control Tower, and resource tagging. These tools can help you allocate costs and usage that allow patterns to emerge. Creating dashboards in Amazon Athena & Amazon QuickSight provide greater illustrative detail, and AWS Cost Explorer can improve visibility.

Once your organization becomes more aware of usage and cost, controls can be put in place through AWS Budgets, AWS Identity and Access Management, and Service Quotas.

Cost-effective resources

Use the right resources and instances for your workload. The server size can make a difference in costs. You might shy away from a larger server that costs more, but it can be true that the larger server takes much less time to run a process compared to a smaller one, driving your expenses lower. A higher cost doesn’t always mean a resource isn’t cost-effective. It’s important to look at the whole picture.

Manage demand and supply resources

Moving to the cloud offers more elasticity than is available when you run a data center. Organizations pay for what they need when they need it, but you can even go one step further and modify the demand coming in. Throttles (API Gateway), buffers, and queues (SQS) can serve the demand coming in with fewer resources, bringing the cost down. You may even be able to process demand later in batches or employ Auto Scaling to add and remove resources on a demand or time-dependent basis.

Optimize over time

Like we mentioned before, making architectural decisions and walking away is not an ideal practice. By regularly reviewing your usage, coupled with AWS service and feature releases, you can continue to ensure cost-effectiveness over time. Evaluate new services and how they might affect your current requirements to garner the best results.

Best practices for AWS cost optimization

Optimizing cost in AWS will look different depending on your situation, the tools used, and where opportunities exist, but here are some things to consider to get you started:

• Choose the Appropriate AWS Region: Some regions cost more than others. When selecting your region, keep cost in mind alongside compliance, latency, and the services and features available.
• Create Schedules to Turn Off Unused Instances: There’s no need to keep developer or test instances active in off-hours. After identifying which resources lie idle, either consistently or on a schedule, you can decide what to turn off and when manually or by using the instance scheduler.
• Identifying Under-Utilized Amazon EC2 Instances: Overshooting the number of instances your organization needs is a surefire way to waste money. However, there are ways to decrease costs without sacrificing performance or productivity. How? By auditing your instances and identifying under-utilized resources.
• Reducing EC2 Costs with EC2 Spot Instances: While spot instances do come with a risk of a dramatic cost increase if the price fluctuates with market value, using spot instances and setting a lower price for workloads that aren’t as critical can be a great cost saver.
• Use cost allocation tags: To track usage and costs in AWS, you can add tags to resources such as S3 buckets and EC2 instances. You can then generate a report to see usage based on these tags. Tying business information to cost and usage data can help you identify opportunities to add or remove resources.
• Combine resource tags with entity lifecycle tracking: Find orphaned resources or projects that aren’t bringing value to your business by bringing tagged resources together with entity lifecycle tracking, such as projects or employees. These orphaned resources, once found, can be deactivated.
• Leverage Compute Savings Plans: Compute Savings Plans are great for businesses that know they will have a certain level of demand long-term using one-year or three-year contracts. Customers can save up to 66% with these plans overpaying for on-demand resources. The key is paying for what you need and not more because you’ll be locked into a long-term agreement.
• Kill unused resources: The most common unused resources include Amazon Simple Storage Service (S3) snapshots or S3 analytics reports that have become obsolete, unattached Elastic Block Storage (EBS) volumes, Elastic IP addresses (static and designed for cloud computing) that are unattached, and unused elastic load balancers (ELB). Even if they aren’t being actively used, they could still be costing you money.
• Move data that is infrequently used: Data that is not used as much doesn’t have as strong of demand. Therefore, you can get by when moving it to a lower-cost tier.

AWS cost optimization tools we work with

To help customers get control of their cloud spending, AWS has worked to provide a strong list of best practices and tools to customers. However, they also acknowledge that managing it all internally can become daunting and that working with a managed cloud services provider can help remove an unnecessary load.

At TierPoint, our AWS engineers and architects leverage powerful cost management tools to help you get the most cost-effective, high-performance AWS setup possible. With our expert advice, we help companies maximize their AWS investment.

How TierPoint can help optimize your AWS Cloud cost in 2023

As you can see, there are a lot of moving parts involved in optimizing AWS cloud cost. Still, getting your 2023 budget right doesn’t have to be overwhelming. TierPoint can help you optimize your IT costs through our Managed AWS services. We offer public cloud expertise that helps you stay competitive, we know how to rightsize your environment to optimize your spend, and most importantly, we can help you get the most out of AWS cloud in every direction.

Need help building your Azure cost optimization strategy? Contact our team for a free cloud cost assessment to get started.