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Optimizing AWS Costs – Best practices to implement

👉Here’s a common scenario: Your organization migrates existing workloads to AWS or sets up new workloads in AWS. Things are going well until you see their AWS bill. You get a sticker shock – the amount is much more than what was budgeted. This highlights the crucial need for effective cost management strategies. The post is for CEOs, CIOs and other business executives who want to manage their AWS costs. Let’s dive into practical ways to keep AWS costs under control, ensuring businesses can make the most of AWS without unexpected financial strain.

⚙️Taking a systematic approach

At its core, AWS cost management revolves around understanding where your money is going, identifying inefficiencies, and implementing strategies to reduce spending without compromising on performance or capabilities. Stated simply, it comes down to using less resources and getting a better price for what you use. The trick is striking a balance between the two. For instance, downsizing resources to save money won’t work if there is a negative impact on performance.

🔍Gain Visibility

First and foremost, understand where your money is going. AWS provides detailed billing reports and the Cost Explorer tool, which can help you dissect your expenses. This allows you to analyze your expenses over time, by service, and even by specific usage characteristics. This visibility is the first step toward effective cost management. You’ll often find that a significant portion of costs comes from a handful of services or instances that are not optimally configured.

Right size Your Services

One common pitfall is over-provisioning resources. It’s like renting a huge apartment, even when you only use one room. AWS offers a variety of instances, each tailored for different needs. Using the AWS Trusted Advisor, you can identify instances that are underutilized and downsize them, or switch to a more cost-effective instance type. This simple step can lead to substantial savings.

Reserved Instances

Reserved Instances (RIs) offer AWS customers a way to reduce their costs by committing to a specific amount of compute capacity for a predetermined period, typically 1 or 3 years, in exchange for a significantly discounted rate compared to on-demand instance pricing. This billing model is available for several AWS services, including EC2 and RDS, among others. By purchasing RIs, users can achieve savings of up to 75% over on-demand pricing, making it an attractive option for workloads with predictable usage patterns. RIs provide flexibility in terms of payment options, allowing customers to choose from all upfront, partial upfront, or no upfront payments, each offering different levels of discount. It’s also worth noting that while RIs require upfront planning and commitment, they can significantly contribute to lowering the operational costs of running stable and predictable workloads on AWS.

💲Savings Plans

Savings Plans offer a flexible pricing model that allows customers to save up to 72% on their AWS compute costs, compared to on-demand instance pricing. By committing to a consistent amount of compute usage (measured in $/hour) for a 1 or 3-year term, customers can apply these savings across a wide range of services, including EC2, Fargate, and Lambda. AWS offers two types of Savings Plans: Compute Savings Plans, which offer the most flexibility, and EC2 Instance Savings Plans, which provide the highest savings rate for specific instance families in a region.

Spot Instances

AWS Spot Instances allow users to take advantage of unused EC2 computing capacity at significant discounts—up to 90% off the on-demand price. This pricing model is ideal for workloads with flexible start and end times, or for applications that can tolerate interruptions, such as batch processing jobs, big data analysis, or background processing tasks. Spot Instances operate on a supply-and-demand basis, meaning prices fluctuate based on the availability of spare capacity and the current demand for them. Spot Instances represent a powerful cost-saving option for users willing to navigate their operational characteristics, offering unparalleled cost efficiency for the right types of workloads. For critical, long-term workloads, though, going with Reserved Instances or Savings plans is a better option.

Strategies to Optimize AWS cost

Storage

If your S3 costs are higher than what you had anticipated, consider moving infrequently used files to a lower priced tier or archiving them. S3 offers several storage classes. The  S3 Standard class is ideal for frequently accessed files. S3 Standard-Infrequent Access class can be used for less frequently accessed files. It offers lower storage costs while still providing rapid access when needed. For long-term archiving, S3 Glacier and S3 Glacier Deep Archive provide secure and extremely low-cost options for data archiving and backup, with retrieval times ranging from minutes to hours. Storing files in appropriate S3 classes based on their usage can reduce costs considerably. Intelligent tiering or S3 life-cycle rules can help to automate this process.

🗃️Open source databases

Opting for Amazon RDS (Relational Database Service) running open-source databases, such as PostgreSQL, MySQL, or MariaDB, instead of RDS instances running commercial databases like Oracle or SQL Server, can lead to substantial cost savings without sacrificing functionality or performance. Open-source databases do not incur licensing fees, which are a significant component of the cost when using commercial databases. Amazon RDS further simplifies the deployment, scaling, and management of these databases, ensuring that users benefit from the AWS managed services’ scalability, security, and reliability. Switching to an open-source RDS option may require effort, depending on how your applications and systems are designed. For instance, if your applications or data pipelines use a specific flavor of SQL or database specific features, those may need to be restructured to work with the selected open source database.

Cloud native architectures

While migrating to AWS, many organizations take a “lift-and-shift” approach. With this, essentially the on-premise infrastructure footprint is replicated in AWS. This often results in infrastructure or applications that are not optimized for the cloud. Moving to cloud native architectures can help you reduce your AWS bill considerably. However, this is not a quick fix. It can often mean that you must restructure your applications to take full advantage of various services that AWS offers. For example, a legacy web application may be stateful. As the workload increases, it may require you to scale up your EC2 instances. Rearchitecting it as a stateless application can allow you to scale horizontally using smaller, cheaper instances, resulting in a lower EC2 cost overall.

Containers and serverless computing can also lead to cost reductions, especially for microservice-based architectures. By abstracting the underlying infrastructure, these technologies can optimize resource utilization and reduce overhead. ECS for container management and Lambda for serverless computing are worth exploring for their potential cost efficiencies.

💸Track your costs

AWS Budgets and Cloud Watch Alarms are essential tools in your cost-optimization toolkit. They allow you to set custom budget limits and receive alerts when your costs or usage exceed your thresholds. This real-time feedback loop can help prevent bill shock and foster a culture of cost awareness within your team.

🎯Key Takeaways:

Managing and optimizing AWS costs is a continuous journey, not a one-time task. By staying vigilant and making smart use of AWS’s cost management tools, you can ensure that your AWS expenses remain under control, allowing you to focus on growing your business and serving your customers better. Remember, every dollar saved on infrastructure is a dollar that can be invested in innovation and development.

🤝If you’re concerned about rising AWS costs or simply want to ensure you’re getting the most value out of your cloud investment, we’re here to assist. We have helped multiple customers optimize their AWS costs and reduce their overall spend.  Reach out to us atsales@valueglobal.net today to schedule a consultation and take the first step towards smarter, more efficient AWS cost management.

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