Cost management and optimization in the cloud are important for businesses of all sizes. An effective cost management strategy ensures that you only pay for what you need and that you maximize the return on your cloud investment.

With cloud services, costs are dynamic and can escalate if not monitored closely. Financial planning, coupled with a clear understanding of the cost models for each service that you use, lets you allocate resources strategically, aligning spending with your business goals. This includes choosing the right pricing models, such as pay-as-you-go or reserved instances, and using auto-scaling to match resource provisioning with actual demand.

AWS offers services and tools to help you with cost management and optimization, including resources to organize and track your cost and usage data, improve control (through consolidated billing and access permission), enable better planning (through budgeting and forecasts), and further lower your costs by making use of the right resources and pricing optimizations.

This decision guide will help you ask the right questions, evaluate your criteria, and determine which cost management services and tools are the best fit for your needs.  

Seven minute clip from re:Invent 2023 explaining how to improve AWS cost reporting.


AWS cost management strategy can be broken down to several key areas:

Plan and evaluate: When planning for future cloud spend, start by defining your key performance indicators (KPIs), such as the monthly  cost of a specific project. You need to make sure that cloud resources related to a project are properly tagged with cost allocation tags and/or cost categories. Then you can calculate and track the monthly  cost of the project with the cost and usage data available in your AWS Cost Explorer and AWS Cost & Usage Reports.

You can decide the project budget based on the trend shown by your KPIs, as well as the available funds set aside for the project and, you can set the budget thresholds using AWS Budgets for cost or resource usage.

Manage and control: As your organization evolves, you need the freedom to experiment and innovate in the cloud, while maintaining control over cost, governance, and security. One way to do that is to establish centralized ownership through a center of excellence or cloud business team. This is important because while elements of cost management are shared responsibilities across the entire organization, a centralized team can design policies and governance mechanisms, implement and monitor the effort, and help drive organizational best practices.

That central team can be supported by services such as AWS Identity and Access Management (IAM) and AWS Organizations.

You can also use the AWS Billing Console to track your overall spend, and to view your cost breakdown by service and by account on your billing dashboard.

Track and allocate: Tracking spending and allocating that spending to the right team can be vital to effective cost optimization. It's useful to know when you're spending more than you planned, but even more useful when you can clearly identify where that spending is happening. AWS offers several tools to help you get started.

For example, AWS Cost Explorer (when paired with Cost Allocation Tags) lets you categorize your resources and spending to fit your organization’s needs, while AWS Billing Conductor  lets you customize your pricing and billing report to aligns with your business logic. AWS Application Cost Profiler lets you collect and correlate your tenant usage data with your AWS billing information and generate a tenant-specific report with hourly granularity on a daily or monthly basis (or both).

Optimize and save: Cost optimization is about making sure that you pay only for what you need. Two of the more useful strategies for optimizing spending are:

  • Using the right pricing models.
  • Identifying and eliminating any idle or over provisioned resources: Use AWS Cost Explorer resource recommendations to see top-level key performance indicators (KPIs) for rightsizing and instance selection recommendations.  

By focusing on these four areas, you can more effectively manage your AWS costs, maintain financial control, and optimize your cloud operations for maximum efficiency and value.


The following section outlines some of the key criteria to consider when choosing a cost management strategy, as well as supporting tools and services.

  • How you manage the costs of your cloud investment depends on what you’re trying to do, as well as how you’re tracking performance. If your organization is in a growth phase, then your KPIs may be all about market share and customer growth, and how you get the best return on investment. If your focus is on reducing operating costs, then you will concentrate more on achieving the right balance between spending and delivering for your customers.
    You need to set your budget based on the trend shown by your KPI, as well as your available funds. Then, you can set the budget thresholds using AWS Budgets for cost or resource usage and to set utilization or coverage targets for your Reserved Instances and Savings Plans.

    You can monitor how the budget portfolio is progressing in your AWS Budgets Reports dashboard. You can also create notification alerts that are sent whenever cost and usage either reach your forecasts or exceed your threshold limits.

  • One key strategy for controlling cost is to have control over which services can be used by which members of your organization. If you need this kind of access control, you can also use services such as IAM to securely control individual and group access to your resources. This involves being able to create, manage, and grant permissions to IAM users to let them access the appropriate resources for their role and location. Meanwhile, you can use AWS Organizations to enable more automatic policy-based account creation, management, and billing at scale.

  • It’s useful to get alerts that let you know that you’ve exceeded your budget, but it’s even more useful to be able to determine what is causing your bill to exceed your budget. AWS provides an out-of-the-box solution, AWS Cost Explorer to help show which AWS services are increasing spend.

    You also will also want to know which parts of your organization, teams, or divisions drove increased spend and usage. AWS Cost Explorer can be combined with Cost Allocation Tags to let you categorize your resources and spending.

  • When you have multiple users working with multiple AWS services, it becomes really important to get detailed reporting if you want your cost management strategy to scale with your usage. Using the billing dashboard on the AWS Billing Console, you can track your overall spend, and view your cost breakdown by service and account. You can also get a unified view of spend in a single bill, and can establish rules for how to organize costs, as well as share discount benefits associated with Reserved Instances and Savings Plans.

  • It’s not just about the numbers. Your cost optimization strategy also needs to align with the logic of your business. AWS Billing Conductor lets you AWS pricing and billing report to provide that alignment with your business logic.

    To help address your cost allocation needs, you can group accounts according to their financial relationships, and you can adjust ratings, share credits and savings, and add overhead costs.

    AWS Billing Conductor also allows you to customize a second, alternative version of your monthly billing data. This alternative version models the billing relationship between you and your customers or business units, but doesn't change the way that you're billed by AWS. Using the alternative version provides you with a mechanism to configure, generate, and display rates to certain customers over a given billing period. You can also use it to analyze the difference between the rates that you apply to your groupings, relative to the actual rates for those same accounts from AWS.

  • Customers with predictable, steady workloads on Amazon EC2, Amazon SageMaker, and Amazon RDS should consider Reserved Instances (RIs) to save up to 75% over equivalent on-demand capacity. Reserved Instances are available in three options.

    To maximize your savings, when you buy RIs, the larger the up-front payment, the greater the discount. Partial up-front RIs offer lower discounts, but give you the option to spend less up front. Lastly, you can choose to spend nothing up front and receive a smaller discount, this lets you free up capital to spend in other projects.

    AWS offers Reserved Instance and savings plan purchase recommendations through AWS Cost Explorer, based on your past usage. AWS Cost Explorer identifies and recommends the commitment value that it estimates will result in the largest savings.

  • Another key element of cost management is identifying and eliminating any idle or over-provisioned resources. AWS Cost Explorer resource recommendations let you view top-level key performance indicators for rightsizing and instance selection recommendations.

    These recommendations identify idle and underutilized instances, and search for smaller instance sizes in the same instance family.


Now that you know the criteria by which you will be evaluating your cost management options, you are ready to choose which AWS cost management service may be a good fit for your organizational requirements.

The following table highlights which services are optimized for which circumstances. Use the table to help determine the service that is the best fit for your organization and use case.

Service category
What is it optimized for?
Cost management services

These services help set expectations around cloud costs for your projects and applications.

Optimized for improving planning, to create accurate forecasting of variable usage.

Migration Evaluator

Helps you create a directional business case for AWS Cloud planning and migration.


AWS Pricing Calculator

Provides a free web-based planning tool that you can use to create cost estimates for using AWS services.


AWS Budgets

Provides improved planning and cost control with flexible budgeting and forecasting.


AWS Organizations

Helps you centrally govern your AWS environment as you grow and scale on AWS.


These services make it easier for all roles in your organization to manage and control costs.

Optimized to provide centralized billing, automatic cost governance, and a streamlined procure-to-purchase process.

AWS Billing Console

Provides a dashboard to track overall spend, and view cost breakdown by service and account.


AWS Purchase Order Management

Helps you to configure multiple purchase orders (POs), define how POs are mapped to their invoices, and access invoices generated against those POs.


AWS Budget Actions

Provides functionality to run an action when a budget exceeds a certain cost or usage threshold, either automatically or after manual approval.


AWS Cost Anomaly Detection

Helps you use machine learning models to detect and alert on anomalous spend patterns in your deployed AWS services.


AWS Consolidated Billing

Consolidates billing and payment for multiple AWS accounts, allowing shared volume discounts across all accounts.


These services help deliver actionable cost insights and optimization opportunities.

Optimized to track and analyze cost trends and drivers in aggregate.

AWS Cost Explorer

Provides visualization of cost and utilization with default reports, and creates specific views with filters and grouping.


AWS Cost and Usage Reports

Delivers cost and usage data to an S3 bucket where it can be integrated into other AWS tools or ERP for further analysis.


AWS Cost Categories

Group accounts, tags, services, and charge types into meaningful categories with custom rules.


AWS Billing Conductor

Supports the showback and chargeback workflows of AWS Solution Providers and Enterprise customers.


AWS Application Cost Profiler

Track the consumption of shared AWS resources used by software applications, and to report granular cost breakdown across your tenant base.


These services help continuously optimize spend based on your actual and forecasted usage.

Optimized for resource right-sizing, reserve capacity planning, and data transfer and storage optimization.

AWS Savings Plans

Provides a flexible pricing model that can help reduce your bill by up to 72% over on-demand prices.


Amazon EC2 Reserved Instances

Offers a billing discount that provides savings on EC2 costs compared to on-demand instance pricing.


AWS Compute Optimizer

Recommends optimal AWS compute resources for your workloads, helping you reduce costs and improve performance.


Amazon EC2 Spot Instances

Provides EC2 instances that use spare EC2 capacity that is available for less than the on-demand price.


Amazon S3 Intelligent Tiering

Optimizes storage costs by automatically moving data to the most cost-effective access tier when access patterns change.


AWS Cost Optimization Hub

Provides you with a comprehensive view of your cost optimization recommendations across your AWS Regions and AWS accounts within your organization.


You should now have a clear understanding of what each AWS cost management service (and the supporting AWS tools and services) does - and which might be right for you.

To explore how to use and learn more about each of the available AWS cost management services, we have provided a pathway to explore how each of the services work. The following section provides links to in-depth documentation, hands-on tutorials, and resources to get you started.

  • AWS Billing Conductor
  • AWS Billing Conductor

    Getting started with AWS Billing Conductor

    Learn how you can create billing groups, pricing configurations, and custom line items in AWS Billing Conductor.

    Explore the guide »

    AWS Billing Conductor

    Getting Started with AWS Billing Conductor

    Learn how to customize billing data and reporting in a way that aligns with your unique business logic.

    Read the blog »

    AWS Billing Conductor

    Best practices for AWS Billing Conductor

    Explore best practices when working with AWS Billing Conductor.

    Explore the guide »

  • AWS Budgets
  • Best practices for AWS Budgets

    Explore best practices to use when working with AWS Budgets.

    Explore the guide >>

    Getting Started with AWS Budgets

    Learn how you can use AWS Budgets to set a custom cost budget that tracks your costs at a monthly level, and to configure alerts that will notify you when your user-defined spend thresholds are reached.

    Read the blog >>

    Managing your costs with AWS Budgets

    Learn how to use AWS Budgets to track and take action on your AWS costs and usage, as well as monitoring your aggregate utilization and coverage metrics for your Reserved Instances (RIs) or Savings Plans.

    Explore the guide >>

  • Compute Optimizer
  • AWS Compute Optimizer

    Getting started with AWS Compute Optimizer

    Learn how to access the AWS Compute Optimizer for the first time, covering how to opt in your accounts.

    Explore the guide >>

    AWS Compute Optimizer

    Rightsizing recommendation preferences

    Learn how to use the rightsizing recommendation feature to customize the settings you want Compute Optimizer to consider when generating Amazon EC2 and Auto Scaling group instance recommendations.

    Explore the guide >>

    AWS Compute Optimizer

    AWS Graviton-based instance recommendations

    Learn how to view the price and performance impact of running your workload on AWS Graviton-based instances.

    Explore the guide >>

  • Cost Explorer
  • Cost Explorer

    Getting started with Cost Explorer

    Explore how to get started with Cost Explorer from the AWS Cost Management console.

    Explore the guide >>

    Cost Explorer

    Exploring your data using Cost Explorer

    Discover how to see your estimated costs for the month to date, your forecasted costs for the month, a graph of your daily costs, your five top cost trends, and a list of reports that you recently viewed.

    Explore the guide >>

    Cost Explorer

    Forecasting with Cost Explorer

    Learn how to create a forecast, a prediction of how much you will use AWS services over the forecast time period that you selected.  

    Explore the guide >>

    Cost Explorer

    Exploring more data for advanced cost analysis

    Learn how to enable multi-year data (at monthly granularity) and more granular data (at hourly and daily granularity) for the previous 14 days.

    Explore the guide >>

  • RI Reporting
  • Reserved Instances

    Getting started with Amazon EC2 Reserved Instances

    Learn how reserved instances work.

    Explore the guide >>

    Reserved Instances

    Reserved Instance (RI) Reporting FAQs

    Get answers to frequently asked questions about reserved instance reporting and recommends best practices.

    Explore the guide >>

    Reserved Instances

    Accessing Reserved Instance Recommendations

    If you enable Cost Explorer, you automatically get Amazon EC2, Amazon RDS, ElastiCache, OpenSearch Service, Amazon Redshift, and Amazon MemoryDB Reserved Instance (RI) purchase recommendations that could help you reduce your costs. Learn how to use those recommendations.

    Explore the guide >>

  • Savings Plans
  • Savings Plans

    Getting started with Savings Plans

    Learn how to get started with optimizing your AWS costs with Savings Plans.

    Explore the guide >>

    Savings Plans

    Developing a compute Savings Plan

    Explore the overview of Savings Plan for EC2, Fargate, and Lambda.

    Explore the guide >>

    Savings Plans

    Savings Plans FAQs

    Get answers to frequently asked questions about Savings Plans.

    Read the FAQs >>

  • Amazon EC2 Spot Instances
  • Spot instance

    Getting started with EC2 Spot Instances

    Get started with optimizing your AWS costs EC2 Spot Instances.

    Explore the guide >>

    Spot instance

    Best practices for EC2 Spot Instances

    Learn the best practices for utilizing EC2 Spot Instances to save up to 90% over on-demand instances.

    Explore the guide >>

    Spot instance

    Spot Instance pricing history

    Learn how pricing history works - and provides links to the latest pricing options.

    Explore the guide >>

  • S3 Intelligent Tiering
  • S3 Intelligent Tiering

    How S3 Intelligent-Tiering works

    Dive deeper into how S3 Intelligent-Tiering works.

    Explore the guide >>

    S3 Intelligent Tiering

    Using S3 Intelligent-Tiering

    Learn how to move data to S3 Inteligent-Tiering.

    Explore the guide >>



Explore patterns to help you develop your AWS cost management strategy.

Explore patterns »


Explore whitepapers to help you get started in developing your cost management strategy.

Explore whitepapers »

Solutions and guidance

Explore additional architectural guidance for cost management.

Explore guidance»

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