AWS Public Sector Blog

TCO and cost optimization: Best practices for managing usage on AWS

September 8, 2021: Amazon Elasticsearch Service has been renamed to Amazon OpenSearch Service. See details.

While moving to the cloud saves cost when compared to on-premises IT models, it is important to inspect possible mistakes that could lead to unplanned cloud costs. Based on customer cost optimization consultations with AWS, some organizations have seen up to 33% reduction in cloud spending waste. Here we provide some tips and resources to recognize cloud cost optimization.

Cloud cost optimization improves forecasting and cost predictability and provides visibility into usage patterns to right size for organizations’ specific needs and can help identify mismanaged resources, reserving capacity for higher discounts, and right-sizing services to scale. One place to start is to look for unused resources. Often a temporary compute instance is “spun-up” to perform a function, and forgotten when the job is complete. As an example, Amazon Web Services (AWS) estimates that by using automated instance scheduling, customers can lower costs up to 70% when shutting down non-production instances outside of work hours.

What are some other common oversights customers make that can drive up their cloud spend? Avoid the following missteps:

  1. Orphaned resources. Often customers mistakenly set up compute or storage instances without using auto-scaling or other monitoring tools. This is common with dev/test environments due to their temporary nature. However, it is not uncommon for customers to have large storage pools or database workloads database orphaned and consuming valuable financial resources.
  2. Misconfigured storage resources. Storage can cause pitfalls for customers. Primarily, customers forget to release their storage resources from their compute instances, and their storage costs continue despite the compute instances being terminated. Another common mistake is the misalignment of data types and storage class. Often customers will allocate warm or cold storage into local or pools of higher-performing data storage. Right-sizing storage by data type and usage can reduce your associated costs by up to 50%.
  3. Over-provisioned resources. Right-sizing is the process of matching instance types and sizes to performance and capacity requirements at the lowest possible cost. A key cloud cost optimization priority includes identifying such instances and consolidating computing jobs into fewer instances. In the past, administrators often over-provisioned so they would have capacity for a spike in traffic. By right-sizing workloads and using automation, AWS customers have seen up to 36% in cost savings.
  4. Incorrect pricing plans. Many organizations do not use the cloud pricing plans that best align to their usage requirements. AWS offers multiple pricing models options such as Spot Instances, which allow you to request spare computing capacity for up to 90% off the On-Demand price. Reserved Instances also provide a significant discount compared to On-Demand pricing. Learn more about these cost saving pricing models. As an example, AWS customer ST Unitas was able to cut almost 60% of their cloud spend through the use of reserved instances.
  5. Overlooking newer technologies. AWS routinely updates its service portfolio, and these new technologies offer unique advances in productivity, and can potentially reduce your cloud spend. Some customers can benefit from re-platforming their existing deployments with newer cloud services. For example, a customer could replace their hosted monitoring services with Amazon CloudWatch, or they could replace traditional compute instances with a serverless implementation to save significant costs. Watch our webinar, “Architecting for Cost Optimization on AWS,” to learn more.

AWS provides a set of out-of-the-box cost management tools to help you manage, monitor, and optimize your costs. These key services and solutions to help you manage your cloud spend include:

AWS Trusted Advisor Since 2013, AWS customers have viewed over 2.6 million best-practice recommendations and realized over $300M by using AWS cloud cost optimization tools. AWS Trusted Advisor provides you real-time guidance to help you provision your resources, following AWS best practices. Trusted Advisor helps optimize your entire AWS infrastructure to increase security and performance and reduce your overall costs. Watch a technical walk through of the service and console.
AWS Cost Explorer AWS Cost Explorer helps visualize and manage your AWS costs and usage over time. A set of default reports are included to help you quickly gain insight into your cost drivers and usage trends. Use forecasting to get a better idea of what your costs and usage may look like in the future.
AWS Budgets AWS Budgets gives you the ability to set custom alerts for when your costs or usage exceed your budgeted threshold. You can also use AWS Budgets to set reservation utilization or coverage targets and receive alerts when your utilization drops below defined parameters. Reservation alerts are supported for Amazon Elastic Compute Cloud (Amazon EC2), Amazon Relational Database Service (Amazon RDS), Amazon Redshift, Amazon ElastiCache, and Amazon Elasticsearch Service (Amazon ES).
AWS Cost & Usage Report The AWS Cost & Usage Report contains the most comprehensive set of AWS cost and usage data available. The AWS Cost & Usage Report lists AWS usage for each service category used by an account and its AWS Identity and Access Management (IAM) users in hourly or daily line items, as well as any tags that you have activated for cost allocation purposes.
TSO Logic To assist potential customers with planning a migration, TSO Logic (an AWS company) provides data-driven Total Cost of Ownership (TCO) and cost modelling analysis, so customers can plan for their ideal future state on AWS.
CloudChomp AWS recommends CloudChomp to all customers looking for a third-party solution to help analyze their IT environment and produce an accurate TCO assessment. CloudChomp software dynamically connects to the AWS Pricing API, and analyzes your IT systems, virtual machines and software licenses, for an accurate read of your utilization and spending patterns.

How Trusted Advisor works

AWS is dedicated to supporting customers’ cloud journeys and empowering them to maximize value from their investments, improving cost predictability, and creating a culture of ownership. AWS provides powerful tools to simplify these efforts, but organizational recognition and commitment to the process are critical to success. Learn more about these solutions by visiting our new Cost Optimization Help Center website.

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