AWS Cost Optimization: Recommended Tools, Checklists, and Best Practices

AWS (Amazon Web Services) is one of the leading cloud computing platforms globally, providing numerous services that seamlessly cover computing, storage, networking, and PaaS (Platform as a Service). Undoubtedly, the benefits of AWS are phenomenal compared to the conventional on-premise infrastructure, where its elasticity and scalability are real game changers! However, this tends to raise uncapped costs as well.

Many experts agree that AWS costing can be difficult to analyze, and without a solid system as a backup, identifying and analyzing the source of the costs is nearly impossible, let alone managing it is another story. Without an AWS trusted advisor in cost optimization, businesses can quickly undermine their profit margins and resultantly lose track.

In an attempt to remedy the situation for AWS users, there are several tools and best practices that can help enterprises manage and optimize their costs. In this guide, we will discuss some top AWS cost optimization tools and best practices that can help you reduce overspending.

It’s crucial to optimize costs by implementing cost-saving best practices in order to make the most of your investment in the AWS cloud. In the past, cost optimization was primarily seen as a technique to reduce cloud costs by:

• Identifying mismanaged resources,
• Eliminating waste spend,
• Reserving capacity for discounts, and
• Right-sizing computing services for scale.

AWS cloud cost optimization goes beyond just reducing your bill and spending.

It’s an ongoing process that involves conscious spending, aligned with business goals and outcomes. For SaaS organizations, monitoring COGS and unit costs, such as cost per customer or feature, is essential. When organizations see how their cloud spending aligns with these metrics, they can make informed decisions that improve profitability and make the most out of the environment.

This way, engineering, and finance can work together to optimize AWS spending and improve profitability without sacrificing resources.

Before proceeding, it’s vital to understand waste spending and the percentage of it.

Enterprises are embracing public cloud computing, and the industry is thriving. However, wasted cloud spending is becoming a significantly critical concern. Flexera, an IT analytics company, released its State of the Cloud Report annually. They highlighted the waste in public cloud computing while comparing the data to businesses’ efficient spending.

As per the 2021 State of the Cloud Report data, self-estimated wastage has been recorded at 30%, whereas efficient spend was recorded at 70%. For the year 2022, waste spending should have declined. Instead, the State of the Cloud Report provided a self-estimated wasted spend of 32% with an efficient spend of 68%.

It’s impossible to eradicate the waste spending or lower it to 0%. However, a slight decrease can leave a significant impact. For every business, whether it’s a big enterprise or an SMB, saving money and spending it wisely is necessary.

So, what can help in lowering this waste spending? Cost optimization in AWS and its powerful tools is the ultimate answer.

To optimize costs in your environment, there are five key pillars to consider. Let’s scrutinize each of them.

The first thing to consider is the right size. Make sure the resources you provision match your requirements. This includes CPU, storage, network throughput, and memory.

Secondly, take advantage of the cloud model’s elasticity by turning resources off when they’re no longer needed. In a traditional setup, the IT hardware is rarely turned off!

Choose the right pricing model for your workload’s needs, such as on-demand pricing, Spot Instances, or Reserved Instances.

Fourthly, optimize your storage by identifying the appropriate storage tier for specific data types.

The last pillar to consider is to measure, monitor, and improve. Businesses need to establish measurements and monitoring to track and optimize costs. This can be achieved through cost allocation tagging, defining metrics and targets, and assigning optimization responsibilities to specific individuals or teams.

Amazon Web Services provides a wide range of cost optimization and management tools. These tools allow businesses to gain data, make informed decisions, and create intellectual rules and automated actions. The end result will be positively uplifting with a considerable reduce in waste spending and increased saving on AWS.

With the AWS Cost Explorer interface, organizations can quickly check the usage, costs, and ROI (Return on Investment) for any Amazon services they have used. It covers data for the past 13 months and helps businesses to predict future spending. With the AWS Cost Explorer, you can customize the views to analyze costs in detail and discover areas for improvement.

Additionally, AWS Cost Explorer offers an API allowing enterprises to access the data using any preferred analytics tools.

AWS Trusted Advisor cost optimization helps to ensure that businesses follow the best practices. It checks five areas, including cost optimization, and provides recommendations to help you save money. Some of the areas it covers include:

• Optimizing EC2 reserved instances
• Reducing low utilization of instances
• Identifying idle load balancers
• Finding underutilized EBS volumes
• Identifying unassociated elastic IP addresses
• Identifying idle DB instances on Amazon RDS
• Classify redundant Route 53 latency resource record sets
• Detect underutilized Amazon Redshift clusters

The third tool on the list for cost optimization in the AWS is AWS Budgets. With this tool, enterprises can easily create budgets for different Amazon services and get notified through emails or messages from the Simple Notification Service (SNS) when the budget limit is reached or exceeded. They can set an overall cost budget or connect it to specific data points, such as the number of instances or data usage.

The Budgets dashboard offers a similar view to Cost Explorer, giving them an idea of how services are utilized compared to their budgets.

With Amazon CloudWatch, businesses can create alarms using various metrics from their Amazon services, for this purpose this tool is often utilized for cost optimization purposes.

To illustrate, organizations can establish an alarm and receive notifications when an EC2 instance’s usage falls below 30%. After investigating the reason for the underutilization, they can decide to resize the instance or merge workloads to address the issue.

Amazon S3 analytics Storage Class Analysis can help organizations analyze storage access patterns and decide when to move data to the appropriate storage class. With this feature, S3 cost optimization and analytics observe data access patterns, allowing companies to determine when it’s reasonable to transition from STANDARD storage to STANDARD_IA (IA, for infrequent access) storage class.

The AWS Cost and Usage Reports provide the most extensive cost and usage data collection. Organizations can use these reports to publish their AWS billing reports to an Amazon Simple Storage Service (Amazon S3) bucket that belongs to them.

These reports can break down the costs into categories of hour, day, or month, by product or product resource, or by tags that you define yourself. AWS updates the report in their bucket daily in comma-separated value (CSV) format.

Enterprises or SMBs can view the reports using spreadsheet software like Microsoft Excel or Apache OpenOffice Calc or access them from an application using the Amazon S3 API.

Now that we discussed the valuable offerings of AWS cost optimization tools, let’s round up some of the best practices that can help your business by optimizing and reducing overall AWS costs.

The Resource Optimization report in AWS Cost Explorer is a helpful tool that identifies idle or underutilized EC2 instances. This information can be used to reduce costs by either stopping these instances or switching them to a smaller size.

AWS Instance Scheduler and AWS Operations Conductor can automate stopping underutilized or scheduling instances. The AWS Compute Optimizer also offers recommendations for optimizing EC2 instances, such as downsizing instances or switching to more powerful ones to improve performance. It can also provide guidance for the efficient use of Auto Scaling groups.

If you’re using Amazon, it’s worth knowing that Reserved Instances can save you a lot of money. However, it’s crucial to ensure you’re using them effectively to keep your investment.

If you have unused or underused reserved instances, consider using them for a new or existing application to avoid resorting to more expensive on-demand instances. Alternatively, you can sell your RIs on the Reserved Instance Marketplace.

One of the most impressive AWS cost optimization best practices is to choose Amazon EC2 spot instances. By using it, businesses can save up to 90% on EC2 costs if the workload can tolerate potential interruptions. This is a valuable strategy for reducing AWS expenses.

Remember that Spot Instances can be interrupted with only two minutes’ notice. Workloads suitable for this option include big data, containerized workloads, CI/CD, web servers, and development/testing.

Amazon offers the Spot Fleet feature, which allows you to run both on-demand and spot instances in one Auto Scaling group. This way, you can reserve some on-demand instances that are essential components and cannot be interrupted.

Finally, here is a checklist to control and manage your waste spending and reduce costs in AWS.

To maintain your AWS resource spending, it’s essential to:

• Create a budget plan and analyze your business cost spending using the Cost and Usage Report in the AWS Console.
• AWS Trusted Advisor can also view cost estimates and identify unused resources.

When optimizing compute instances, choose the service that best fits your requirements, and consider purchasing reserved instances for a reasonable period.

If you don’t need an instance, avoid keeping it longer than necessary. Additionally, using the latest instance types can provide higher efficiency or performance at a lower cost. It’s also crucial to carefully select which workloads to run on reserved instances versus on-demand instances.

For workloads that don’t require high reliability, consider using spot instances. You can schedule instances to run only during business hours or when needed using AWS Instance Scheduler or other tools.

To optimize storage and other resources, be sure to:

• Check the Delete on Termination checkbox when creating EC2 instances to avoid orphaned EBS volumes.
• Keep EBS snapshots for a few weeks and delete them as new ones are created.
• Terminate unneeded resources, such as database volumes and Elastic IPs that are not in use.
• Store production files in S3 and move them between storage tiers. It will be based on activity or dynamically using S3 Smart Tiering.
• Archive rarely used data in the S3 Glacier and back up your business’s long-term archived information in Glacier Deep Archive.

AWS Optimization can be overwhelming with so many options available. Traditionally, cost optimization is focused on waste reduction and purchasing plans like reserved instances. However, many forward-thinking and futuristic companies are now focused on engineering enablement and architectural optimization.

Modern enterprises have realized that reducing AWS costs is insufficient; engineering teams need cost intelligence to make informed development decisions that lead to profitability. Additionally, they need to report cloud spending accurately to finance and align it with business metrics.

NETSOL is a cloud cost intelligence platform that empowers engineering teams to see the cost impact of their work and make informed business decisions. It aligns costs with metrics like COGS, unit cost, and cost per customer. We also have automated cost anomaly alerts to notify engineers of fluctuations to prevent a cost overrun.

Contact Us today to schedule a meeting with our representative and address the loopholes in your cloud computing management.