22 steps to reduce your AWS bill (Part 5— Procurement)
A brief introduction to AWS cloud cost optimization techniques.
This is Part 5 from series of “22 steps to reduce you AWS bill series”. Please also check articles Part 1, Part 2, Part 3 and Part 4.
22 cloud cost optimization areas
The AWS cloud cost optimization is a very broad topic with many different components which are cost drivers adding-up to your total bill. The optimization process is not limited to the list presented below but these are the most common and most obvious sources. Depending on your AWS architecture and services used you should also try to explore additional methods that would support your AWS cost management and potentially lead to lower bills.
Procurement
- Choose the right pricing model
- Savings Plans
- Compute Savings Plans
- EC2 Instance Savings Plans
- Reserved instances
- Standard
- Convertible
- Spot instances
- Consolidate billing
- Bring Your Own License (BYOL)
Choose the right pricing model
Having a company infrastructure running on AWS means serving most of your services from the cloud. If you do so you probably can forecast the capacity and usage of its components during a 12 months or longer period. 12 months is long enough to step-up on another licensing model that offers significant discounts from base pricing. The discounts range from 24% to 75% for EC2 instances. The longer commitment and the bigger the upfront payment the greater the discount. You can choose from four discounted tires but we will discuss the most popular three:
- savings plans,
- reserved instances,
- spot instances.
1. Savings Plans
In exchange for a commitment to a consistent amount of usage (measured in $/hour), you get lower prices for EC2, Lambda, and Fargate. The discounted price will apply to all usage up to the commitment. Afterward, you switch to on-demand pricing. AWS offers two types of savings plans:
1.1. Compute Savings Plans
They apply to all EC2 instances, Fargate or Lambda regardless of instance family, size, availability zone, region, operating system, or tenancy. You can change instances, shift from one region to another or move from EC2 to Fargate, and still pay the savings plan price. Compute savings plans can reduce your costs by up to 66%.
1.2 EC2 Instance Savings Plans
They also apply to all EC2 instances but you have to select an individual instance family and a region. You can still change between instances within a family in that region. EC2 Instance Savings Plans can reduce your cost by up to 75%.
2. Reserved instances
In exchange for a reservation of a capacity, you get lower prices for EC2 instances, RDS instances, ElastiCache, ElasticSearch, and Redshift. The discounted price will apply to usage throughout the commitment period. Purchasing reserved instances will reduce your costs but can also increase them if reserved resources are not utilized as much as you expected. You can also purchase the wrong type of reserved instance. Therefore before making a decision check the recommendations provided in AWS Cost Explorer documentation. AWS offers two types of reserved instances:
2.1. Standard
It applies to all EC2 instances. You can change the instance type or availability zone and still keep the same discount level. Standard reserved instances can reduce your costs by up to 72%.
2.2. Convertible
It applies to all EC2 instances. You can change the instance family, instance type, operating system, or availability zone. Convertible reserved instances can reduce your costs by up to 54%.
3. Spot instances
If you need computing capacity without fixed start and end time and can handle interruptions, spot instances can help manage all your stateful workloads. Spot instances are sold in an auction-like manner. You bid on capacity in the EC2 service that is currently idle. Pricing is pre-defined by AWS and adjusts periodically based on supply and demand for a particular pricing model. You set a maximal bid price and optionally a period up to 6 hours. When you start using spot instance the pricing you pay is the spot price for each hour. When this price goes above your specified maximum bid price, the instance is terminated otherwise the instance is guaranteed to remain active for the specified amount of time up to 6 hours. Spot instances can reduce your costs by up to 90%.
Consolidate billing
If your organization is big enough to have more than one AWS account it would be worth considering consolidated billing. It is a free feature in AWS Organizations. Consolidation combines the usage across all accounts in the organization to determine which pricing tiers should be applied to the volume pricing discounts, reserved instance discounts, and savings plans. AWS then allocates each member account a portion of the overall volume discount based on the account’s usage. The result is lower pricing for all accounts.
Bring Your Own License (BYOL)
Chances are you already license and use Microsoft, Oracle, SAP, or IBM software. There is an option to lower your monthly AWS bill by over a dozen percent by assigning your own licenses to AWS resources running such software. This process is called bring your own license (BYOL). When you BYOL, the licensing cost of the software is no longer included in the price of the instance and you must start managing licensing and compliance by yourself. AWS License Manager is a free tool that centralizes license usage, provision, and tracking.
Closing word
Whether you are preparing your first cloud cost optimization project or have already started working on this topic there are still some benefits you would gain from working with our AWS cloud subject matter experts. Regardless of the stage of your project or your current needs I will back you up and support your team through:
- tailored workshop focusing on selected cloud cost optimization topic,
- dedicated audit of your cloud infrastructure costs and cost optimization processes,
- bringing AWS expert into your cloud technical team,
- supervision and leading of your AWS cloud cost optimization project.
