Cost Optimization

The Cost Optimization pillar includes the ability to run systems to deliver business value at the lowest price point.

Design Principles

There are five design principles for cost optimization in the cloud:


There are four best practice areas for cost optimization in the cloud:

As with the other pillars, there are tradeoffs to consider. For example, do you want to prioritize for speed to market or for cost? In some cases, it’s best to prioritize for speed—going to market quickly, shipping new features, or simply meeting a deadline—rather than investing in upfront cost optimization. Design decisions are sometimes guided by haste as opposed to empirical data, as the temptation always exists to overcompensate “just in case” rather than spend time benchmarking for the most cost-optimal workload over time. This often leads to drastically over-provisioned and under-optimized deployments, which remain static throughout their life cycle. The following sections provide techniques and strategic guidance for the initial and ongoing cost optimization of your deployment.

Best Practices

Expenditure Awareness

The increased flexibility and agility that the cloud enables encourages innovation and fast-paced development and deployment. It eliminates the manual processes and time associated with provisioning on-premises infrastructure, including identifying hardware specifications, negotiating price quotations, managing purchase orders, scheduling shipments, and then deploying the resources. However, the ease of use and virtually unlimited on-demand capacity requires a new way of thinking about expenditures.

Many businesses are composed of multiple systems run by various teams. The capability to attribute resource costs to the individual organization or product owners drives efficient usage behavior and helps reduce waste. Accurate cost attribution allows you to know which products are truly profitable, and allows you to make more informed decisions about where to allocate budget.

In AWS you can use Cost Explorer to track your spend, and gain insights into exactly where you spend. Using AWS Budgets, you can send notifications if your usage or costs are not inline with your forecasts. You can use tagging on resources to apply business and organization information to your usage and cost; this provides additional insights to optimization from an organization perspective.

The following questions focus on these considerations for cost optimization.

COST 1: How do you govern usage?
COST 2: How do you monitor usage and cost?
COST 3: How do you decommission resources?

You can use cost allocation tags to categorize and track your AWS usage and costs. When you apply tags to your AWS resources (such as EC2 instances or S3 buckets), AWS generates a cost and usage report with your usage and your tags. You can apply tags that represent organization categories (such as cost centers, workload names, or owners) to organize your costs across multiple services.

Combining tagged resources with entity lifecycle tracking (employees, projects) makes it possible to identify orphaned resources or projects that are no longer generating value to the organization and should be decommissioned. You can set up billing alerts to notify you of predicted overspending, and the AWS Simple Monthly Calculator allows you to calculate your data transfer costs.

Cost-Effective Resources

Using the appropriate instances and resources for your workload is key to cost savings. For example, a reporting process might take five hours to run on a smaller server but one hour to run on a larger server that is twice as expensive. Both servers give you the same outcome, but the smaller server incurs more cost over time.

A well-architected workload uses the most cost-effective resources, which can have a significant and positive economic impact. You also have the opportunity to use managed services to reduce costs. For example, rather than maintaining servers to deliver email, you can use a service that charges on a per-message basis.

AWS offers a variety of flexible and cost-effective pricing options to acquire instances from EC2 and other services in a way that best fits your needs. On-Demand Instances allow you to pay for compute capacity by the hour, with no minimum commitments required. Reserved Instances allow you to reserve capacity and offer savings of up to 75% off On-Demand pricing. With Spot Instances, you can leverage unused Amazon EC2 capacity and offer savings of up to 90% off On-Demand pricing. Spot Instances are appropriate where the system can tolerate using a fleet of servers where individual servers can come and go dynamically, such as stateless web servers, batch processing, or when using HPC and big data.

Appropriate service selection can also reduce usage and costs; such as CloudFront to minimize data transfer, or completely eliminate costs, such as utilizing Amazon Aurora on RDS to remove expensive database licensing costs.

The following questions focus on these considerations for cost optimization.

COST 4: How do you evaluate cost when you select services?
COST 5: How do you meet cost targets when you select resource type and size?
COST 6: How do you use pricing models to reduce cost?
COST 7: How do you plan for data transfer charges?

By factoring in cost during service selection, and using tools such as Cost Explorer and AWS Trusted Advisor to regularly review your AWS usage, you can actively monitor your utilization and adjust your deployments accordingly.

Matching supply and demand

Optimally matching supply to demand delivers the lowest cost for a workload, but there also needs to be sufficient extra supply to allow for provisioning time and individual resource failures. Demand can be fixed or variable, requiring metrics and automation to ensure that management does not become a significant cost.

In AWS, you can automatically provision resources to match demand. Auto Scaling and demand, buffer, and time-based approaches allow you to add and remove resources as needed. If you can anticipate changes in demand, you can save more money and ensure your resources match your workload needs.

The following questions focus on these considerations for cost optimization.

COST 8: How do you match supply of resources with demand?

When designing to match supply against demand, actively think about the patterns of usage and the time it takes to provision new resources.

Optimizing Over Time

As AWS releases new services and features, it is a best practice to review your existing architectural decisions to ensure they continue to be the most cost-effective. As your requirements change, be aggressive in decommissioning resources, entire services, and systems that you no longer require.

Managed services from AWS can significantly optimize the workload, so it is essential to be aware of new managed services and features as they become available. For example, running an Amazon RDS database can be cheaper than running your own database on Amazon EC2.

The following questions focus on these considerations for cost optimization.

COST 9: How do you evaluate new services?

When regularly reviewing your deployments, assess how newer services can help save you money. For example, Amazon Aurora on RDS can reduce costs for relational databases

Key AWS Services

The tool that is essential to Cost Optimization is Cost Explorer, which helps you gain visibility and insights into your usage, across your workloads and throughout your organization. The following services and features support the four areas in cost optimization:


Refer to the following resources to learn more about our best practices for Cost Optimization.

Cost Optimization Pillar
Analyzing Your Costs with Cost Explorer
AWS Cloud Economics Center
AWS Detailed Billing Reports
AWS Total Cost of Ownership (TCO) Calculators
AWS Simple Monthly Calculator
Cost Optimization on AWS