What does AWS mean by Cost Optimization?

There are many things that AWS actively try to help you with — and cost optimization is one of them. Cost optimization simply defined comes down to helping you reduce your cloud spend in specific areas, without impacting on the efficacy of your architecture and how it functions. Cost optimization is one of the pillars in the well architected framework, and we can use it to help us move towards a more streamlined, and cost efficient workload.

AWS Well-Architected Framework enables cloud architects to build fast, reliable, and secure infrastructures for a wide variety of workloads and applications. It is built around six pillars:

  • Operational excellence
  • Security
  • Reliability
  • Performance efficiency
  • Cost optimization
  • Sustainability

The Well-Architected Framework provides customers and partners with a consistent approach for evaluating architectures and implementing scalable designs on AWS. It is applicable for use whether you are a burgeoning start-up or an enterprise corporation using the AWS Cloud.

In this article however, we are going to focus on exactly what is cost optimization, explore some key principles of how it is defined and demonstrate some use cases as to how it could help you when architecting your own AWS Solutions.

What is Cost Optimization?

Besides being one of the pillars on the Well Architected framework, Cost Optimization is a broad, yet simple term and is defined by AWS as follows:

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

It provides a comprehensive overview of the general design principles, best practices, and questions related to cost optimization. Once understood, it can have a massive impact on how you are launching your various applications on AWS.

As well as a definition of what the Cost Optimization is there are some key design principles which we’ll explore in order to make sure we are on the right track with enhancing our workloads:

Implement Cloud Financial Management

In order to maximize the value of your cloud investment, cloud financial management/cost optimization is essential for achieving financial success and maximizing the value of your cloud investment. As your organization moves into this new era of technology and usage management, there is an imperative need for you to devote resources and time to developing capability in this new area. As with security or operational excellence, if you want to become a cost-efficient organization, you will have to build capability through knowledge building, programs, resources, and processes in a similar manner to how you would build capability for security.

Adopt a consumption model

If you want to save money on computing resources, it is important to pay only for what you require, and to increase or decrease usage based on the needs of the business, without relying on elaborate forecasting.

Measure overall efficiency

It is important to measure the business output of a workload as well as the costs associated with delivering that workload. You can use this measure to figure out what gains you will make if you increase output and reduce costs. Efficiency doesn’t also have to be just financially worthwhile to help get your cloud spend under control. It can also help any one server from becoming under or over utilized and help from a performance standpoint also.

Stop spending money on unnecessary activities

When it comes to data center operations, AWS handle everything from racks and stacks to powering servers and providing the racking itself. By utilizing managed services, you will also be able to remove the operational burden of managing operating systems as well as applications. The advantage of this method is that you are able to focus on your customers and your business projects rather than on your IT infrastructure.

Analyze and attribute expenditure

There is no doubt that the cloud allows for easy identification of the usage and cost of systems, which in turn allows for transparent attribution of IT costs to individual workload owners. Achieving this helps workload owners to measure the return on investment (ROI) of their investment as well as to reduce their costs and optimize their resources.

Now that we fully understand what we mean when we say ‘Cost Optimization on AWS’, we are going to show some ways that we can use cost optimization principles in order to improve the overall financial performance of our workloads on Amazon S3, and Amazon EC2:

Cost optimization on S3

Amazon S3 is an object-storage service which provides 11 Nines of Durability, and near infinite, low-cost object storage. There are a number of ways to even further optimize your costs, and ensure you are adhering to the Cost Optimization pillar of the Well Architected Framework.

S3 Intelligent Tiering

Amazon S3 Intelligent-Tiering is a storage class that is intended to optimize storage costs as well as provide users with an easy way to move data to the most cost-effective access tier as their usage patterns change over time. In the case of S3, Intelligent-Tiering monitors access patterns and, for a small monthly fee, automatically moves objects that have not been accessed to lower-cost access tiers. You can automatically save storage costs when you use S3 Intelligent-Tiering, which is a technology that provides low-latency and high-throughput access tiers to reduce storage costs. As a result of S3 Intelligent-Tiering storage class, it is possible to automatically archive data that is asynchronously accessible.

S3 Storage Class Analysis

Amazon S3 Storage Class Analysis analyses storage access patterns to help you decide when to transition the right data to the right storage class. This is a relatively new Amazon S3 analytics feature that monitors your data access patterns and tells you when data should be moved to a lower-cost storage class based on the frequency with which it is accessed.

Cost optimization on EC2

Amazon EC2 is simply a Virtual Machine in the cloud that can be scaled up, scaled down dynamically as your application grows. There are a number of ways you can optimize your spend on EC2 depending on your use case, whilst still delivering excellent performance.

Savings Plans

In exchange for a commitment to a specific instance family within the AWS Region (for example, C7 in US-West-2), EC2 Instance Savings Plans offer savings of up to 72 percent off on-demand.

EC2 Instance Savings Plans allow you to switch between instance sizes within the family (for example, from c5.xlarge to c5.2xlarge) or operating systems (such as from Windows to Linux), or change from Dedicated to Default tenancy, while continuing to receive the discounted rate.

If you are using large amounts of particular EC2 instances, buying a Savings Plan allows you to flexibly save money on your compute spend.

Right-sizing EC2 Instances

Right-sizing is about matching instance types and sizes to your workload performance and capacity needs at the lowest possible cost. Furthermore, it involves analyzing deployed instances and identifying opportunities to eliminate or downsize them without compromising capacity or other requirements.

The Amazon EC2 service offers a variety of instance types tailored to fit the needs of different users. There are a number of instance types that offer different combinations of resources such as CPU, memory, storage, and networking, so that you can choose the right resource mix for your application.

You can use Trusted Advisor to give recommendations on which particular EC2 instances are running at low utilization. This takes a lot of undifferentiated heavy lifting out of your hands as AWS tell you the exact instances you need to re-size.

Using Spot Capacity where possible

Spot capacity is spare capacity that AWS has within their data centers, which they provide to you for a large discount (up to 90%). The downside is that if a customer is willing to pay the on-demand price for this capacity, you will be given a 2-minute warning after which your instances will be terminated.

Applications requiring online availability are not well suited to spot instances. The use of Spot Instances is recommended for stateless, fault-tolerant, and flexible applications. A Spot Instance can be used for big data, containerized workloads, continuous integration and delivery (CI/CD), stateless web servers, high performance computing (HPC), and rendering workloads, as well as anything else which can be interrupted and requires low cost.

There are many considerations when it comes to optimizing cost on AWS, and the Cost Optimization pillar provides us all of the resources we need to be fully enabled in our AWS journey.

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Neal Davis

Neal Davis

Founder of Digital Cloud Training, IT instructor and Cloud Solutions Architect with 20+ year of IT industry experience. Passionate about empowering his students