Choosing an AWS cost management strategy
Taking the first step
Purpose |
Help determine which cost management services and tools are the best fit for your needs. |
Last updated |
June 18, 2024 |
Covered services |
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Introduction
Cost management and optimization in the cloud are important for businesses of all sizes. An effective cost management strategy ensures that you only pay for what you need and that you maximize the return on your cloud investment.
With cloud services, costs are dynamic and can escalate if not monitored closely. Financial planning, coupled with a clear understanding of the cost models for each service that you use, lets you allocate resources strategically, aligning spending with your business goals. This includes choosing the right pricing models, such as pay-as-you-go or reserved instances, and using auto-scaling to match resource provisioning with actual demand.
We offer services and tools to help you with cost management and optimization, including resources to organize and track your cost and usage data, improve control (through consolidated billing and access permission), enable better planning (through budgeting and forecasts), and further lower your costs by making use of the right resources and pricing optimizations.
This decision guide will help you ask the right questions, evaluate your criteria, and determine which cost management services and tools are the best fit for your needs.
Seven-minute clip from re:Invent 2023 explaining how to improve AWS cost reporting.
Understand
AWS cost management strategy can be broken down to several key areas:
Plan and evaluate: When planning for future cloud spend, start by defining your key performance indicators (KPIs), such as the monthly cost of a specific project. Make sure that cloud resources related to a project are properly tagged with cost allocation tags, cost categories, or both. Then, calculate and track the monthly cost of the project with the cost and usage data available in your AWS Cost Explorer and AWS Cost and Usage Report.
![Diagram showing the AWS Cloud Financial Management Portfolio.](/images/decision-guides/latest/cost-management-on-aws-how-to-choose/images/cfm-portfolio.png)
Decide the project budget based on the trend shown by your KPIs, as well as the available funds set aside for the project, and set the budget thresholds using AWS Budgets for cost or resource usage.
Manage and control: As your organization evolves, you need the freedom to experiment and innovate in the cloud, while maintaining control over cost, governance, and security. One way to do that is to establish centralized ownership through a center of excellence or cloud business team. While elements of cost management are shared responsibilities across the entire organization, a centralized team can design policies and governance mechanisms, implement and monitor the effort, and help drive best practices.
This team can be supported by services such as AWS Identity and Access Management (IAM) and AWS Organizations.
Use the AWS Billing Console to track your overall spend, and to view your cost breakdown by service and by account on your billing dashboard.
![Diagram showing the AWS Billing Conductor and AWS Application Cost Profiler.](/images/decision-guides/latest/cost-management-on-aws-how-to-choose/images/billing-console-cost-profiler.png)
Track and allocate: Tracking spending and allocating that spending to the right team can be vital to effective cost optimization. It's useful to know when you're spending more than you planned, but even more useful when you can clearly identify where that spending is happening. We offer several tools to help you get started.
AWS Cost Explorer (when paired with Cost Allocation Tags) lets you categorize your resources and spending to fit your organization’s needs, while AWS Billing Conductor lets you customize your pricing and billing report to aligns with your business logic. AWS Application Cost Profiler lets you collect and correlate your tenant usage data with your AWS billing information and generate a tenant-specific report with hourly granularity on a daily or monthly basis, or both.
Optimize and save: Cost optimization is about making sure that you pay only for what you need. Two of the more useful strategies for optimizing spending are:
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Using the right pricing models.
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Identifying and eliminating any idle or over-provisioned resources. Use AWS Cost Explorer resource recommendations to see top-level KPIs for rightsizing and instance selection recommendations.
Focus on these four areas to manage your AWS costs more effectively, maintain financial control, and optimize your cloud operations for maximum efficiency and value.
Consider
The following section outlines some of the key criteria to consider when choosing a cost management strategy, as well as supporting tools and services.
Choose
Now that you know the criteria by which you will be evaluating your cost management options, you are ready to choose which AWS cost management service may be a good fit for your organizational requirements.
The following table highlights which services are optimized for which circumstances. Use the table to help determine the service that is the best fit for your organization and use case.
Service category | What is it optimized for? | Cost management services |
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Plan and evaluate |
Services optimized for improving planning, to create accurate forecasting of variable usage. |
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Helps you create a directional business case for AWS Cloud planning and migration. |
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Provides a free web-based planning tool for creating cost estimates for using AWS services. |
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Provides improved planning and cost control with flexible budgeting and forecasting. |
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Helps you centrally govern your AWS environment as you grow and scale on AWS. |
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Manage and control |
Services optimized to provide centralized billing, automatic cost governance, and a streamlined procure-to-purchase process. |
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Provides a dashboard to track overall spend, and view cost breakdown by service and account. |
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Helps you to configure multiple purchase orders (POs), define how POs are mapped to their invoices, and access invoices generated against those POs. |
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Provides functionality to run an action when a budget exceeds a certain cost or usage threshold, either automatically or after manual approval. |
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Helps you use machine learning models to detect and alert on anomalous spend patterns in your deployed AWS services. |
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Consolidates billing and payment for multiple AWS accounts, allowing shared volume discounts across all accounts. |
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Track and allocate |
Services optimized to track and analyze cost trends and drivers in aggregate. |
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Provides visualization of cost and utilization with default reports, and creates specific views with filters and grouping. |
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Delivers cost and usage data to an S3 bucket where it can be integrated into other AWS tools or ERP for further analysis. |
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Group accounts, tags, services, and charge types into meaningful categories with custom rules. |
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Supports the showback and chargeback workflows of AWS Solution Providers and Enterprise customers. |
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Track the consumption of shared AWS resources used by software applications, and to report granular cost breakdown across your tenant base. |
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Optimize and save |
Services optimized for resource right-sizing, reserve capacity planning, and data transfer and storage optimization. |
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Provides a flexible pricing model that can help reduce your bill by up to 72% over on-demand prices. |
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Offers a billing discount that provides savings on EC2 costs compared to on-demand instance pricing. |
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Recommends optimal AWS compute resources for your workloads, helping you reduce costs and improve performance. |
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Provides EC2 instances that use spare EC2 capacity that is available for less than the on-demand price. |
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Optimizes storage costs by automatically moving data to the most cost-effective access tier when access patterns change. |
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Provides you with a comprehensive view of your cost optimization recommendations across your AWS Regions and AWS accounts within your organization. |
Use
You should now have a clear understanding of what each AWS cost management service (and the supporting AWS tools and services) does—and which might be right for you.
To explore how to use and learn more about each of the available AWS cost management services, we have provided a pathway to explore how each of the services work. The following section provides links to in-depth documentation, hands-on tutorials, and resources to get you started.
Explore
Patterns Explore patterns to help you develop your AWS cost management strategy. |
Whitepapers Explore whitepapers to help you get started in developing your cost management strategy. |
Solutions and guidance Explore additional architectural guidance for cost management. |