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Optimizing AWS Costs: Practical Tips for Budget-Conscious Cloud Engineers

Published at

1/5/2025

INTRODUCTION

AWS provides a flexible cloud environment, but this flexibility can lead to significant costs if not carefully managed.

Cost optimization is about aligning resources and architecture with application needs while leveraging AWS' pricing options to minimize expenses.

Cost optimization in AWS requires a strategic approach to resource management, pricing options, and architectural choices.

Below is a list of practical steps with actionable tips to help reduce AWS bills.

1. Use AWS Cost Management Tools

AWS provides a set of cost management tools that help monitor and analyze expenses:

AWS Cost Explorer

AWS Cost Explorer helps visualize AWS costs and usage patterns over time.

Steps involved in using AWS Cost Explorer:

a. Go to AWS Billing Console > Cost Explorer.

b. Set custom date ranges, filter by services or accounts, and visualize costs.

c. Use Cost Explorer’s forecast feature to predict future expenses based on historical usage.

Tip: Regularly review Cost Explorer reports to identify and eliminate unnecessary resources.

AWS Budgets

AWS Budgets allow you to set custom cost and usage budgets.

Steps involved:

a. In the Billing Console, navigate to Budgets and choose Create a Budget.

There are several budget templates here:
i. Zero-Spend Budget: Suitable for users on Free-tier.

It creates a budget that notifies you once your spending exceeds $0.01 which is above the AWS Free Tier limits.

ii. Monthly Cost Budget: It creates a monthly budget that notifies you if you exceed, or are forecasted to exceed, the budget amount.

iii. Daily Savings Plans coverage budget: It creates a coverage budget for your savings plans that notifies you when you fall below the defined target.

iv. Daily reservation utilization budget:
Create a utilization budget for your reservations that notifies you when you fall below the defined target.

You can also customize your budget yourself rather than using these set templates by opting for the Customize option.

b. Set a budget amount, specify cost thresholds, and set up alerts.

Taking Zero-Spend as an example, the budget is already set at $0.00 and the cost threshold is $0.01.

You can give your Zero-spend budget a name and enable an email notification by adding an email address to notify you whenever you go beyond the AWS Free-tier limit.

Then click on Create budget.

Tip: Use AWS Budgets to enforce a spending cap across teams or projects.

2. Rightsize Instances with AWS Compute Optimizer

AWS Compute Optimizer suggests instance sizes based on your workloads, helping you select the optimal EC2 instance type.

Steps to Use Compute Optimizer:

In the AWS Management Console, go to AWS Compute Optimizer.
Select Get Started, Opt in for Only this Account, then EC2 Instances.

Review instance recommendations, which are categorized as under-provisioned, over-provisioned, or optimally provisioned.

Resize or change instance types based on the recommendations.

Tip: Regularly review recommendations to resize instances as needs change. Switching to the recommended instance size can lead to considerable cost savings.

3. Use Reserved Instances and Savings Plans

Reserved Instances (RIs) and Savings Plans provide significant discounts in exchange for a commitment to a specific usage amount or duration.

Reserved Instances
What they are: Purchase commitments for EC2 instances at reduced rates for 1- or 3-year terms.

How to purchase:
In the EC2 Console, navigate to Reserved Instances.

Choose an instance type, region, and term (1 or 3 years).

Select a payment plan (All Upfront, Partial Upfront, or No Upfront).

Tip: Use RIs for predictable, consistent workloads.

4. Savings Plans

Savings Plans offer flexible pricing models with a commitment to specific usage for 1 or 3 years across EC2, Lambda, and Fargate.
It is part of the budget templates that was briefly discussed under the AWS Budget Section above.

How to set up:

a. Go to AWS Billing Console > Savings Plans

b. Choose a Compute Savings Plan (for any region and instance family) or EC2 Instance Savings Plan (specific to instance family in a region).

Set your hourly commitment and term length.

Tip: Choose Savings Plans if you have variable workloads that span multiple services.

5. Implement Auto Scaling to Match Demand

Auto Scaling dynamically adjusts resources based on actual demand, reducing costs by releasing resources during low demand periods.

Setting Up Auto Scaling for EC2

a. In the EC2 Console, go to Auto Scaling Groups > Create Auto Scaling Group.

Under Launch Template > Create Launch Template

Then, while creating the Launch template, select the Operating System of your choice e.g., Ubuntu and instance type.

b. Use the Launch template you just created and configure the minimum, desired, and maximum instance counts.

c. Configure scaling policies to define triggers, such as CPU utilization or network traffic.

d. Set up notifications for scale-in and scale-out events.

Tip: Use Auto Scaling with Spot Instances for even more savings (see below for details).

6. Use Spot Instances for Non-Critical Workloads

AWS Spot Instances offer spare capacity at up to a 90% discount, ideal for flexible, fault-tolerant workloads.

Using Spot Instances:

a. In the EC2 Console, choose Launch Instance.

Select the instance type and configure it as a Spot Instance under Purchase Options.
Set the maximum bid price for the instance.

b. Launch and monitor spot requests in the Spot Requests section.

Tip: Use Spot Instances for batch jobs, data processing, or other non-time-sensitive tasks.

Combine Spot Instances with Auto Scaling to automatically manage instance availability.

7. Optimize Storage Costs with S3 and EBS

S3 Storage Classes

Standard: For frequently accessed data.
Intelligent-Tiering: Automatically moves data to the most cost-effective tier based on access patterns.
Infrequent Access (IA): For less-frequently accessed data.
Glacier and Glacier Deep Archive: For archival data.

Tip: Set up Lifecycle Policies in the S3 Console to transition objects to cheaper storage classes as they age.

EBS Volume Optimization

a. Delete Unused Volumes: Regularly review and delete any unattached EBS volumes.

b. Use Snapshots for Backups: Use snapshots for backup rather than keeping idle volumes.

c. Right-Size EBS Volumes: Choose the storage type and size that align with performance needs, e.g., switching from Provisioned IOPS SSDs to General Purpose SSDs for less intensive workloads.

8. Leverage AWS Lambda for Serverless Architectures

AWS Lambda enables a serverless approach, where you only pay for the compute time you use. This can lead to significant cost savings, especially for intermittent workloads.

Creating a Lambda Function

a. In the Lambda Console, click Create Function.

b. Choose Author from scratch, name the function, and select the runtime.

c. Define the function's Memory and Timeout settings, optimizing for performance and cost.

d. Test and deploy the function.

Tip: Use Provisioned Concurrency only if necessary. Lambda functions billed per millisecond can be more cost-effective for many small tasks.