Many companies expect cost benefits from moving to the cloud – and rightly so. But unfortunately, saving money in the cloud doesn’t happen by itself. If you want to reduce your cloud costs with AWS, you should understand AWS pricing and know the various levers for cost optimisation.
Usage-based price calculation
AWS pricing is predominantly usage-based: you pay only for the services and resources you really need. At the same time, AWS wants its pricing to motivate you to use as many resources as possible for as long and as intensively as possible. In addition, you are to plan your usage predictably so that AWS can optimise its own resource utilisation.
In plain language, this means that you get discounts for higher usage (Volume Discounts), for reservations (Reserved Instances), and for committing to use services over a longer period of time (Savings Plans), but also when you are willing to use currently unused resources (Spot Instances).
Moreover, Amazon wants to motivate you to try new services with free quotas. You can use many AWS services free of charge for a certain period of time. For example, Amazon EC2 and Amazon RDS (Relational Database Service) currently give you a free quota of 750 hours per month for 12 months, and you can use Amazon Redshift and Amazon Sagemaker free of charge for 2 months.
More is less: volume discounts
As your consumption increases, you benefit from volume discounts. For example, Amazon S3 offers a tiered pricing model: in the Standard storage class, you pay $0.023 per GB per month for up to 50 TB of storage, $0.022 for >50-500 TB of storage, and only $0.021 per GB for over 500 TB of storage. Access patterns are also relevant to pricing: infrequent access to long-lived data drops the price to 0.0125 USD/GB; archiving at S3 Intelligent - Tiering costs only 0.0004 USD/GB (Instant Access). The costs for data transfers also decrease with increasing data volumes.
Less is more: right-sizing
Even though AWS likes you to consume as much as possible: lower consumption is still cheaper. This is where right-sizing comes in.
Right-sizing means choosing exactly the cloud resources, such as instance sizes or storage, that you need for your workloads. This starts with cloud migration, where you should size cloud resources – such as booked instances – according to the actual resource consumption of your on-premises systems (we can help you do that with our SoftwareOne Optimization and Licensing Assessment). During operation, the AWS Trusted Advisor supports you in finding underutilised resources such as EC2 or RDS instances, EBS volumes, Redshift clusters, or load balancers, and adjust resource booking to your own usage patterns.
Success can be planned: Reserved Instances and Savings Plans
As mentioned earlier, if you help AWS plan its resource utilisation, the provider rewards you with discounts. When you use Amazon EC2 Reserved Instances (RI) or Savings Plans, you save up to 72 percent over on-demand instance prices. With Reserved Instances, you reserve fixed capacity, while Compute Saving Plans allow you to switch instances and move workloads between regions or services.
Savings Plans are available not only for EC2, but also for Fargate, Lambda or Sagemaker. You receive discounts (also up to 72 percent with EC2) if you commit to using these services to a certain extent for a period of one or three years.
Three payment options are available for both. Full payment in advance for the entire term gives you the highest discount, without prepayment the lowest; the "partial upfront payment" option is in between.
Tip: Useful tools from AWS also help you save. AWS Cost Explorer helps you understand, manage, and optimise your cloud costs, and AWS Auto Scaling even does this automatically, increasing or decreasing the resources used based on workload needs.
Don't click too fast: discounts in the AWS Marketplace
The AWS Marketplace is a curated digital catalogue of thousands of offerings from third-party vendors (ISVs), primarily software but also services. Sourcing is easy – but a quick click on "Subscribe" is rarely the most cost-effective option. The respective terms and conditions of the providers often hide potential savings. In particular, longer-term commitments and individually negotiated terms and conditions offer considerable leeway that can be exploited.
In order to really take advantage of the respective potential, you should be able to estimate your concrete needs over a longer period of time, carefully examine the conditions and options offered and, if possible, also negotiate with the vendors. You can get the most out of channel partners like SoftwareOne, which already has negotiated individual conditions and wholesale prices with many ISVs (via Channel Partner Private Offer, CPPO).
Better spontaneous: Spot Instances on EC2
Those who like it more spontaneous can book "Spot Instances" – unused EC2 capacities in the AWS Cloud. This allows AWS to optimise the utilisation of its infrastructure. Spot Instances are comparable to Deutsche Bahn savings fares: the lower the current utilisation, the higher the discount. Amazon EC2 Spot Instances are available at discounts of up to 90 percent compared to on-demand prices. Rates and availability change over time based on supply and demand; you can specify a maximum price you are willing to pay.
But beware: While no one will kick you off the train when new passengers join, it's a slightly different story with Spot Instances. This is because AWS reclaims the discounted capacity when it is needed again (and thus can be sold at the regular on-demand price), or when the price exceeds your maximum price. The warning time is just 2 minutes.
Therefore, Spot Instances are recommended for stateless, fault-tolerant, flexible applications, for example Big Data applications, containerised workloads, CI/CD, stateless web servers, High Performance Computing (HPC) or rendering workloads. In addition, it makes sense to use multiple Spot Instances or other resources for automatic capacity balancing, such as via auto scaling.
The supreme discipline: discounts in AWS EDP
You prefer planning to spontaneity after all? The ultimate in forward-thinking savings is AWS EDP – the AWS Enterprise Discount Program. It is specifically targeted at larger AWS customers with extensive cloud usage (over € 500,000 annually) and a long-term growth strategy. Similar to Savings Plans, considerable discounts are available if a customer commits to a high cloud usage for as long as possible: The higher the committed cloud spend and the longer the term (up to 5 years), the higher the discount.
However, unlike all previously mentioned savings opportunities, the AWS EDP applies to the complete AWS usage and covers most services – even Marketplace purchases (up to a maximum of 25 % of the total commitment). Commitment and discount apply to the final price of all resources used. EDP can therefore potentially be combined with other savings options such as Savings Plans – but in practice this is a matter of negotiation.
What does this mean for you? Your cost benefits are directly related to the amount and duration of your cloud usage commitment, and therefore the accuracy with which you can forecast your future AWS usage. That's why enterprises can benefit from working with a central cloud sourcing partner like SoftwareOne, who intimately knows their cloud landscape and usage, can provide spot-on forecasts for EDP commitments, and can also assist them with EDP negotiations.
Connect with our experts
Share a few details about your business challenge, and we’ll get right back to you.
Connect with our experts
Share a few details about your business challenge, and we’ll get right back to you.
Author
