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AWS Cost Management

AWS Cost Management

Section titled “AWS Cost Management”

Understanding AWS pricing and managing cloud spend is a critical skill. AWS provides a set of tools to visualize, analyze, and control costs.

In Azure terms: See Azure Cost Management + Billing equivalents below.

AWS Pricing Models

Section titled “AWS Pricing Models”
ModelDescriptionBest For
On-DemandPay by the second, no commitmentDev/test, unpredictable workloads
Reserved Instances (RI)1 or 3-year commitment on specific instance type, up to 72% offSteady-state production
Savings PlansFlexible spending commitment ($/hour), up to 66% offMix of instance types and Fargate
Spot InstancesSpare EC2 capacity, up to 90% off, can be interruptedBatch jobs, ML training, fault-tolerant apps
Dedicated HostsPhysical server reserved for youLicense compliance (Windows, SQL Server)
Free Tier12-month + always-free servicesLearning and experimentation

Savings Plans vs Reserved Instances

Section titled “Savings Plans vs Reserved Instances”
FeatureSavings PlansReserved Instances
FlexibilityApply to any instance type/region (Compute SP)Specific instance type and region
DiscountUp to 66%Up to 72%
Term1 or 3 years1 or 3 years
PaymentUpfront, partial, or no upfrontSame
ScopeEC2 + Lambda + FargateEC2 only (usually)

Recommendation: Savings Plans are generally more flexible and preferred for most teams.

Cost Management Tools

Section titled “Cost Management Tools”

AWS Cost Explorer

Section titled “AWS Cost Explorer”

Visualize and analyze historical spending and usage:

  • View costs by service, region, account, tag, or resource
  • Identify trends and anomalies
  • Forecast future spend
  • View Reserved Instance and Savings Plans utilization

AWS Budgets

Section titled “AWS Budgets”

Set cost and usage thresholds with alerts:

Budget TypeTriggers On
Cost BudgetActual or forecasted cost exceeds $X
Usage BudgetUsage (hours, GB, requests) exceeds threshold
Reservation BudgetRI utilization drops below X%
Savings Plans BudgetSP utilization drops below X%
Terminal window
# Create a monthly cost budget with email alert
aws budgets create-budget \
  --account-id 123456789012 \
  --budget '{
    "BudgetName": "monthly-limit",
    "BudgetLimit": {"Amount": "500", "Unit": "USD"},
    "TimeUnit": "MONTHLY",
    "BudgetType": "COST"
  }' \
  --notifications-with-subscribers '[{
    "Notification": {
      "NotificationType": "ACTUAL",
      "ComparisonOperator": "GREATER_THAN",
      "Threshold": 80
    },
    "Subscribers": [{"SubscriptionType": "EMAIL", "Address": "team@example.com"}]
  }]'

AWS Cost Anomaly Detection

Section titled “AWS Cost Anomaly Detection”

ML-powered detection of unexpected cost spikes:

  • Set thresholds (e.g., alert if spend is $X above expected)
  • Get notified via SNS/email
  • Drill into root causes

AWS Compute Optimizer

Section titled “AWS Compute Optimizer”

Analyzes EC2, Lambda, EBS, and ECS utilization to recommend right-sizing:

  • Identifies over-provisioned (too large) and under-provisioned (too small) resources
  • Provides specific instance type recommendations with estimated savings

Tagging Strategy for Cost Allocation

Section titled “Tagging Strategy for Cost Allocation”

Tags are essential for attributing costs to teams, projects, or environments:

Tag KeyExample Values
Environmentprod, staging, dev, test
Teambackend, frontend, data, platform
Projectcheckout, payments, auth
CostCenter1234, marketing, engineering
Owneralice, bob

Activate tags for billing: In the AWS Billing console → Cost Allocation Tags → activate your tag keys. It takes 24 hours for them to appear in Cost Explorer.

Cost Optimization Quick Wins

Section titled “Cost Optimization Quick Wins”
ActionTypical Savings
Delete unattached EBS volumes100% of that volume cost
Release unused Elastic IPs$0.005/hour (~$3.60/month each)
Delete unused Load Balancers$16–$25/month each
Switch EC2 gp2 to gp3 EBS20% cost reduction
Buy Savings Plans (1-year)30–40% off compute
Move to Graviton (ARM) instances20% cheaper than x86 equivalents
Use S3 Intelligent-TieringAutomatic tier-down for infrequent access
Enable S3 lifecycle policiesMove data to Glacier after 90 days

AWS vs Azure Cost Tools

Section titled “AWS vs Azure Cost Tools”
ToolAWSAzure
Cost visualizationCost ExplorerAzure Cost Management
Budgets & alertsAWS BudgetsAzure Budgets
Pricing calculatorAWS Pricing CalculatorAzure Pricing Calculator
Anomaly detectionCost Anomaly DetectionAzure Cost Alerts (smart alerts)
Right-sizingCompute OptimizerAzure Advisor
Reserved pricingReserved InstancesReserved VM Instances
Flexible reservedSavings PlansAzure Savings Plan for Compute
Spot pricingEC2 Spot InstancesAzure Spot VMs
Section titled “Useful Links”