AWS Cost Optimization

AWS Costs: 3 Ways to Save Big and 10 Price Variations to Watch Out For

[Cloud Volumes ONTAP, AWS, Elementary, 6 minute read, AWS Cost Optimization]

As organizations move more applications and services to the cloud, and a sizable part of IT budgets are diverted to cloud providers, understanding your cloud bill and how to get the most of your budget on cloud providers like Amazon Web Services, is a prime concern. AWS cost optimization has become a discipline of its own with specialized tools, economic models and best practices.

In this post, we’ll explain several pricing models that allow you to generate significant savings in the Amazon cloud, and explain ten reasons why your cloud bill may be different than expected. In addition, we’ll show how NetApp Cloud Volumes ONTAP can help reduce a significant part of your cloud bill—Amazon storage costs.

In this article, you will learn:

Four AWS Pricing Models: Which One is Right for You?

Beyond the basic pay-per-use pricing model, AWS offers three more pricing models that let you give us some flexibility in exchange for significant discounts.

1. On-demand pricing

The basic AWS pricing model is on-demand, with pricing for services based on actual usage, billed per hour or per second (supported for some services). It is highly flexible, but also the most expensive option. Many organizations start with on-demand pricing to understand their cloud needs and later switch to another model.

  • Suitable for organizations that prefer to structure their expenses as Operating Expenses (OpEx) with no up-front payments or time commitment.
  • Suitable for applications that are mission critical or have unpredictable spikes in load.
2. On-demand pricing with Enterprise Discount Program (EDP)

Organizations using on-demand pricing in the long term, should consider applying for an Amazon EDP. An EDP requires you to buy enterprise support and commit to a certain level of spend for a specified period of time. For example, a commitment to spend of $5 million per month may result in a discount of up to 13%. However, you can and should negotiate to receive deeper discounts. You can improve your leverage in the negotiation by, for example, pre-planning and optimizing workloads, and consolidating accounts to show bigger spend.

  • Suitable for organizations that have sizable infrastructure requirements and a large budget to spend on the cloud.
  • Suitable for applications that are large, with stable, predictable demand in the long term (at least when combined with other applications in the same portfolio).
3. Reserved instances

Amazon lets you reserve instances for a period of 1-3 years and receive discounts of up to 75%. In a reserved instance model, if you need to scale down, you cannot get rid of the reserved instances. Scaling up will require consuming resources on-demand at a higher cost. This reduces the flexibility of the Amazon offering, although you can still benefit from the advanced automation options and rich ecosystem of services Amazon provides. 

  • Suitable for organizations that are primarily running existing or legacy enterprise applications on the cloud.
  • Suitable for applications that have predictable usage which can be planned a long time in advance, or have a predictable growth trend.
4. Spot instances

Spot instances are only available for Amazon EC2. They offer the deepest discounts available on Amazon, up to 90% from on-demand instance pricing. Spot instances allow you to bid for spare computing capacity on Amazon’s open market. Pricing may change every five minutes, and if your price bid is above the current market price, you receive the spot instance. The Amazon EC2 Spot service can interrupt your instance if capacity is not available, or the current spot price exceeds your maximum price.

  • Suitable for organizations that have advanced cloud-native development capabilities, with the ability to dynamically cluster, start, stop and migrate applications.
  • Suitable for applications that are stateless and either highly distributed, or run non-time-critical workloads, for example overnight batch processing of analytics data.

Avoiding Surprises in Your Monthly Cloud Bill: 10 Price Variations to Watch Out For

Although there are many tools for estimating your AWS costs, such as official pricing calculator, there may be considerable variation in your actual cloud spend. Below are 13 reasons you may see something different on your Amazon bill compared to your original estimates.

  1. Actual usage—unless you place strict limits on your cloud utilization, actual usage may differ from the usage you estimated.
  2. Different services—in real-life deployments, teams often need to use other or additional AWS services than they originally planned, which may add costs.
  3. Data transfer and throughput costs—it is sometimes difficult to predict how much data your application will transfer, and some Amazon services charge for data transfer or throughput, measured in Input/Output Operations per Second (IOPS).
  4. Region—Amazon services are priced differently in each global region. If you end up running services in a different region than the one you estimated, prices will vary.
  5. Price changes—Amazon constantly updates prices, so if you use services on-demand, there may be unpredictable price movements compared to your estimate.
  6. Taxes—most Amazon calculators do not take into account sales taxes or other government charges related to your Amazon service.
  7. Free tier and promotions—in many cases, part of your initial utilization will use the Amazon free tier, or may be eligible for other discounts, which can reduce your actual costs.
  8. Tiered pricingsome Amazon calculators do not take tiers into account—for example it does not quantify the amount of storage on S3 you choose to move to Amazon Glacier. Check out NetApp’s storage-focused AWS calculator which actually does calculate AWS storage costs according to your use of storage tiers.
  9. Third-party licensing fees—if you purchase software or services on the AWS Marketplace, or directly install commercial software on your instances, these additional license costs may not be reflected in your estimate.
  10. Currency—most calculators show prices in US Dollars, but your actual price may vary depending on your local currency and the current exchange rate.

AWS Cost Reduction with Cloud Volumes ONTAP

NetApp Cloud Volumes ONTAP, the leading enterprise-grade storage management solution can do even more to help reduce your overall AWS spending through its powerful storage efficiency technologies, space-efficient snapshots, and zero-cost data cloning. With the thin provisioning, data compression, and deduplication storage efficiencies, companies can reduce storage footprint and costs on AWS by 70% and more.

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