Optimizing your AWS pricing: The complete guide
Why optimizing your AWS pricing is critical
For many organizations, cloud services like AWS are the second largest budget item after employee salaries. Although AWS cost management is a complex topic, it can be broken into two overall methodologies:
- Rate optimization: Optimizing the rates and prices you pay AWS for services
- Usage optimization: Optimizing which, where, how, and how much of AWS’ offerings your team uses
This guide will help you understand why optimizing the rates you pay AWS is the easiest, most efficient, and lowest-risk way to rein in in cloud spend, regardless of your organization's size or cloud maturity. You’ll learn five ways your team can take more control of the rates you pay AWS, that include:
- Cost-free ways to easily visualize all your purchasing options and shortcut the path to the best discounts
- How you can cover hard-to-discount usage types with savings and set your own commitment terms
- Tactics to qualify for credits, and how to model your long-term growth so you can negotiate private pricing
There are two primary AWS cost optimization strategies
The field of cloud cost management, often called cloud financial management or FinOps, contains two main areas of practice, both further divided into two primary methodologies.
1. AWS rate optimization
Rate optimization is concerned with maximizing your discounts and getting the best pricing for AWS services. One benefit to rate optimization is it does not require any input or effort from your DevOps or Engineering organizations since it can be performed completely at the billing and contracts layer.
There are two methodologies for getting the best AWS rates:
- Purchasing and managing AWS commitment-based discounts: AWS Savings Plans (SPs) and Reserved Instances (RIs) enable you to commit to spend on specific AWS services over a one or three-year term in exchange for savings. Effectively managing commitments is the highest-savings rate optimization strategy.
- Negotiating enterprise pricing and securing and maximizing AWS credits: Negotiated enterprise terms in the form of the AWS Enterprise Discount Program (EDP) or an AWS Private Pricing Addendum or Agreement (PPA) enable organizations that are spending at least $500,000 annually to commit to annual spending thresholds over a multi-year term in order to receive a blanket discount on AWS services. AWS credits are coupons or vouchers that can be obtained through a wide variety of programs and let you discount a dollar of AWS spend for each credit across a large range of services. EDP/PPA and credits deliver lower overall savings, but are a key part of optimizing your AWS pricing.
2. AWS usage optimization
Usage optimization is focused on purchasing the right AWS services in the right amounts, and only paying for what you absolutely need. Optimizing your AWS usage requires close collaboration with Engineering and DevOps to ensure production applications and end-user experience is not impacted. There are numerous solutions that help with AWS usage optimization, but controlling usage is a complex, time consuming, and often ongoing process. Usage optimization can be completed in tandem with less-complicated rate optimization efforts.
There are two components of optimizing AWS usage:
- Rightsizing, replatforming, and reprovisioning AWS resources: Rightsizing AWS workloads is the most complex aspect of optimizing AWS usage, but also delivers some of the highest cost savings. FinOps stakeholders must collaborate with Engineer to guarantee production workloads are not impacted. In AWS, often simply migrating to new-generation instances can yield significant savings.
- Terminating unused resources: The fastest way to optimize AWS usage is to shut off and delete service components that are not being used. Although terminating unused resources often results in less savings that going through the time consuming process of rightsizing, identifying unused workloads and snapshots can usually be completed with less effort.
Why AWS rate optimization is always an open opportunity
One of the primary benefits of AWS rate optimization is that there are always strategies that can be implemented at any point in your AWS journey, independent or even aligned with usage optimization efforts your team might be performing. AWS rate optimization can be performed:
- In the middle of an infrastructure transformation or migration
- While an organization is adopting AWS services in the cloud
- During cloud infrastructure modernizations
- Amidst mergers and acquisitions of unfamiliar AWS infrastructure
Because rate optimization impacts only the contracts layer of your AWS Organization and accounts, as long as you have control of your payer account, you can optimize at any time.
Archera’s free cloud rate optimization platform
Archera delivers a free platform for AWS rate optimization and first-of-a-kind paid rate optimization products, including Insured Commitments and Enterprise Pricing Insurance. Customers save millions using our free rate optimization capabilities without ever paying us a dime, and we help them get savings with our paid products that are otherwise unachievable.
AWS pricing optimization tactics
There are five main components to optimizing the prices you pay AWS. Although there is always rate optimization that can be performed, some of the tactics below are only relevant during a specific stage of your AWS cloud journey.
- Understand your costs (often called cost visibility or FinOps visibility) so you can determine where savings are possible
- Use AWS’ commitment-based discounts — Savings Plans (SPs) and Reserved Instances (RIs) — to reduce the price of committable services with predictable usage
- Selectively leverage flexible-term Insured Commitments to get discounts on short-term AWS usage
- Take advantage of AWS credits — promotional coupons — to further cut prices
- Work towards securing AWS enterprise pricing — often called an EDP or PPA — which is a negotiated agreement with AWS for mature customers that often delivers a top-level discount across most services
Each chapter of this guide includes detailed explanations of one of the five tactics, along with examples of AWS native tooling so you can operationalize this advice. We’ll also outline how Archera’s free platform and unique paid solutions can help. Read on and achieve significant and immediate savings by implementing these five rate optimization strategies at the billing and contracts layer to optimize your AWS pricing!
Continue reading this series
- Introduction: How to optimize your AWS pricing
- Chapter 1: Understand your AWS spend so you can identify savings opportunities
- Chapter 2: Maximize commitment-based discounts to save up to 70% on static AWS infrastructure
- Chapter 3: Use flexible-term Insured Commitments to save 30–50% on less-certain AWS infrastructure
- Chapter 4: Qualify for and secure additional AWS credits
- Chapter 5: Accelerate your attainment of AWS enterprise pricing
