reduce aws costs

Reducing Cloud Costs in AWS – Best Practices & Practical Tips

Cloud computing has revolutionized business operations, with Amazon Web Services (AWS) leading the pack in this space. AWS provides an impressive variety of services designed to meet diverse computing needs; however, its convenience comes at the cost of managing costs effectively. In this blog post, we explore best practices and practical tips to reduce AWS costs, so businesses can optimize operations without exceeding budgetary restrictions.


Growth of Cloud Technologies Usage

Cloud computing is an ever-expanding field, with businesses of all sizes turning to it for their IT needs. Various factors contribute to its rise, including its scalability, flexibility, and cost-efficiency. Here are some trends that are expected to influence its future:

  • The growth of serverless computing: Serverless computing is a cloud computing model in which businesses do not have to provision or manage servers. This can save companies time and money, and it can also help to improve scalability and flexibility.
  • The increasing use of artificial intelligence and machine learning: Artificial intelligence (AI) and machine learning (ML) are being used to automate tasks in the cloud, such as provisioning resources, managing workloads, and optimizing performance. This is leading to greater efficiency and productivity in the cloud.
  • The growth of security and compliance concerns: With businesses moving more data and applications to the cloud, security and compliance concerns have become more pressing. Cloud providers have made considerable strides toward protecting customer data; businesses must take precautionary steps to keep it safe in the cloud.


Now, let’s discuss some best practices and practical tips to reduce AWS costs.


Best Practices & Practical Tips to Reduce AWS Costs

Rightsize Resources

One of the fundamental principles of cost optimization is rightsizing resources. AWS offers various instance types explicitly tailored to different workloads; analyze your usage patterns and choose instances that match up with them to avoid overprovisioning. Tools like AWS Trusted Advisor and Cost Explorer give insight into resource usage patterns, allowing opportunities for downsizing or consolidating instances to emerge.

For example, consider an e-commerce platform experiencing varying traffic throughout the day. By analyzing CloudWatch metrics, you identify that your application consistently uses only 60% of CPU capacity on a larger instance during peak hours. Downsizing from an m5.large instance (2 vCPUs, 8 GB RAM) to an m5.medium instance (1 vCPU, 4 GB RAM) can yield substantial savings.


Cost Calculation:

m5.large: $0.096/hour

m5.medium: $0.048/hour

Savings: $0.048/hour (50%)

Savings Per Month: $34.56


Utilize Auto Scaling

Autoscaling lets you automatically adjust the number of instances based on demand. You can increase the instances during peak periods and scale back during lulls, and this dynamic approach ensures optimal performance without overspending on idle resources. You will only have to pay for the computing power you consume.

For example, a video streaming service experiences spikes in demand during new content releases. The service automatically adjusts the number of instances based on traffic by setting up Auto Scaling. During a release, the service scales up from 10 instances to 30 instances. After the peak, it scales down to 15 instances.


Cost Calculation:

20 instances (peak hours) * $0.10/instance/hour = $2.00/hour

12 instances (off-peak hours) * $0.10/instance/hour = $1.20/hour

Total savings: $0.80/hour

Savings Per Month: $576


Reserved Instances and Savings Plans

AWS provides both Reserved Instances (RIs) and Savings Plans that provide considerable discounts in return for a commitment to using specific instances for an agreed-upon duration. While RIs require more upfront planning, they can bring substantial long-term savings, while Savings Plans give greater flexibility by applying discounts across an array of instance types.

For example, gaming companies know they need consistent instances for multiplayer servers, and by purchasing Reserved Instances over one year, they secure an impressive 30% savings compared to on-demand pricing.


Cost Calculation:

On-demand cost per hour: $0.15

Reserved Instance cost per hour: $0.105

Savings per hour: $0.045

Savings Per Month: $32.40


Managing Costs on Amazon CloudWatch

Managing costs on specific AWS tools, such as Amazon CloudWatch, requires a targeted approach. Creating CloudWatch dashboards to visualize metrics and alarms will help you keep an eye on resources efficiently and make timely decisions, thus avoiding cost spikes due to issues that go undetected. Also, consider customizing retention periods based on your analysis needs – longer retention periods will increase storage costs, so choose one that meets them to reduce AWS costs. 


Here are some more tips to help you keep CloudWatch costs under control while still effectively monitoring your resources:


Choose Metric Granularity Wisely: CloudWatch allows you to select the granularity of your metrics, such as 1-minute, 5-minute, or longer intervals.  Opting for coarser metrics may help cut costs as more detailed ones require additional resources to maintain.

Enable Detailed Monitoring Selectively: AWS resources like EC2 instances offer detailed monitoring with more frequent data points, which comes at a higher cost. Use detailed monitoring only for instances or resources where it’s absolutely necessary.

Consolidate Log Groups: When using CloudWatch Logs, consolidating log groups may reduce the number of log streams, potentially cutting costs associated with log ingestion.


Monitor and Optimize Data Transfer

Monitoring and optimizing data transfer on AWS is critical to controlling costs effectively. Data transfer expenses can quickly increase when dealing with large-scale applications, content distribution, or replication scenarios. Review your AWS Cost and Usage Reports regularly to gain a complete picture of which services and regions contribute the most towards data transfer costs – this will allow you to identify areas for optimization.

For example, if you transfer 500 GB of data (images and videos) from an Amazon S3 bucket to users globally. Assuming an average cost of $0.09 per GB for data transfer from US East (N. Virginia) to other regions, the total data transfer cost will be -> 500 GB * $0.09/GB = $45.00. However, with CloudFront in place, approximately 80% of the data requests will be served from edge locations, resulting in an 80% reduction in data transfer. So, you may end up saving $36.00 and pay $9.00 for the same. Isn’t that amazing?

However, it’s important to note that CloudFront does tend to be on the more expensive side compared to some other CDNs available in the market. There are several other CDNs available such as Cloudflare, KeyCDN, Akamai, etc. that offer competitive pricing without compromising on performance and reliability.

For example, compared to CloudFront where data transfer pricing is $0.09/GB, the data transfer pricing for KeyCDN is $0.04/GB so it will cost $20 for 500 GB, and Cloudflare pro plan of $25 per month has a limit of 1 TB data transfer. 


Continuous Cost Monitoring

Cost optimization is an ongoing process. Regularly monitor your AWS Cost and Usage Reports to track spending patterns, identify cost spikes, and implement necessary adjustments. AWS Budgets and CloudWatch Alarms can also help you set cost thresholds and receive alerts when spending exceeds predefined limits.

For example, an AI startup sets a monthly budget of $5,000 for AWS resources. Setting up an AWS Budget allows the team to receive email alerts when costs approach the limit. This prompts them to optimize usage and prevent unexpected overages and reduce AWS costs preamptively.



By adopting these best practices and practical tips for AWS cost management, you can successfully reduce AWS costs and navigate its complexities with confidence. Align cloud resources with your actual needs, optimize usage, and regularly evaluate cloud strategy – this approach will allow you to achieve both operational efficiency and expense reduction on your AWS journey.

If you’re ready to take your business to the next level, contact us today to learn more about how we can help you harness the power of cloud computing. Our software consultants and dedicated teams are eagerly waiting to assist you in transforming your business, embracing agility, and unlocking the true potential of the cloud.

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