Best AWS Cost Optimization Practices : Tools, Checklist & much more!

Prasad Puranik

Why to Optimize Costs on AWS?

AWS cost optimization transcends mere cost-cutting; it’s a strategic imperative aligning cloud resources with business objectives. Here’s a brief breakdown of the key benefits:

  • Maximize ROI:
    • Ensuring that every dollar invested in AWS yields the highest possible return on investment. This involves strategically allocating resources to initiatives that generate the most value for the organization.
  • Improve Efficiency:
    • Streamlining resource usage leads to heightened efficiency. By eliminating unnecessary expenditures and optimizing resource allocation, organizations ensure that their AWS environment operates at peak efficiency.
  • Scalability:
    • Cost optimization on AWS involves preparing the cloud environment for seamless scaling. This adaptability ensures that as business needs evolve, the AWS infrastructure can flexibly accommodate changing workloads without excessive costs.
  • Informed Decision-Making:
    • Cost optimization provides valuable insights into spending patterns. Armed with this data, organizations can make informed, data-driven decisions regarding resource allocation, enabling more precise and strategic management of cloud resources.
  • Competitive Edge:
    • Allocating optimized costs to innovative projects can give organizations a competitive edge. By strategically investing in cutting-edge initiatives, businesses position themselves as leaders in their industry, fostering innovation and staying ahead of the competition.

What Are the AWS Design Principles for Cost Optimization?

The five AWS design principles for cost optimization as per AWS Well Architected Framework serve as guiding strategies for organizations seeking to manage their AWS expenditures efficiently. Here’s a brief explanation of each principle:

  1. Adopt a Consumption Model:
    • Embrace a pay-as-you-go model, where organizations pay only for the AWS resources they consume. This approach aligns costs directly with actual usage, allowing for flexibility and cost efficiency as business needs evolve. It eliminates the need for upfront investments and provides a scalable and responsive cost structure.
  2. Measure Overall Efficiency:
    • Regularly evaluate and enhance the efficiency of AWS resources. This involves optimizing the performance of applications and workloads to ensure they are running at their best. By continually assessing and improving efficiency, organizations can achieve cost savings while maintaining or improving the overall performance of their AWS environment.
  3. Stop Spending on Data Center Operations:
    • Transitioning from traditional data center operations to AWS services is a core principle. By leveraging the cloud, organizations reduce the overhead associated with maintaining on-premise infrastructure. AWS offers a wide range of services that handle the operational aspects, allowing businesses to focus on innovation rather than managing data center operations.
  4. Analyze and Attribute Expenditure:
    • Implementing detailed tagging practices is crucial for attributing costs to specific projects, departments, or teams. This granular visibility into expenditures enhances financial transparency, enabling organizations to make informed decisions based on the allocation of resources. It facilitates accountability and aids in understanding the impact of AWS costs on various aspects of the business.
  5. Use Managed Services to Reduce TCO:
    • Leveraging AWS managed services is a strategic approach to reduce the total cost of ownership (TCO). By offloading operational tasks to AWS, organizations can benefit from the expertise and infrastructure provided by AWS managed services. This allows for greater efficiency, scalability, and cost-effectiveness, as AWS takes on the responsibilities of managing and maintaining the underlying infrastructure.

AWS Pricing Models and How They Help Optimize AWS Costs

On-Demand Instances:


On-Demand Instances in AWS offer a flexible and convenient pricing model, allowing users to pay for compute capacity without any upfront commitments. This model is ideal for workloads with variable usage patterns or unpredictable demand.

Key Features:

  • Flexibility: Users can scale compute capacity up or down based on their requirements.
  • No Upfront Costs: There are no upfront costs or long-term commitments, making it a pay-as-you-go model.
  • Hourly or Per-Second Billing: Costs are incurred based on the actual compute capacity used, billed either per hour or per second.

Use Cases:

  • Development and Testing: On-Demand Instances are well-suited for development and testing environments with varying resource needs.
  • Short-Term Projects: Ideal for projects with uncertain or short-term resource requirements.

Reserved Instances (RIs):


Reserved Instances provide a cost-effective alternative to On-Demand pricing by offering significant discounts in exchange for a commitment to a one- or three-year term and good AWS cost optimization.

Key Features:

  • Cost Savings: Users benefit from a substantial discount compared to On-Demand pricing.
  • Term Commitment: Committing to a specific term demonstrates a willingness to predict and commit to usage levels.
  • Instance Type Flexibility: RIs allow flexibility in choosing instance types within the same family.

Use Cases:

  • Stable Workloads: Reserved Instances are suitable for applications with stable and predictable workloads.
  • Long-Term Projects: Ideal for projects with a long-term roadmap and predictable resource needs.

Spot Instances:


Spot Instances enable users to bid for unused EC2 capacity, providing access to cost-effective compute resources. The pricing is dynamic and fluctuates based on supply and demand.

Key Features:

  • Cost Efficiency: Spot Instances often offer the lowest prices, making them a cost-efficient option for highest AWS cost optimization.
  • Variable Pricing: Prices vary based on availability and demand, allowing users to capitalize on lower costs during specific periods.
  • Termination Possibility: Instances may be terminated if the Spot price exceeds the user’s bid or if the capacity is needed elsewhere.

Use Cases:

  • Fault-Tolerant Workloads: Spot Instances are suitable for fault-tolerant applications that can handle interruptions.
  • Batch Processing: Ideal for batch processing, data analysis, or other workloads with flexible timing.

Savings Plans:


Savings Plans offer users significant cost savings compared to On-Demand pricing, providing a consistent amount of usage (measured in $/hr) for a 1 or 3-year commitment.

Key Features:

  • Cost Predictability: Savings Plans provide cost predictability for a specific amount of committed usage.
  • Flexibility in Instance Types: Users can switch between instance families, sizes, and regions while still benefiting from savings.
  • Automatic Discount Applied: Savings Plans automatically apply discounts, reducing the complexity of managing reservations for AWS cost optimization.

Use Cases:

  • Consistent Workloads: Well-suited for workloads with consistent and predictable usage patterns.
  • Cost-Conscious Organizations: Ideal for organizations looking to maximize savings while maintaining flexibility.

Top AWS Cost Optimization Tools

1 Tevico

AWS Cost Optimization Tool

Tevico, a cutting-edge cloud governance solution, stands at the forefront of revolutionizing AWS cloud management. Tailored for businesses seeking efficiency and optimization, Tevico offers premium features designed to save significant time, money, and effort in the realm of cloud governance. From financial management and security assessments to efficient governance and adherence to well-architected frameworks, Tevico empowers businesses with a comprehensive suite of tools, providing a seamless and user-friendly experience. Elevate your AWS cost optimization with Tevico, where innovation meets practicality for unparalleled business success.

AWS Cost Optimization:

Effortlessly track, analyze, and optimize your cloud expenses with Tevico’s advanced financial management tools. Gain insights into your spending patterns and maximize the cost-efficiency of your AWS cloud resources.

Cloud Security Assessment:

Ensure the robust security of your cloud environment with Tevico’s comprehensive security assessment tools. Identify vulnerabilities, assess risks, and receive actionable insights to fortify your cloud infrastructure against potential threats.

Cloud Inventory:

Streamline your cloud governance with Tevico’s Cloud Inventory feature, providing a detailed view of your AWS resources. Effortlessly manage and organize your cloud assets to enhance operational efficiency and resource utilization.

Well-Architected Framework:

Align with best practices using Tevico’s integration of the Well-Architected Framework. Tevico ensures that your cloud architecture meets the highest standards of security, reliability, and performance, as recommended by our AWS experts.

2 AWS Cloudwatch

Amazon CloudWatch stands out as AWS’ go-to solution for effective cloud cost management. It gathers your metrics and logs from a vast array of over 70 AWS applications, services, and resources in near-real-time, facilitating comprehensive AWS cost reporting. The consolidated data is then presented on a single, user-friendly dashboard for simplified computation and analysis.

With CloudWatch, you have the flexibility to collect custom metrics for your AWS applications, establish budgets, set alarms for cost anomalies, and automate responses to changes in costs on ECS, EKS, and Kubernetes clusters.

For a more holistic approach to AWS cost management, you can seamlessly integrate other native tools such as AWS Cloud Explorer, AWS Cost optimization and Usage Report, and AWS Budgets with Amazon CloudWatch. This combination ensures a well-rounded and efficient strategy for overseeing of AWS cost optimization.

3 AWS Cost Explorer

If your workloads operate solely within the AWS ecosystem, Cost Explorer serves as a built-in tool for monitoring, analyzing, and overseeing costs.

Specifically, Cost Explorer monitors your AWS usage and its corresponding costs, presenting this information in a visual format, in contrast to the tabular format provided by an AWS Cost and Usage Report.

Cost Explorer utilizes various AWS monitoring tools, such as AWS CloudTrail, to gather and report data. This includes offering detailed insights with hourly and resource-level granularity, along with reports on Reservations and Savings Plans.

10+ AWS Cost Optimization Best Practices

  1. Monitor and Analyze Costs: Regularly monitor your AWS usage and spending using tools like AWS Cost Explorer, AWS Budgets, and AWS Cost and Usage Reports. Analyze cost trends, identify cost drivers, and look for AWS Cost Optimization opportunities.
  2. Implement Budgets and Alerts: Set up AWS Budgets to define spending thresholds and receive alerts when costs exceed predefined limits. This helps you stay within budget and avoid unexpected expenses.
  3. Right Size Resources: Choose appropriately sized AWS resources based on your workload requirements. Avoid over-provisioning by selecting instance types and sizes that match your application’s performance needs. Use tools like AWS Trusted Advisor to identify and resize underutilized resources.
  4. Utilize Reserved Instances (RIs) and Savings Plans: Commit to a certain amount of usage in exchange for discounted pricing with Reserved Instances and Savings Plans. Analyze your usage patterns to determine the most cost-effective purchasing options.
  5. Explore Spot Instances: For Better AWS cost optimization or managemnt Consider using Spot Instances for fault-tolerant and flexible workloads that can tolerate interruptions. Spot Instances offer significant cost savings compared to On-Demand instances, but be prepared for potential termination if the spot price exceeds your bid.
  6. Leverage Autoscaling: Implement Auto Scaling to automatically adjust the number of EC2 instances or other resources based on demand. This ensures that you’re only paying for the resources you need at any given time, as a result achieving AWS cost optimization while maintaining performance.
  7. Use Managed Services: Take advantage of AWS managed services like Amazon RDS, AWS Lambda, and Amazon DynamoDB to reduce operational overhead and improce AWS cost Optimization. Managed services handle infrastructure provisioning, scaling, and maintenance, allowing you to focus on your applications.
  8. Optimize Storage Costs: Use lifecycle policies to transition infrequently accessed data to cheaper storage tiers like Amazon S3 Glacier or S3 Glacier Deep Archive. Regularly review and delete unneeded data to minimize storage costs.
  9. Optimize Data Transfer: Minimize data transfer costs by optimizing data transfer patterns, using AWS Direct Connect for predictable data transfer, and leveraging content delivery networks (CDNs) like Amazon CloudFront.
  10. Implement Tagging and Cost Allocation: Tag your AWS resources with meaningful metadata to categorize and track costs. Use tags to allocate expenses to specific projects, teams, or departments, enabling better cost visibility and accountability.
  11. Review and Optimize Architectures: Regularly review your architecture for opportunities to optimize costs. Consider architectural changes such as serverless computing, containerization, and microservices to reduce infrastructure overhead and improve cost efficiency.
  12. Optimize Licensing Costs: Take advantage of AWS license-included instances and bring-your-own-license (BYOL) options to minimize software licensing costs. Consider reserved licensing agreements for long-term cost savings.

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