Optimizing AWS Cloud Costs and

Lowering Total Cost of Ownership

(TCO)
AWS Services and Best Practices for Managing AWS
Usage and Costs
Notices
This document is for informational purposes only. It represents Amazon Web
Services’ (AWS) current product offerings and practices as of the date of issue
of this document, which are subject to change without notice. Customers are
responsible for making their own independent assessment of the information in this
document and any use of AWS’s products or services, each of which is provided “as
is” without warranty of any kind whether express or implied. This document does
not create any warranties, representations, contractual commitments, conditions,
or assurances from AWS, its affiliates, suppliers, or licensors. The responsibilities
and liabilities of AWS to its customers are controlled by AWS agreements, and this
document is not part of, nor does it modify, any agreement between AWS and its
customers.

© 2020, Amazon Web Services, Inc. or its affiliates. All rights reserved.
 Table of Contents

Introduction 4

Common Cost Optimization Challenges 5

AWS Cost Optimization and TCO Services 7

TCO and Migration Planning 9

Software and Integration Partners 12

Conclusion 14

Further Reading and Key Resources 15

© 2020, Amazon Web Services, Inc. or its affiliates. All rights reserved.
Introduction

While moving to the cloud saves money as compared to on-premises IT delivery

models, organizations can make common mistakes that lead to unplanned cloud
costs. According to the 2019 State of the Cloud Report, managing cloud spending is
a challenge for 76 percent of the survey respondents and an average of 35 percent
of cloud spend is wasted. In this guide, you will learn how you can avoid some of the
most common pitfalls that can drive up cloud spending waste. Then, you will review
the latest AWS tools and suite of cost optimization services and solutions to help
new customers plan a TCO business case and predict their future state with AWS.

This guide details the cost optimization tools customers can use with the AWS Cloud,
to scale usage up and down based on demand, track usage, and lower the TCO of
their AWS cloud deployments. By using the best practices, tools and services, and
approaches outlined in this guide, customers can achieve cost optimization and
invest their savings in greater innovation. Explore the embedded assets throughout
this guide to get deeper insights, customer testimonials, and additional guidance.

Learn More
View The Webinar

Wade’s webinar:
Best Practices in Cloud Cost
Optimization and Financial Management

© 2020, Amazon Web Services, Inc. or its affiliates. All rights reserved.
Common Cost Optimization Challenges

Cloud cost optimization is the process of reducing overall cloud spending by

identifying mismanaged resources, eliminating waste, reserving capacity for
higher discounts, and “right sizing” services to scale. The easiest way to optimize
cloud costs is to look for unused or unattached resources. For example, often an
administrator might “spin up” a temporary compute instance to perform a function
and forget to turn it off when the job is complete. AWS estimates that by using
automated instance scheduling customers can lower costs by up to 70 percent by
shutting down non-production instances outside of work hours. Below are some of
the most common oversights customers make, that drive up their cloud costs.

1. Orphaned resources – Customers mistakenly avoid a pay-as-you-go model

and setup compute or storage instances without using AWS Auto Scaling
or other AWS automation and monitoring tools. This is quite common with
application testing and development environments given their temporary
nature. However, it is common for customers to have large storage pools or
database workloads database orphaned and consuming valuable financial
resources. Without the proper monitoring tools, these rogue instances can
live on indefinitely, negatively affecting your bottom line.

Learn More
View the partner webinar

Mastering AWS Cloud Cost Optimization

in Six Steps

“We had a customer that had a huge number of unattached

Amazon EBS volumes. When I say huge, we’re talking volumes
costing $20,000 to $30,000 per month that nobody was using.
That’s where Onica’s Cloud Optimizer™ comes in, it helps you
identify idle and unused resources.”

Timothy Fox, VP of Managed Services, Onica, an AWS Partner

2. Misconfigured storage resources – Storage can cause a few pitfalls for

customers. Customers forget to release their storage resources from their
compute instances, and their storage costs continue even if they terminate
the compute instances. Another common mistake is the association of data
types and storage class. Often customers allocate warm or cold storage into
local or pools of higher-performing data storage. Right sizing storage by
data type and usage can reduce your associated costs by up to 50 percent.

Learn More
Read The Case Study
Safeguarding Oxford University’s
Global Heritage Collections with AWS

© 2020, Amazon Web Services, Inc. or its affiliates. All rights reserved.
 3. Over-provisioned resources – Right sizing is the process of matching
compute instance types and sizes to performance and capacity requirements
at the lowest possible cost. A key cloud cost optimization priority includes
identifying these instances and consolidating computing jobs into fewer or
smaller instances. In the days of on-premises data centers, administrators
often wanted to operate at low utilization rates or would over provision,
so they would have capacity for a spike in traffic. Instead, AWS offers
automatic scaling, load balancing, and on-demand capabilities (AWS Auto
Scaling, Elastic Load Balancing, and On-Demand Instances) that allow
customers to scale up or down, automatically, anytime, as needed. By right
sizing workloads and using automation, AWS customers have seen up to 36
percent in cost savings. Here are two scenarios for consideration:
a. Horizontal over scaling: The use of too many resources when fewer
would do the job.
b. Vertical over scaling: Running the right amount—but the wrong type—
of resources. These are larger than what’s needed with regards to sizing.

4. Incorrect pricing plans - Many organizations do not use the cloud pricing
plans that best align to their usage requirements. Often organizations are
not aware of their specific usage requirements or their service provider’s
unique pricing options. Without active management and the right tools, it
is difficult to predict your usage requirements and understand what cloud
resources you must purchase the correct pricing plan for your business.
AWS offers many pricing models such as Spot Instances, which allow you to
request spare Amazon EC2 computing capacity for up to 90 percent off the
On-Demand price. Reserved Instances provide a significant discount (up to
40 percent savings for 1 year) compared to On-Demand pricing and are ideal
for workloads with steady or predictable usage. Lastly, AWS Savings Plans
is a flexible pricing model that provides savings of up to 72 percent on your
AWS compute usage. Learn more about these, cost saving, pricing models.

Learn More
Read The Case Study
ST Unitas is an EdTech company founded in 2010.
The organization cut 60 percent of expenses thanks
to the implementation of Reserved Instances.

Learn More
Read The Case Study
ST Unitas is an EdTech company founded in 2010.
The organization cut 60 percent of expenses thanks
to the implementation of Reserved Instances.

© 2020, Amazon Web Services, Inc. or its affiliates. All rights reserved.
 5. Overlooking newer technologies – AWS frequently updates its services
with new features or launches a new and innovative services. These new
technologies enable greater productivity. However, they help reduce
operational costs and cloud spend. For example, AWS recently previewed
Amazon EC2 instances built on the AWS Graviton family of CPUs based on
ARM technology and architectures. These new instances will deliver up to
40 percent better price performance over comparable current generation
instances for a broad spectrum of workloads such as application servers,
microservices, video encoding, high performance computing, electronic
design automation, open source databases, in-memory caches, and CPU-
based machine learning inference. If you are looking for improved compute
economics built on a traditional x86 architecture, then AWS’s AMD-based
solutions can reduce your compute and memory costs by up to 10 percent.
Customers may also benefit from re-platforming their existing deployments
with newer cloud services. For example, a customer could replace their
hosted monitoring services with Amazon CloudWatch, a monitoring and
observability service that provides you with data and actionable insights to
monitor your applications, respond to system-wide performance changes,
optimize resource utilization, and get a unified view of operational health.
In the webinar below, hear from AWS solution architects on how re-
platforming or implementing a cloud native architecture from the onset can
help improve performance and reduce costs. View the webinar below to get
deeper insights.

Learn More
View The Webinar

Architecting for Cost Optimization on AWS

AWS Cost Optimization and TCO

Services

AWS provides a set of out of the box cost management tools to help you manage,
monitor, and, ultimately, optimize your costs. To get started, identify someone
to set the standard for cloud excellence in your organization, begin using cost
management tools, and define and track against a set of cost-related benchmarks
for cost optimization. As your cost management capabilities grow, you can begin to
use more advanced metrics, set budgets and alerts, and use advanced analytics to
identify additional savings opportunities. Below is a summary of the key services and
solutions offered by AWS to help you manage your cloud spend. Click on the service
to learn more.

© 2020, Amazon Web Services, Inc. or its affiliates. All rights reserved.
 Since 2013, AWS customers have viewed over 2.6 million
best-practice recommendations and realized over $300M
by using AWS Cloud cost optimization tools. AWS Trusted
Advisor is an online tool that provides you real time
guidance to help you provision your resources following
AWS AWS best practices. Trusted Advisor helps optimize
Trusted your entire AWS infrastructure to increase security and
Advisor performance, reduce your overall costs, and monitor
service limits.

r
AWS Cost Explorer helps visualize, understand, and
manage your AWS costs and usage over time. A set of
default reports are included to help you quickly gain
insight into your cost drivers and usage trends. Use
forecasting to get a better idea of your what your costs
AWS Cost and usage may look like in the future.
Explorer

AWS Budgets gives you the ability to set custom budgets

that alert you when your costs or usage exceed (or are
forecasted to exceed) your budgeted amount. You can
also use AWS Budgets to set reservation utilization or
coverage targets and receive alerts when your utilization
AWS drops below the threshold you define. AWS Budgets
Budgets supports alerts for Amazon EC2, Amazon RDS, Amazon
Redshift, Amazon ElastiCache, and Amazon ElasticSearch
reservations.

The AWS Cost & Usage Report contains the most

comprehensive set of AWS cost and usage data available,
including additional metadata about AWS services, pricing,
and reservations (e.g., Amazon EC2 Reserved Instances
[RIs]). The AWS Cost and Usage Report lists AWS usage
for each service category used by an account and its AWS
AWS Cost Identity and Access Management (IAM) users in hourly or
daily line items, as well as any tags that you have activated
and Usage for cost allocation purposes. You can also customize the
Report AWS Cost & Usage Report to aggregate your usage data to
the daily or hourly level.

To assist potential customers with planning a migration,

TSO Logic (an AWS company) provides the industry’s most
accurate data-driven TCO and cost modelling analysis, so
customers can plan for their ideal future state on AWS.
TSO Logic’s software ingests millions of data points from
the customer’s existing IT environment, including system
TSO age, technical configurations of all hardware and software,
compute and local storage utilization patterns, and even
Logic Windows licenses. By replacing guesswork with algorithmic
analysis, any customer can get a data-backed blueprint as
the foundation for their business case for AWS.

AWS recommends CloudChomp to all customers looking for

a third-party solution to help analyze their IT environment
and produce an accurate TCO assessment. CloudChomp
software dynamically connects to the AWS Pricing API
and analyzes your IT systems, virtual machines, and
Cloud software licenses for an accurate read of your utilization
Chomp and spending patterns. CloudChomp is ideal for Microsoft,
VMware, and bare-metal deployments.

© 2020, Amazon Web Services, Inc. or its affiliates. All rights reserved.
 How Trusted Advisor works

Cost Investigation
Optimization recommended

No problem
Performance detected

Action
Security
recommended

AWS Trusted Advisor

Fault Tolerance No problem
AWS Trusted Advisor scans your detected
AWS infrastructure, compares
As an AWS customer, you want it to AWS best practices in
the most value from your five categories, and provides Service limits No problem
invesrment. Trusted Advisor recommended actions. detected
can help.
Recommendations
& action links

Learn More
Watch The Video

In this My Architecture video,

discover how organizations can
use AWS Cost and Usage Reports
from Amazon S3, together with
Amazon Redshift using Lambda,
and run queries to create alerts and
dashboards based on their spend. This
allows for the real time identification
of any operational anomalies and the
ability to address them immediately.

Learn More
View The Video

Optimize Your AWS Cloud Costs With

Trusted Advisor: A Technical Walkthrough
Of The Service and Console

TCO and Migration Planning

Throughout this guide, we have discussed the importance of cost optimization with
AWS to help reduce your cloud spending waste. However, the optimal outcome is for
customers to migrate to AWS and put their best foot forward from the start. A TCO
analysis helps evaluate your on-premises IT costs and generate a realistic projection
of your future cloud costs. An in-depth TCO analysis will also provide you with a
detailed report to build your evidence-based business case for cloud migration.

© 2020, Amazon Web Services, Inc. or its affiliates. All rights reserved.
TSO Logic, an Amazon company, provides the industry’s most accurate data-driven
analysis of TCO and cost modelling for your ideal future state. TSO Logic’s software
ingests millions of data points from your current environment, including age,
generation, and configuration of all hardware and software, in addition to each
instance’s historical utilization. TSO Logic’s predictive analytics provide insights on
an ongoing basis you are running each application in the best place with the right
software and at the lowest TCO—even as your environment, cloud options, and
prices change. TSO Logic will help you build a clear business case to accelerate your
migration planning.

Value of TSO Logic Software and

Microsoft Workload Migration to AWS:

37% 88%

36 percent cost savings by 88 percent cost savings when

helping customers right size their moving SQL Server with BYOL
workloads to AWS services

43% 22%

43 percent cost savings when moving 22 percent cost savings with moving
Windows Server with BYOL MSDN workloads with BYOL

Learn More
Read The Blog

Using TSO Logic Data Analytics and Data

Modeling to Demonstrate Cost Advantages
of AWS Cloud Migration

Learn More
View The Video

Get Started On Your Migration Business Case

© 2020, Amazon Web Services, Inc. or its affiliates. All rights reserved.
CloudChomp, a widely used third-party Migration Competency Partner, provides the
fastest and most intuitive agentless financial analysis tool. In most cases there is no
cost to the customer to use CloudChomp. Most manual work is eliminated and they
are connected to the AWS Pricing API so you can count on your results to be accurate
and up to date with your live data and AWS pricing. CloudChomp’s CC Analyzer
combines TCO, SQL license planning, application discovery, deep dive storage,
machine dependency mapping and VMC estimates into one discovery tool allowing
you to gain insights into your utilization and create an efficient migration plan; all
with a few clicks of a button. The interactive workspace allows customers, partners
and AWS employees to collaborate on pre-migration planning business cases and
create an unlimited number of dynamic scenarios. In many cases a complete TCO
and price comparison estimates are available within 24 hours from the simple and
agentless install. CloudChomp has analysed over 400 billion data points and shown
customers how to save 41% on average over traditional lift and shift strategies. To
learn more about CloudChomp, see the partner section and view their solution video
below.

How CloudChomp Addresses Questions

That Affect Your TCO

60 Min. Install 24 Hr Results* 41% Avg. Savings

*In most cases

What does Cloud Chomp have? What applications are running

Agentless Pre-migration on which machines?
Transformation Tools Application Discovery

What does it cost to operate on- What should I move to

premises? AWS first?
On-Premises TCO based on live Machine Dependency Mapping
assets and custom assumptions that provides a complecityscore

What will it cost on AWS? What is the cost to migrate?

AWS RIght-Sized Pricing Options Migration Planner (SOW Calculator)

What are my SQL licensing options? What are my storage options?

SQL License Planner Deep Dive Storage

Learn More
View The Video

Cloud Economics in a box

Learn More
Read The Solution Brief

CloudChomp Overview

© 2020, Amazon Web Services, Inc. or its affiliates. All rights reserved.
At AWS we have our four-phase migration process, which we designed to help any
organization, regardless of size or migration scope. While each phase is a common
component of a successful migration, they are not discrete phases but rather an
iterative process. As you migrate more workloads, you can drive repeatability and
predictability in processes and procedures and find that the migration process
accelerates. Our comprehensive portfolio of AWS migration tools and our mature
third-party migration tooling ecosystem provides automation and intelligent
recommendations based on Amazon Machine Learning (Amazon ML) to simplify
and accelerate each step of the four-phase migration process.

AWS Migration Process

Assessment Readiness and Migrations Operations and

Planning Optimizations

Start your journey today by taking a complimentary cloud adoption readiness

assessment. The online AWS Cloud Adoption Readiness Tool (CART) lets
organizations quickly assess their migration readiness by answering 16 questions
across key perspectives: business, people, process, platform, operations, and
security. Once you complete a CART survey, you receive a detailed report, which
includes a heat map with detailed scoring information and resources to help you
improve your migration readiness. This report will help you plan and communicate
next steps with your stakeholders. You can review a sample CART report. As you
progress through your journey, don’t forget that you can request assistance and
guidance from AWS Professional Services, APN Partners, or AWS Cloud economics
experts. Customers have unlocked costs savings between 33-58 percent by
engaging with AWS cost-optimization experts. You can, too. Ask your AWS account
manager to setup an introductory consultation.

Software and Integration Partners

Onica is the cloud native

services company leading the
most complex technology projects
in the world.

Onica is the cloud native services company leading the most complex technology projects
in the world. They use the innovative capabilities of the cloud to help customers build new
revenue streams, increase efficiency, and deliver incredible experiences. Onica started with
the vision that cloud computing would change the world and AWS would power that change.
With that belief, they assembled a team of passionate technologists that were big believers
in this new mindset and honed their skills. Today, Onica delivers technology services focused
on cloud adoption and cost optimization, data engineering and science, artificial intelligence,
serverless application development, application modernization, and the Internet of Things
(IoT). For more information, visit Onica’s website and download the guide: Mastering AWS
Cost Optimization in Six Steps.

© 2020, Amazon Web Services, Inc. or its affiliates. All rights reserved.
 CloudChomp, Inc. is a
cloud migration tools
company helping organizations
take a bite out of 21st century
computing and IT costs.

CloudChomp, Inc. is a cloud migration tools company helping organizations take a bite
out of 21st century computing and IT costs, turning bits and bytes into dollars and cents.
CloudChompwas founded with the mission of accelerating right-sized migration to AWS
and eliminating the waste associated with manual and expensive assessment processes.
They built the platform on and highly optimized for AWS. Two veteran software executives
who have built and created exits for four other software companies founded the company.
For more information, visit CloudChomp’s website.

CloudCheckr was
founded in 2011
and has over 5,000 users
across the globe.

CloudCheckr was founded in 2011 and has over 5,000 users across the globe, ranging
from hot startups and large Fortune 500 enterprises to government agencies and leading
managed service providers. They manage over $1 billion USD in annual AWS spend and
pride ourselves on helping our customers turbocharge their cloud adoption. CloudCheckr’s
cost management software generates the largest possible savings with predictive analytics
and actionable resource purchasing recommendations. Actionable insights pinpoint wasted
resources, provide resource re-sizing recommendations, and optimize every dollar across
AWS. For more information, visit CloudCheckr’s website.

© 2020, Amazon Web Services, Inc. or its affiliates. All rights reserved.
Conclusion
The cloud offers tremendous opportunity for increased agility, faster innovation, and lower
TCO. The organizations that are most successful in moving from on-premises environments
to the cloud are those that establish a well-defined strategy for approaching this new IT
operating model early in their journey. Moving from a model of large upfront investment in
data centers to the consumption-based model of AWS requires changes to tools, processes,
and mindsets to make sure your team effectively manages costs. The key to optimizing
costs with AWS is to start early. Although many cost-optimization practices can be easy
to implement in small environments, organizations need new operational best practices,
automation, and organizational incentives to be successful at scale. Establishing these best
practices early in the journey can help define the right processes and behaviors.

AWS is dedicated to supporting customers’ cloud journeys and empowering them

to maximize value from their investments, improve forecasting accuracy and cost
predictability, create a culture of ownership and cost transparency, and continuously
measure optimization status. The potential of cost optimization in the cloud is ultimately
unlocked through a cultural commitment to the involvement of cross-functional teams.
AWS provides powerful tools to simplify these efforts, but organizational recognition and
commitment to the process are critical for success.

To learn more about the solutions that AWS provides to help you access, understand,
allocate, control, and optimize your AWS costs and usage, visit our new Cost Optimization
Help Center landing page and AWS Cost Management home page.

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Further Reading and Key Resources
Further reading
• Cost Management in the AWS Cloud whitepaper
• Right Sizing: Provisioning Instances to Match Workloads whitepaper
• AWS Cost Optimization Blog home page
• Cost Optimization On AWS Summit presentation
• IDC TCO Research Report
• How to Terminate Instances whitepaper
• Automating Elasticity with AWS Lambda
• Application Auto Scaling home page
• Amazon DynamoDB Auto Scaling whitepaper
• Understanding Consolidated Billing whitepaper

Additional resources
• AWS Cost Optimization Help Center landing page
• AWS Cost Management Sessions at AWS re:Invent 2019
• AWS Cost Optimization home page
• AWS Cloud Economics home page
• AWS Cloud Adoption Readiness Tool (CART)
• TSO Logic home page
• CloudChomp home page
• AWS Total Cost of Ownership (TCO) Calculators
• AWS Simple Monthly Calculator
• Professional Services home page
• The AWS Cloud Adoption Framework (AWS CAF)
• AWS Migration Acceleration Program (MAP)
• AWS Well-Architected Framework
• AWS Migration Readiness Guide

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