AWS Cost Management: Tools, Tips, and Advanced FinOps Practices

As organizations increasingly shift to cloud computing, managing cloud costs emerges as a primary concern. The flexibility and scalability of platforms like Amazon Web Services (AWS) bring significant benefits but also introduce tremendous complexity in tracking and controlling expenses. The dynamic nature of cloud billing, with its myriad of services and pricing options, often leads to unexpected costs, making it challenging for organizations to stay within budget.

To address this, Amazon provides a range of free tools aimed at helping users understand and manage their AWS costs. These tools offer insights into spending patterns, facilitate budget tracking, and suggest optimization strategies. However, for many organizations, these basic tools are not enough. The need for more sophisticated, integrated solutions becomes apparent as businesses grow and their cloud environments become more complex—especially for organizations with a multi-cloud strategy.

In this article, we explore the importance of effective AWS cost management, the inherent challenges, and the available tools—from native AWS solutions to advanced third-party options. We will also provide practical tips and delve into advanced practices like leveraging unit economics to ensure you maximize the value of your cloud investments.

This is part of an extensive series of guides about DevOps. 

Table of Contents

1. Why Is AWS Cost Management So Important?
2. Challenges of Managing AWS Costs
3. Native AWS Cost Management Tools
4. Third-Party AWS Cost Management Tools
5. 6 Tips for Managing and Optimizing AWS Costs
6. Beyond the Basics: Leveraging Unit Economics for Advanced Cost Management

Why Is AWS Cost Management So Important? 

Without carefully managing AWS costs, it is impossible to detect wasteful spending and identify inefficiencies in cloud deployments. Organizations need to analyze usage and expenditure data to allocate financial resources more effectively. 

Additionally, cost management tools support proactive budget management. Organizations can set custom spending alerts to notify them before budgets are exceeded, ensuring that expenditures remain within predefined limits. This prevents cost overruns and aids in financial planning and forecasting, making the financial aspects of cloud management more predictable and manageable.

Challenges of Managing AWS Costs 

Managing the costs associated with AWS services can involve several challenges: 

• Understanding the AWS bill: Navigating and understanding AWS bills can be difficult due to their complexity and detail. Organizations frequently face challenges in decoding the usage and services charges, which are compounded by the sheer volume of services and pricing options AWS offers. This complexity can lead to oversight of billing errors or misjudged resource usage that inflates costs unnecessarily.
• Accurately forecasting AWS costs: Forecasting AWS costs accurately is challenging due to the dynamic nature of cloud services, where workloads can scale based on demand. Predicting future costs requires a deep understanding of current and projected usage patterns, which can fluctuate widely with business activities and market conditions. 
• Cost accountability issues: In organizations with multiple teams or divisions, assigning AWS costs can become complex, leading to accountability issues. Without clear visibility and attribution of expenses, it's challenging to understand which department or project is driving costs. 
• Reducing AWS costs: Optimizing the configuration and scaling of services to match workload requirements can significantly reduce costs, but this requires technical skill and effort. Managers must enforce policies that ensure teams are accountable for their cloud consumption and adhere to best practices for cost efficiency.
• Complexity of managing Elastic Kubernetes Service (EKS) costs: Managing costs for EKS introduces additional complexity due to the need to monitor and optimize multiple layers of resources. EKS involves not only the costs of the Kubernetes control plane but also the underlying EC2 instances, storage, and networking. Effective cost management requires detailed visibility into resource utilization within the EKS cluster.
• Managing AWS costs alongside other clouds: For organizations employing a multi-cloud strategy, managing AWS costs in conjunction with other providers like Azure and Google Cloud adds another layer of complexity, because each cloud provider has its own pricing models, billing structures, and cost management tools.
• Taking actionable decisions: Even with a wealth of data, many organizations find it difficult to take actionable decisions regarding AWS costs. This challenge can be alleviated by using budget groups, which categorize expenses based on projects, departments, or business units, and forecasting tools which predict future spending based on historical data.

Native AWS Cost Management Tools 

Billing and Cost Management Console

The AWS Billing and Cost Management Console is a central dashboard where users can view and manage their AWS costs and usage. It provides access to billing reports that break down expenses by service, geography, and linked accounts, enabling users to track spending patterns and make necessary adjustments. 

In addition to standard billing information, the console offers tools for budgeting and forecasts, alerts, and recommendations. Users can set custom spending limits, receive notifications when usage approaches or exceeds these limits, and explore ways to optimize costs based on AWS’s personalized suggestions.

Source: AWS

AWS Cost Explorer

AWS Cost Explorer is an analytic tool designed to help users visualize, understand, and manage their AWS spending and usage over time. With an easy-to-use interface, it allows for the creation of custom reports that detail past and projected expenditures in graphical formats. This helps in identifying trends, pinpointing cost drivers, and uncovering potential savings areas.

Cost Explorer also offers the capability to filter and aggregate data based on various parameters such as service, tags, or time periods. This makes it suitable for detailed cost analysis and planning, helping organizations make informed decisions on where to allocate resources.

Rightsizing recommendations

Within the Cost Explorer tool, AWS provides the Rightsizing Recommendations tool, which analyzes your current resource usage and suggests changes to your instances and services that could save money. These recommendations are based on your actual usage patterns and can include suggestions to scale down or terminate resources that are consistently underutilized.

AWS Budgets

AWS Budgets gives customers the ability to set specific budget limits and receive alerts when their usage or costs exceed or are projected to exceed their budgeted amount. This tool is useful for managing financial compliance and ensuring that spending does not spiral out of control. 

By defining expected cost and usage limits, organizations can align their cloud expenditures with their financial planning and operational objectives. AWS Budgets also integrates with other AWS cost management tools, providing a comprehensive view of financial performance and forecasts. 

Source: AWS

AWS Trusted Advisor

AWS Trusted Advisor is an online resource that scans your AWS environment and provides real-time recommendations concerning cost optimization, performance, security, and fault tolerance. By highlighting areas where resources are underutilized or improperly configured, it helps users reduce costs and improve system performance and security.

The tool provides actionable insights and guidelines that can lead to significant cost savings. For example, it suggests where Reserved Instances can be applied to reduce long-term costs, identifies idle resources that are wasting money, and recommends security enhancements that could prevent costly data breaches.

Source: AWS

AWS Cost Anomaly Detection

AWS Cost Anomaly Detection is a service that uses machine learning to monitor for unusual spikes in spending that may indicate misconfigurations, unintended deployments, or potential security issues. It automatically analyzes historical spending data to detect anomalies and alerts users through integrated notification services when irregular spending patterns occur.

Source: AWS

Related content: Read our guide to AWS cost monitoring

AWS CUDOS

AWS Cost and Usage Report (CUDOS) provides detailed insights into your AWS costs and usage. It consolidates billing data from all your AWS accounts into a single, customizable report, enabling a granular analysis of spending and resource consumption. Organizations can break down costs by dimensions such as service, account, region, and usage type. 

Source: AWS

Third-Party AWS Cost Management Tools

Finout

Finout offers a comprehensive suite of capabilities for AWS, designed to optimize and streamline cloud cost management. 

Key features of Finout:

• Virtual Tagging: Allows for enhanced visibility and control over AWS resource allocation. This capability enables users to create and manage virtual tags without modifying existing infrastructure, ensuring a more flexible and precise cost allocation process. 
• CostGuard: Enables waste detection across both AWS services and EKS (Elastic Kubernetes Service). Identifies unused or underutilized resources, providing actionable insights to reduce unnecessary expenses and optimize cloud usage. 

CloudCheckr is a cloud management platform from Spot by NetApp, designed to support large enterprises and managed service providers (MSPs). It aids in managing and reducing cloud costs, optimizing resources, and enhancing operational efficiencies. Additionally, CloudCheckr improves governance and helps strengthen cloud security and compliance.

Features of CloudCheckr:

• Actionable visibility: Provides insights into current and historical cloud spend, showing which services and resources are in use, by whom, and how they impact costs.
• Cost optimization: Identifies opportunities to right-size and rebalance instances and offers purchase recommendations for commitment discounts, potentially optimizing cloud spend by 30%.
• Resource efficiency: Tracks long-term resource consumption trends to detect waste and improve utilization, enabling quick responses to cost overruns.
• Accurate chargeback/showback: Allocates cloud consumption costs to the appropriate cost center, business unit, product line, project, or team, ensuring accountability.
• Security and compliance: Automatically identifies infrastructure misconfigurations and vulnerabilities to reduce risks and maintain compliance.

Source: CloudCheckr

Apptio Cloudability

Apptio Cloudability is a cloud management platform that enables IT, finance, and DevOps teams to collaboratively optimize cloud resources for speed, cost, and quality. It supports financial management, offering tools to establish budgets, forecast expenses, and correlate spending to business value, aiding strategic cloud investment decisions.

Features of Apptio Cloudability:

• Team budgeting and forecasting: Establishes accurate team budgets and tracks cloud spend, helping IT and finance teams manage their resources effectively.
• Business value correlation: Correlates cloud spending with business outcomes, empowering business leaders to make confident investment decisions.
• Anomaly and rightsizing alerts: Keeps DevOps and FinOps teams informed of cost anomalies and rightsizing opportunities by team, service, or project, allowing for proactive cost management.
• Full cost allocation: Ensures complete cost allocation, including containers and support charges, facilitating accurate chargeback of cloud costs to the business.

Source: Apptio

CloudHealth

CloudHealth provides a set of tools for cloud cost management, helping organizations gain visibility, optimize usage, and control costs across multi-cloud environments.

Features of CloudHealth:

• Cost Management: Offers detailed cost visibility, allocation, budgeting, and forecasting to track and control spending.
• Optimization: Identifies savings opportunities and optimizes resource use to reduce costs and improve efficiency.
• Governance and Security: Automates enforcement of compliance and security policies while providing continuous monitoring and alerts for risks and compliance issues.
• Reporting: Customizable dashboards and comprehensive reports deliver insights and support informed decision-making.
  
  Source: CloudHealth

6 Tips for Managing and Optimizing AWS Costs

Here are some of the measures that organizations can take to ensure effective cost management in AWS.

1. Right-Size Resources

Right-sizing AWS resources involves adjusting the allocation of AWS services to match the requirements of specific workloads precisely. Often, organizations over-provision resources to avoid performance issues, leading to unnecessary costs. Right-sizing ensures that you are using the most cost-effective resources for your needs, minimizing waste.

Regular performance monitoring and analysis are required to determine optimal resource levels. Adjusting instance sizes, and leveraging scalable services can lead to significant cost reductions and improved deployment efficiency. 

2. Leverage Auto Scaling

Auto-scaling is an AWS feature that automatically adjusts the number of instances in response to the demand to maintain performance and minimize costs. It ensures that you are running the right number of instances based on actual need, not estimations. By scaling resources up and down as required, you avoid overspending on underused resources during low demand and prevent performance issues during high demand.

Configuring auto-scaling correctly involves setting proper scaling policies based on predictable usage patterns and monitoring these to adjust as those patterns change. This helps in maintaining operational efficiency across applications and services.

3. Delete Unused Resources

Over time, organizations might accumulate idle instances, unattached storage volumes, or outdated snapshots that contribute to unnecessary charges. Regular audits can identify these resources, and removing them can lead to immediate cost savings.

Implementing policies that require frequent review and decommissioning of unused resources can reduce wastage. This practice cleans up your AWS environment and streamlines operations, making them more manageable and cost-efficient.

4. Use Reserved Instances and Savings Plans

Reserved Instances (RIs) and Savings Plans offer significant discounts compared to on-demand instance pricing, in exchange for committing to a specific usage level for a one or three-year term. These options are suited for workloads with predictable usage patterns and can reduce costs by up to 75 percent compared to on-demand rates.

When using RIs or Savings Plans, it is vital to perform detailed analysis to understand your usage patterns and ensure the most cost-effective commitment. Strategic planning and careful selection of terms and instance types are crucial to maximizing savings.

5. Use Spot Instances

Spot Instances allow users to purchase unused AWS capacity at steep discounts, which can save up to 90% compared to on-demand prices. However, these instances can be terminated at 2 minutes’ notice if AWS needs to reclaim the spare capacity. Therefore, these instances are suitable for flexible, interruption-tolerant applications such as batch processing, background processing, and fault-tolerant microservices.

6. Optimize Data Transfer

Data transfer costs can be a hidden source of expenses in AWS environments. Optimizing how data is transferred between services and regions can reduce expenditures. Techniques like selecting the right data storage locations and minimizing data movement can help in avoiding unnecessary data transfer charges. AWS services like CloudFront for content delivery and S3 Transfer Acceleration for faster data uploads can optimize data transfer processes.

Beyond the Basics: Leveraging Unit Economics for Advanced Cost Management

As organizations transition to a FinOps framework to manage cloud costs, they are discovering the concept of cloud unit economics. This concept helps organizations achieve the maximum return on their cloud investment by measuring marginal costs (unit cost metrics) and marginal revenue (unit revenue metrics). By understanding the difference between these two metrics, organizations can determine where their cloud operations break even and begin to generate profit.

Cloud unit economics supports FinOps by enabling data-driven business decisions about cloud investments. It involves quantifying the cloud's role in financial performance, forecasting profitability, and building plans for cost optimization. This approach also evaluates a product's future potential and drives responsible cloud resource use by end-users.

Organizations can use cloud unit economics to define and measure critical metrics such as: 

• Cost per transaction
• Cost per user
• Cost per customer

This type of analysis allows companies to understand and optimize their cloud expenditure in a way that actually impacts their bottom line. Cloud unit economics allows businesses to ensure cloud spend has a positive financial impact on the organization as a whole.