AWS Cost Optimization- Whitepaper

1. AWS Cost Optimization: Comprehensive Overview of Design Principles, Optimization Strategies, and Usage Awareness www.bacancytechnology.com

2. Table of Content 1. Abstract 1 2. Inroduction 2 3. AWS Cloud Architecture Design Principles 3 Cloud Financial Management • Embrace a Consumption Model • Reduce Expenses on Indifferent Heavy Lifting • Keep Track of Efficiency • Track Expenditure and Attribute them the right way • 4. Cloud Optimization Strategies 5 Cost Optimization Strategies for Compute • Cost Optimization Strategies for Storage • 5. AWS Pricing Concepts 8 Pay-As-You-Go • Payless Use More • Save When You Reserve • Free Usage Tier • 6. AWS Cost Management Tools 10 AWS Billing and Cost Management Dashboard • Cost Analytics • AWS Budgets •

3. Table of Content 12 7. AWS Cost Optimization Practices Turn off Unused Resources • Apt Storage Class: • Keeps Tabs on Service Usage: • Prioritize Reserve and Spot Instances • Pick the Right Instance • AWS Expenditure and Usage Awareness 14 8. Optimize Overtime • Review and Implement New Services • Conclusion 16 9.

4. Abstract Abstract Moving your on-premise architecture to the cloud is undoubtedly an excellent decision. It not only facilitates remote access to data and enterprise applications but, at the same time, eliminates the limitations posed by the traditional architecture. This is where the concept of AWS seems relevant. As one of the leading cloud solutions, AWS helps in the migration of enterprise applications to the cloud with ease. True that the above results in a better work environment and also boosts productivity, one thing that needs to be thought about is the cost incurred in making a move. Irrespective of whether a small enterprise or a big organization, the process of switching to the cloud infrastructure is intense both in terms of efforts and money. This paper deals with the latter. To be precise, we outline the cost of AWS migration, followed by the strategies to optimize and reduce the same. The paper is directed towards the CTOs, the CFOs, and the key stakeholders of an organization to understand what AWS cost optimization is and what measures do they need to undertake for its implementation. www.bacancytechnology.com 01

5. Introduction Introduction AWS cost optimization is more about the benefits offered and less about the cost. What this implies is that a cost-optimized workload is one that drives maximum output with minimal input or one that garners returns more than the investment or minimal investment. Optimization is a never-ending process helping business leaders to utilize resources to their best of ability without adding to the cost of operation. All of the methods adopted and the strategies implemented are done keeping in mind the need to minimize cost, and so optimization comes in. While the process is quite challenging as leaders are expected to predict future possibilities while they are actually in the middle of the procurement process, cost optimization is an important concept and must be adopted by all. Keeping this as the core of our discussion, let's get started. www.bacancytechnology.com 02

6. AWS Cloud Architecture Design Principles Design Principles For Your AWS Cloud Architecture Ideally, there are five different design principles with respect to cloud cost optimization. Leverage CFM CFM or Cloud Financial Management is one of the best ways to manage AWS cost-effectively. A research conducted by 451 Research Study found that nearly 56% of the cost can be eliminated if leaders implemented cloud financial management practices. No matter how small a change may be, it makes a huge difference and is for the good of the company. Hence, it is important for the organization to spare time and look for ways to set up a structure that adheres to cost account- ability. Measurement & Accountability Cost Optimization Architecture, Design & Service Selection Account Strategy Cost Visibility Match Supply with Demand Metric Tracking Pricing Models Tagging Strategy Resource type & sizing Planning & Forecasting Cloud Financial Operations Budgeting Automation & Tooling Business Planning Build the Cloud Team Cost Forecasting Establish Culture of Cost Accountability Usage Forecasting Govemance & Controls Procurement Strategy Training www.bacancytechnology.com 03

7. AWS Cloud Architecture Design Principles Embrace a Consumption Model Why pay for resources when you aren't using any of them? An excellent way to cut down on the unnecessary costs is by adopting a Consumption Model. What this implies is that you only pay for the resources that you use at a given point in time. If the test environment is used only for 12 hours a week, the billing is done for the said 12 hours and no more. This helps cut down costs dramatically Reduce Expenses on Indifferent Heavy Lifting Remember the amount you paid for the backend maintenance and management job? Or the charges levied for tasks such as racking, powering servers, etc.? Too much, isn't it? With AWS cloud solutions, you can simply ward off the expenditures on such heavy lifting jobs. Appar- ently, AWS does the job for you, helping you cut down unwanted expenses. Keep Track of Efficiency Imagine the cost of production being x, the cost of delivery y, and the output by z. Now, if (x+y) is greater than z, your business isn't doing well. Hence, it is important to keep tabs on each and every expense and then determine your overall efficiency. This helps attain a better view of your organization and its productivity. Track Expenditure and Attribute them the Right Way Finally, use AWS to identify the workload, its cost, and usage to attribute them in the best possible way. When your cost structure remains transparent, the IT team can better under- stand the expenses and take measures to reduce the same. www.bacancytechnology.com 04

8. Cloud Optimization Strategies Cloud Optimization Strategies: Why Do You Need Them? Do you know that a researcher from Stanford University published a report last year that stated only 20% of the organizations migrating their infrastructure to the cloud would benefit from it? And by benefit, we mean that they might witness a decline in their operational cost? Whether you agree to this or not, the facts put forward clearly indicate the above. But if cloud infrastructure adds to the expenses, why would organizations make a move? Let me tell you; they will definitely move to the cloud because it is not the process or the tech that costs them more. It is the reverse. When migrating to the cloud, organizations end up spending for services they actually need. This increases the overall cost and hence, they fall in the 80% of the companies that do not benefit from AWS cloud migration. The only way to get this done right is by looking up the cost optimization strategies. Many companies are already looking forward to it. Most Organizations Are Still Attempting to Optimize Their Cloud Strategies Cloud Maturity Level 3% Optimized 11% Managed 22% No Strategy 31% of oraganizations have Repeatable, Managed, or Optimized cloud strategies 17% Repeatable 22% of have no cloud strategy 28% Ad Hoc 19% Opportunistic www.bacancytechnology.com 05

9. Cloud Optimization Strategies When it comes to AWS, overspending is primarily done on storage and compute resources, and so the optimization strategies fall in two categories: 01 Cost Optimization Strategies for Compute Even if you think you have the most optimized cloud solution, compute is one area that always leaves room for improvement. To help you understand better, we here list the top seg- ments that call for optimization. Limit Under-utilized Instances: It is a known fact that you do not have a steady usage of instances at any point in time. They vary and dramatically. In order to optimize the cost, lead- ers recommend downsizing the instances. It is noted that even downsizing a single size of an instance leads to a reduction in 50% cost. Note that you can downsizing by more than one size, depending upon your usage and requirements. Switch off unused instances: Next, to limit or to downsize, we recommend you turn off the instances that are not used for long. Suppose that you have two instances but given a signifi- cant time period, the load can be handled by a single instance. Switching off the second instance will help you reduce the cost and optimize it at the same time. Prioritize Discounted Instances: The more the good and the longer, the better. What this means is that when you opt for more number of instances and for a longer period of time, the cost associated with the same decreases. For example, if you agree for s three-year commit- ment, the price here would be less than that of a year's engagement. Spot Instances on AWS: When moving your infrastructure to the AWS cloud, the EC2 instances are the best bet. They help reduce the expenses by 20%. Keep Data Transfer Cost Minimal: Imagine having your Object storage in location A and compute services in B. Now, the closer the two locations are, the cheaper is the data transfer cost. Either keep them within the same region or at least, as close as possible. www.bacancytechnology.com 06

10. Cloud Optimization Strategies Cost Optimization Strategies for Storage 02 Similar to the above, you now need to adopt strategies for optimizing the cost of storage. Having too much data and primarily redundant data only adds up to the storage cost. It is necessary that you filter all that you have in your system storage to minimize them and opti- mize them to save costs. Remove Unwanted Files: This apparently is the first step when consultants and cloud archi- tects work on the migration step. However, the process is not a one-time thing but needs to be done in repetition. Engineers can create programs that automate the process of removing unwanted data and files. Also, the time-lapse between two runs can be scheduled so as to keep the process running without requiring your attention. Shrink Data Size: Data compression is an effective way to store more in a given share of space. Compression algorithms such as LZ4 help you reduce the storage requirements, which can further optimize the overall cost of the AWS cloud solution. Clear Incompleted Uploads: Often, it so happens that while you were uploading a data of a file, the process was interrupted and stopped in between. Even though you might consider it to be of no use, the halfway upload ends up consuming your storage space. It is a good prac- tice to run operations on the above and clear all such half-done uploads. Strategize Cache Storage: Caching is one technique that improves the accessibility of the data. The ones that are used frequently move up the ladder and are stored in the in-memory for faster retrieval. Now, this not only improves the performance but also reduces the need for high-level storage space, benefitting you as a whole. www.bacancytechnology.com 07

11. AWS Pricing Concepts AWS Pricing Concepts There are organizations that have experienced Stellar growth post AWS migration, and there are enterprises that witnessed tremendous loss. True that the solution for both is the same; what differs is the manner in which the two implemented the same. While we have outlined certain strategies above, the next few sections are dedicated to the best practices, the cost management tools, and the pricing concept for the AWS solution. Following the bottom-up approach, we begin with the pricing structure of AWS. Precisely, there are four different concepts that fuel the pricing table. www.bacancytechnology.com 08

12. AWS Pricing Concepts Pay-As-You-Go: An excellent way to get started with your AWS solution, the pay-as-you-go model is one that gives you the flexibility to rent the infrastructure and pay for resources that you actually use. This turns CapEx to OpEx and eliminates every possibility of overcapacity. Payless Use More: Sounds too good to be true? Even if it does, Amazon goes to great lengths and provides huge discounts on instances to build your infrastructure. Users that spend more than $500k get bulky discounts, and enables organizations to meet their needs without spending much. For some, this is a complicated model, as the tiered pricing involves a bundle of features. However, organizations that have the ability to use the solution benefit a lot and, in the long run too. Save When You Reserve: Reserving instances for a longer time again acts as a plus. One of the best solutions and at the core of AWS is EC2. When you lease them for 1-3 years, you are liable to get discounts and offers. A similar concept is that of spot Instances, where you are given an instance when required and taken back when someone else demands it. The spot instance model is proven to reduce the cost by 60%, benefiting all. Free Usage Tier: For the ones that are just starting out and not sure if AWS migration is all they need to move to the cloud, Amazon offers a one-year free plan with some of its services. This is one way Amazon found its way to the industry and would continue to do so for a long. The plan helps eliminate risks while boosting the adoption rate of the solution. While the plan offers limited solutions, it is enough when someone is getting started and wished to test the solution before investing in it. www.bacancytechnology.com 09

13. AWS Cost Management Tools $ $ $ AWS Cost Management Tools Managing your cloud transformation cost is an important thing. Now that we are aware of the pricing structure of the AWS Platform, it isn't enough to get started with the solution. Optimiza- tion is not just about picking up the right plan but assessing and analyzing the performance so that additional strategies can be implemented to keep the cost minimal at all stages of the migration. This is where you would need to have a management tool. While there are an array of tools that can be used to track cost, we have narrowed down the same to the top three tools. www.bacancytechnology.com 10

14. AWS Cost Management Tools Transparency and Visibility: AWS Billing and Cost Management Dashboard The one and the top tool used for in cost management of AWS solution is the billing dash- board. The AWS billing and management dashboard can be accessed from the AWS Man- agement Console's main account. As you log in to the account, the home page or the landing page itself displays the dashboard. The same reveals all of the costs in a holistic manner. The dashboard also segments the different areas where the cost is spent. This way, you can better manage the spendings and optimize the cost. Informational Insights: Cost Analytics The AWS Cost Explorer is one tool that extracts the cost information for the last 12 months. This helps identify and watch trends that influence the cost of AWS solution. Besides render- ing insights on the monthly expenses, the tool further allows you to both filter and group data/features to build customized reports. Stay Notified: AWS Budgets: Set aside a budget and then track the expenses in an ad-hoc manner. From cost to usage, features, and data, you can track each and every money buck that you spare for the AWS solution. You can set thresholds so as to make sure that your final usage never exceeds the limit predefined. www.bacancytechnology.com 11

15. AWS Cost Optimization Practices for Reducing your Amazon Bill AWS Cost Optimization Practices for Reducing your Amazon Bill Here we present the top five practices one must adopt when seeking ways to optimize the cloud migration cost. 1. Turn off Unused Resources: We did mention the practice while we were discussing ways to optimize cost wasted on com- pute. Here again, we bring this up as developers tend to leave resources unattended for long. The ones that are no longer required or not in usage for quite a long time consume a lot of power and are billed heavily. It is important to shut down the resources that you are not using or will not use in the next hours of operation. 2. Apt Storage Class: Talking about the storage class of Amazon web services, there are a total of five different class- es. Now each of these has their share of perks, and the charges differ accordingly. What's important here is to understand and identify which storage class would be best for you. Once done, you can then invest in a particular one. Also, if required, you can switch to object lifecycle management to transfer data from one storage class to another as and when needed. This is, in fact, the best way to optimize the cloud cost of storage. 3. Keeps Tabs on Service Usage: The services that you pay for aren't necessarily all that you use. What we mean to say is that at times not all services are in usage. You might underutilize an instance and unknowingly pay for it as well. This is where you need to have tools that help you track, analyze, monitor, and opti- mize service usage. Trusted Advisor is one that notifies resources that are idle, whereas Cloud- watch is another tool that sets the alarm and even reacts to changes that account for wastage to optimize cost. www.bacancytechnology.com 12

16. AWS Cost Optimization Practices for Reducing your Amazon Bill 4. Prioritize Reserve and Spot Instances: An effective way to cut down the cost of cloud migration is to invest in instances for a longer time period. What this suggests is that instead of going for a yearly commitment, opt for 3 years. AWS provides huge discounts for instances that are reserved for a bigger time period. Following a similar concept, spot instances is another way to optimize cost. Here, an instance is allocated only when needed. Once your task is complete, the same instance is passed on to the one demanding for it. The cost here is pretty less as compared to other plans. 5. Pick the Right Instance: You can always stick to the best instance but doing that, you might run the risk of paying too much. Hence, the need to select the right instance. Fortunately, AWS provides an array of instances to select from. Sketch out your requirements and then move ahead to pick one that has maximum returns with minimal investment. One thing to keep in mind is that your require- ments never stay the same. You must analyze your system from time to time so as to ensure the best outcome. Here is the quick summary of the above: Right - Sizing your Instances Increase Elasticity Pick the Right Pricing Model Match usage to storage class Michanisms for Optimisation www.bacancytechnology.com 13

17. AWS Expenditure and Usage Awareness AWS Expenditure and Usage Awareness Organizations have multiple workloads, and each of these has their share of requirements. Under- standing each of the above is important and challenging. This is one area that dramatically influ- ences the cost of cloud migration. When you are well aware of the different segments within the organization that adds to the cloud cost, you are better positioned and can make sound decisions. As a matter of fact, the ability to accurately measure your expenses helps cut down unnecessary ones while increasing awareness. www.bacancytechnology.com 14

18. AWS Expenditure and Usage Awareness Optimize Overtime With time, AWS rolls out new features and services. It is an excellent practice to assess your existing infrastructure and then compare it with the new ones. If the latter appears to be cost-effective, the same needs to be implemented and fast. Review and Implement New Services The concept of reviewing and implementing new services works in tandem with the above idea of optimizing over time. The fact that AWS releases new features, we recommend leaders to design and develop a workload review process. Here, the existing infrastructure is tested against performance and is replaced with the new features, ensuring the final solution is cost-effective. However, you must realize that it is not essential for you to replace or implement the new services, given the old ones are 100% optimized. Review to be totally sure and, if required, make a move. www.bacancytechnology.com 15

19. Conclusion $ $ ... ... ? ? Conclusion It seems a lot to do? Apparently, it is! Migrating your on-premise architecture to the cloud plat- form isn't something that you do in a day or in a Jiffy. Moving to the cloud requires a standardized approach and even expert support. Bacancy Technology's AWS Certified Solutions Architects, dedicated professionals, and expert engineers are keen on redesigning the traditional business infrastructure to increase efficiency and add to productivity. We are your one-stop-shop AWS solution partner and will help you make a move with ease. Reach out to our experts or get in touch with our AWS Certified Solutions Architect to experience SysOps and SLA-driven cloud managed services www.bacancytechnology.com 16

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