5 AWS Cloud Cost Optimization Strategies and Tools

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Companies can save up to 65% on their AWS bills by implementing cost optimization strategies.

And as AWS continues to be the largest cloud services provider, holding a jaw-dropping 34% market share, looking for the best ways to implement its powerful capabilities has never been more important. To make sure you don’t empty your wallet when jumping into the trend, here are 5 powerful ways to optimize your AWS costs and save big bucks. Plus, we'll throw in a bonus by introducing five handy tools that you can start using right away to see some quick results on your IT budget.

Also Read: Cloud Cost Management Best Practices

AWS Cloud Cost Optimization Strategies

With so many options available, it can be easy to get lost in the digital clutter trying to figure out which strategies will work best for your business.

But, ignoring cost optimization can lead to wasted resources and money down the drain. 

So let’s jump right in with clear and actionable strategies for AWS cost optimization, that will help both big and small businesses save money in the long run.

Right-sizing EC2 Instances

EC2 instances are customizable virtual machines hosted in the cloud, and they help you run applications on Amazon’s infrastructure. 

It's crucial to right-size instances for AWS cost optimization since instances that are too large or too small will result in wasted resources. The software becomes secured by integrating it with cloud security software. 

AWS provides EC2 instance types optimized for specific use cases, varying in memory size, compute cores, local storage capacity, and network performance.

So, when selecting an instance type, consider your application's workload characteristics and budget.

To right-size EC2 instances, assess your workload needs, such as required CPU power and anticipated memory usage, and compare them with different instance types' features.

And don’t forget to check instance usage patterns and adjust sizes accordingly for data-driven AWS cost management and performance. 

There are useful tools that provide recommendations based on specific usage data, but we’ll cover them later.

By choosing the right EC2 instance type, utilization, and frequent log monitoring, you can manage AWS costs and even boost your performance in the cloud.

Benefits of right-sizing EC2 instances

Here are the main benefits you can expect from right-sizing: 

  • Lower AWS costs across all applications.
  • Improved performance on your cloud services.
  • Better security for businesses operating in the cloud.

We highly recommend that you take the time to thoroughly understand your workload needs and select the best option for you.

When you do that, you’ll immediately start to see results, as AWS' pay-as-you-go model enables organizations to scale up or down as needed without incurring extra costs. 

Underutilized applications can switch to smaller instance types, and scaling up to larger instance types can quickly meet increased demand without additional hardware.

Plus, virtual machines hosted on AWS cloud servers offer improved security and availability, benefiting from AWS' robust security protocols and state-of-the-art disaster recovery infrastructure.

Right-sizing is the first step for organizations that want to manage their costs without giving up performance.

Reserved Instances

Reserved Instances are pre-defined EC2 instances that can be purchased in advance for a significant discount compared to On-Demand Instances. 

They come in three options: 

  • Convertible, which offers great flexibility, as they can be exchanged for different instance configurations in the same family of EC2 instances.
  • Standard, ideal for applications with predictable workloads.
  • And Scheduled, best used for predictable periodic usage patterns.

All of these options can be purchased through the AWS Marketplace or an authorized reseller. 

Customers can access additional features such as upfront payments, cancellation policies, and support tools, including discounts on AWS Support plans and free technical assistance.

Overall, Reserved Instances offer a cost-effective way to commit to an instance configuration with a specific region and availability zone. 

They are ideal for businesses with predictable workloads or periodic usage patterns.

Benefits of using Reserved Instances

Reserved Instances provide cost savings over On-Demand Instances and increased flexibility. 

As we’ve seen, it’s a matter of figuring out which one works best for your company’s needs, depending on your usage.

Convertible Reservations offer flexibility in switching between instance families, while Standard Reservations provide more cost savings. Scheduled Reservations are ideal for consistent usage patterns.

Reserved Instances offer upfront or spread-out payments, easy cancellation policies, and access to support tools, including discounts on AWS Support plans and free technical assistance.

These are all great resources that can help organizations make better decisions and save money in the long run.

Spot Instances

These instances are available at a discounted rate and can be bid In real-time. 

Once again, figuring out if these instances are the right ones for you depends on how you use cloud services.

You should definitely consider them for workloads where interruptions can be handled, such as:

  • Batch processing jobs.
  • Distributed big data processing jobs.
  • Fault-tolerant applications.

Spot Instances offer cost savings of up to 90% compared to On-Demand pricing and provide additional capacity without the need to purchase Reserved Instances. 

In addition, with the bidding system, you’ll only pay for exactly what you need.

They also provide increased flexibility and scalability, allowing customers to scale up or down quickly depending on their resource requirements.

Here’s how the bidding system works:

Customers must bid on an instance type and specify how long they need it to run. If the bid exceeds the current spot price, the instance will continue to run until either it meets its billing hour limit or the spot price exceeds the customer's bid amount, at which point AWS terminates it.

Customers can manage their Spot Instances through EC2 Management Console or API calls, monitor usage patterns, and adjust bids accordingly to stay within budget. 

Spot Instance pricing provides an additional layer of insurance against price fluctuations.

Overall, Spot Instances are a great cost-saving option, as long as your business can work well with them.

Auto Scaling

Auto Scaling makes it easy to automatically scale Amazon EC2 instances up or down in response to changes in demand, so customers don’t have to worry about changes in workload or traffic.

This resource detects changes in demand, such as increased CPU utilization or incoming requests, and adjusts the number of EC2 instances accordingly, ensuring a consistent level of performance. 

Customers can set thresholds for when additional instances should be turned on or off, allowing them to take advantage of AWS cost savings by running only the required amount of EC2 instances at any given time. 

It also helps to ensure that customer applications are always available, even during periods of heavy usage. 

To configure Auto Scaling, customers must create a scaling plan consisting of scaling policies and launch configurations. The progress of the scaling plan can be monitored through the AWS Management Console, and notifications can be set up to alert customers of any scaling changes.

Benefits of using Auto Scaling

This is one of the most powerful strategies available for businesses working in the cloud, and if you’re still not using it, we highly recommend you start! 

It allows you to easily and quickly scale your applications up or down to meet changing demands, saving time and money on unnecessary server costs.

Customers can set thresholds for when Auto Scaling should turn on additional instances to maintain peak performance and ensure availability during peak times.

You’ll only ever be running the necessary EC2 instances at any given time, reducing costs associated with idle servers. 

Plus, all of these features can be easily monitored in the AWS Management Console.


CloudFormation is an AWS service that takes care of automating the creation and management of infrastructure resources within the cloud. 

Using a single configuration file called a «template», you can easily replicate complex architectures across multiple accounts or regions with just a few clicks. 

Templates can also be used to quickly launch new applications in production environments.

Customers can also customize each resource through parameters, and the stack feature allows for managing changes to cloud environments over time. 

Taking advantage of CloudFormation eliminates a lot of the manual work associated with managing cloud environments, saving time and money while ensuring optimal application performance.

Benefits of using CloudFormation

It’s the quickest way to simplify the management of complex cloud architectures, without most of the manual labor that is usually necessary.

With CloudFormation, customers can easily replicate environments across multiple accounts or regions and quickly launch new applications in production environments.

It also allows for accurate tracking of changes over time and integrates seamlessly with other AWS services. And you’ll have access to detailed metrics, graphs, and notifications for monitoring the progress of scaling plans and responding quickly if necessary.

AWS Cost Optimization Tools

As promised, we’ll now examine five highly recommended tools that can assist both large and small businesses in maximizing their use of AWS while also reducing costs.

AWS Cost Explorer

The perfect tool to get insights into your AWS metrics to help identify wasteful spending trends and opportunities for AWS cost savings. 

The dashboard allows users to view their total cost by month or year, drill down into specific services, and access AWS cost optimization recommendations. 

Advanced features like budget alerts, rightsizing recommendations, and cost allocation tags allow customers to better manage costs across multiple accounts.

Additionally, the Cost Explorer provides detailed analysis and insights into overall cloud spend, enabling users to optimize or remove unnecessary resources.

Best of all, you can view your cost and usage on the Cost Explorer interface for free!

AWS Trusted Advisor

How about having an expert with you at all times, giving you valuable insights?

AWS Trusted Advisor is a free service that helps customers optimize their AWS environment by providing recommendations for cost savings, security risks, and performance optimization opportunities.

It can help with:

  • Switching to reserve instances.
  • Deleting unused resources.
  • Turning on Multi-Factor Authentication.
  • Disabling root access for security improvements.
  • Utilizing Auto Scaling Groups.
  • Setting up CloudWatch alarms for performance optimization. 

Trusted Advisor also provides real-time alerts when changes or new resources are added to the customer's environment. 

It’s best used in conjunction with other AWS services such as CloudFormation and Cost Explorer for even more comprehensive cloud cost optimization strategies. 

There’s a powerful free version available, so any business can start using it to make better-informed decisions and save money.

AWS Budgets

As the name suggests, this is a tool for managing AWS cloud expenses with plenty of useful features.

Customers can create custom budgets and set alerts when they exceed spending limits, allowing them to track actual utilization versus the allocated budget across multiple accounts or projects. 

Detailed breakdowns of resource utilization are also available, including which services are consuming the most expenses over time. 

Advanced features such as reports, forecasts, and cost allocation tags provide greater visibility into cloud costs and enable better forecasting accuracy. 

If you’re looking for pinpoint precision when identifying areas of expenses that could be improved, this is the tool for you.

AWS Savings Plans

The main goal of this tool is to help you take advantage of steep discounts on your bills. 

By committing to an upfront payment for their compute usage, customers can save up to 72% compared with regular on-demand pricing. 

Savings plans are useful for predictable or fixed workloads such as web servers, application servers, or batch-processing jobs. 

They can be combined with Reserved Instances and Trusted Advisors for additional cost optimization.

Customers can also use AWS Savings Plans with Amazon EC2 Auto Scaling features such as Spot Instances, Predictive Scaling, Scheduled Scaling, and Dynamic Scaling. 

AWS Marketplace

A comprehensive platform that enables customers to discover and purchase software solutions from AWS partners.

With over 6500 products available, customers can quickly deploy software such as database management systems, analytics tools, and security technology to their existing cloud infrastructure.

The marketplace allows customers to filter products by category and provider type and provides detailed product descriptions and customer reviews for easy comparison. 

Additionally, the AWS Marketplace offers cost optimization opportunities through dedicated pricing plans and monthly billing options, helping customers save money while getting access to high-quality software solutions from trusted partners.


The AWS cost optimization strategies and tools that we shared in this article are all powerful ways that can help you save a serious amount of money.

Choosing the right ones for your business is a matter of fully understanding your cloud service needs and putting your money exactly where it will get the most returns.

If you have any insights or experiences with trying to optimize your AWS costs, we’d love to hear from you in the comments section below.

Also, don’t forget to share this article with anyone who could use some help with their AWS budget!

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