# Cost-effective resources
**Topics**
+ [COST 5 How do you evaluate cost when you select services?](cost-05.md)
+ [COST 6 How do you meet cost targets when you select resource type, size and number?](cost-06.md)
+ [COST 7 How do you use pricing models to reduce cost?](cost-07.md)
+ [COST 8 How do you plan for data transfer charges?](cost-08.md)
# COST 5 How do you evaluate cost when you select services?
Amazon EC2, Amazon EBS, and Amazon S3 are building-block AWS services. Managed services, such as Amazon RDS and Amazon DynamoDB, are higher level, or application level, AWS services. By selecting the appropriate building blocks and managed services, you can optimize this workload for cost. For example, using managed services, you can reduce or remove much of your administrative and operational overhead, freeing you to work on applications and business-related activities.
**Topics**
+ [COST05-BP01 Identify organization requirements for cost](cost_select_service_requirements.md)
+ [COST05-BP02 Analyze all components of the workload](cost_select_service_analyze_all.md)
+ [COST05-BP03 Perform a thorough analysis of each component](cost_select_service_thorough_analysis.md)
+ [COST05-BP04 Select software with cost-effective licensing](cost_select_service_licensing.md)
+ [COST05-BP05 Select components of this workload to optimize cost in line with organization priorities](cost_select_service_select_for_cost.md)
+ [COST05-BP06 Perform cost analysis for different usage over time](cost_select_service_analyze_over_time.md)
# COST05-BP01 Identify organization requirements for cost
Work with team members to define the balance between cost optimization and other pillars, such as performance and reliability, for this workload.
**Level of risk exposed if this best practice is not established:** High
## Implementation guidance
When selecting services for your workload, it is key that you understand your organization priorities. Ensure that you have a balance between cost and other Well-Architected pillars, such as performance and reliability. A fully cost-optimized workload is the solution that is most aligned to your organization’s requirements, not necessarily the lowest cost. Meet with all teams within your organization to collect information, such as product, business, technical, and finance.
**Implementation steps**
+ ** Identify organization requirements for cost: **Meet with team members from your organization, including those in product management, application owners, development and operational teams, management, and financial roles. Prioritize the Well-Architected pillars for this workload and its components, the output is a list of the pillars in order. You can also add a weighting to each, which can indicate how much additional focus a pillar has, or how similar the focus is between two pillars.
## Resources
**Related documents:**
+ [AWS Total Cost of Ownership (TCO) Calculator](https://aws.amazon.com/tco-calculator/)
+ [Amazon S3 storage classes](https://aws.amazon.com/s3/storage-classes/)
+ [Cloud products](https://aws.amazon.com/products/)
# COST05-BP02 Analyze all components of the workload
Verify every workload component is analyzed, regardless of current size or current costs. The review effort should reflect the potential benefit, such as current and projected costs.
**Level of risk exposed if this best practice is not established:** Low
## Implementation guidance
Perform a thorough analysis on all components in your workload. Ensure that balance between the cost of analysis and the potential savings in the workload over its lifecycle. You must find the current impact, and potential future impact, of the component. For example, if the cost of the proposed resource is \$110 a month, and under forecasted loads would not exceed \$115 a month, spending a day of effort to reduce costs by 50% (\$15 a month) could exceed the potential benefit over the life of the system. Using a faster and more efficient data-based estimation will create the best overall outcome for this component.
Workloads can change over time, and the right set of services may not be optimal if the workload architecture or usage changes. Analysis for selection of services must incorporate current and future workload states and usage levels. Implementing a service for future workload state or usage may reduce overall costs by reducing or removing the effort required to make future changes.
[AWS Cost Explorer](https://aws.amazon.com/aws-cost-management/aws-cost-explorer/) and the [AWS Cost and Usage Report](https://aws.amazon.com/aws-cost-management/aws-cost-and-usage-reporting/) (CUR) can analyze the cost of a Proof of Concept (PoC) or running environment. You can also use [AWS Pricing Calculator](https://calculator.aws/#/) to estimate workload costs.
**Implementation steps**
+ **List the workload components: **Build the list of all the workload components. This is used as verification to check that each component was analyzed. The effort spent should reflect the criticality to the workload as defined by your organization’s priorities. Grouping together resources functionally improves efficiency, for example production database storage, if there are multiple databases.
+ **Prioritize component list:** Take the component list and prioritize it in order of effort. This is typically in order of the cost of the component from most expensive to least expensive, or the criticality as defined by your organization’s priorities.
+ ** Perform the analysis:** For each component on the list, review the options and services available and chose the option that aligns best with your organizational priorities.
## Resources
**Related documents:**
+ [AWS Pricing Calculator](https://calculator.aws/#/)
+ [AWS Cost Explorer](https://aws.amazon.com/aws-cost-management/aws-cost-explorer/)
+ [Amazon S3 storage classes](https://aws.amazon.com/s3/storage-classes/)
+ [Cloud products](https://aws.amazon.com/products/)
# COST05-BP03 Perform a thorough analysis of each component
Look at overall cost to the organization of each component. Look at total cost of ownership by factoring in cost of operations and management, especially when using managed services. The review effort should reflect potential benefit, for example, time spent analyzing is proportional to component cost.
**Level of risk exposed if this best practice is not established:** Low
## Implementation guidance
Consider the time savings that will allow your team to focus on retiring technical debt, innovation, and value-adding features. For example, you might need to lift and shift your on-premises environment to the cloud as rapidly as possible and optimize later. It is worth exploring the savings you could realize by using managed services that remove or reduce license costs. Managed services remove the operational and administrative burden of maintaining a service, which allows you to focus on innovation. Additionally, because managed services operate at cloud scale, they can offer a lower cost per transaction or service.
Usually, managed services have attributes that you can set to ensure sufficient capacity. You must set and monitor these attributes so that your excess capacity is kept to a minimum and performance is maximized. You can modify the attributes of AWS Managed Services using the AWS Management Console or AWS APIs and SDKs to align resource needs with changing demand. For example, you can increase or decrease the number of nodes on an Amazon EMR cluster (or an Amazon Redshift cluster) to scale out or in.
You can also pack multiple instances on an AWS resource to enable higher density usage. For example, you can provision multiple small databases on a single Amazon Relational Database Service (Amazon RDS) database instance. As usage grows, you can migrate one of the databases to a dedicated Amazon RDS database instance using a snapshot and restore process.
When provisioning workloads on managed services, you must understand the requirements of adjusting the service capacity. These requirements are typically time, effort, and any impact to normal workload operation. The provisioned resource must allow time for any changes to occur, provision the required overhead to allow this. The ongoing effort required to modify services can be reduced to virtually zero by using APIs and SDKs that are integrated with system and monitoring tools, such as Amazon CloudWatch.
[Amazon RDS](https://aws.amazon.com/rds/), [Amazon Redshift](https://aws.amazon.com/redshift/), and [Amazon ElastiCache](https://aws.amazon.com/elasticache/) provide a managed database service. [Amazon Athena](https://aws.amazon.com/athena/), [Amazon EMR](https://aws.amazon.com/emr/), and [Amazon OpenSearch Service](https://aws.amazon.com/opensearch-service/) provide a managed analytics service.
[AMS](https://aws.amazon.com/managed-services/) is a service that operates AWS infrastructure on behalf of enterprise customers and partners. It provides a secure and compliant environment that you can deploy your workloads onto. AMS uses enterprise cloud operating models with automation to allow you to meet your organization requirements, move into the cloud faster, and reduce your on-going management costs.
**Implementation steps**
+ ** Perform a thorough analysis: **Using the component list, work through each component from the highest priority to the lowest priority. For the higher priority and more costly components, perform additional analysis and assess all available options and their long term impact. For lower priority components, assess if changes in usage would change the priority of the component, and then perform an analysis of appropriate effort.
## Resources
**Related documents:**
+ [AWS Total Cost of Ownership (TCO) Calculator](https://aws.amazon.com/tco-calculator/)
+ [Amazon S3 storage classes](https://aws.amazon.com/s3/storage-classes/)
+ [Cloud products](https://aws.amazon.com/products/)
# COST05-BP04 Select software with cost-effective licensing
Open-source software eliminates software licensing costs, which can contribute significant costs to workloads. Where licensed software is required, avoid licenses bound to arbitrary attributes such as CPUs, look for licenses that are bound to output or outcomes. The cost of these licenses scales more closely to the benefit they provide.
**Level of risk exposed if this best practice is not established:** Low
## Implementation guidance
The cost of software licenses can be eliminated through the use of open-source software. This can have significant impact on workload costs as the size of the workload scales. Measure the benefits of licensed software against the total cost to ensure that you have the most optimized workload. Model any changes in licensing and how they would impact your workload costs. If a vendor changes the cost of your database license, investigate how that impacts the overall efficiency of your workload. Consider historical pricing announcements from your vendors for trends of licensing changes across their products. Licensing costs may also scale independently of throughput or usage, such as licenses that scale by hardware (CPU-bound licenses). These licenses should be avoided because costs can rapidly increase without corresponding outcomes.
**Implementation steps**
+ ** Analyze license options: **Review the licensing terms of available software. Look for open-source versions that have the required functionality, and whether the benefits of licensed software outweigh the cost. Favorable terms will align the cost of the software to the benefit it provides.
+ ** Analyze the software provider: **Review any historical pricing or licensing changes from the vendor. Look for any changes that do not align to outcomes, such as punitive terms for running on specific vendors hardware or platforms. Additionally look for how they execute audits, and penalties that could be imposed.
## Resources
**Related documents:**
+ [AWS Total Cost of Ownership (TCO) Calculator](https://aws.amazon.com/tco-calculator/)
+ [Amazon S3 storage classes](https://aws.amazon.com/s3/storage-classes/)
+ [Cloud products](https://aws.amazon.com/products/)
# COST05-BP05 Select components of this workload to optimize cost in line with organization priorities
Factor in cost when selecting all components. This includes using application level and managed services, such as Amazon Relational Database Service ([Amazon RDS](https://aws.amazon.com/rds)), [Amazon DynamoDB](https://docs.aws.amazon.com/dynamodb/?id=docs_gateway), Amazon Simple Notification Service ([Amazon SNS](https://docs.aws.amazon.com/sns/?id=docs_gateway)), and Amazon Simple Email Service ([Amazon SES](https://docs.aws.amazon.com/ses/?id=docs_gateway)) to reduce overall organization cost. Use serverless and containers for compute, such as AWS Lambda, Amazon Simple Storage Service ([Amazon S3](https://docs.aws.amazon.com/s3/?id=docs_gateway))for static websites, and Amazon Elastic Container Service ([Amazon ECS](https://docs.aws.amazon.com/ecs/?id=docs_gateway)). Minimize license costs by using open source software, or software that does not have license fees: for example, Amazon Linux for compute workloads or migrate databases to [Amazon Aurora](https://docs.aws.amazon.com/rds/?id=docs_gateway).
**Level of risk exposed if this best practice is not established:** Low
## Implementation guidance
You can use serverless or application-level services such as [AWS Lambda](https://aws.amazon.com/lambda/), [Amazon Simple Queue Service (Amazon SQS)](https://aws.amazon.com/sqs/), [Amazon SNS](https://docs.aws.amazon.com/sns/?id=docs_gateway), and [Amazon SES](https://docs.aws.amazon.com/ses/?id=docs_gateway). These services remove the need for you to manage a resource, and provide the function of code execution, queuing services, and message delivery. The other benefit is that they scale in performance and cost in line with usage, allowing efficient cost allocation and attribution.
For more information on Serverless, refer to the [Well-Architected Serverless Application Lens whitepaper](https://docs.aws.amazon.com/wellarchitected/latest/serverless-applications-lens/welcome.html).
** Implementation steps**
+ ** Select each service to optimize cost: **Using your prioritized list and analysis, select each option that provides the best match with your organizational priorities.
## Resources
**Related documents:**
+ [AWS Total Cost of Ownership (TCO) Calculator](https://aws.amazon.com/tco-calculator/)
+ [Amazon S3 storage classes](https://aws.amazon.com/s3/storage-classes/)
+ [Cloud products](https://aws.amazon.com/products/)
# COST05-BP06 Perform cost analysis for different usage over time
Workloads can change over time. Some services or features are more cost effective at different usage levels. By performing the analysis on each component over time and at projected usage, the workload remains cost-effective over its lifetime.
**Level of risk exposed if this best practice is not established:** Low
## Implementation guidance
As AWS releases new services and features, the optimal services for your workload may change. Effort required should reflect potential benefits. Workload review frequency depends on your organization requirements. If it is a workload of significant cost, implementing new services sooner will maximize cost savings, so more frequent review can be advantageous. Another trigger for review is change in usage patterns. Significant changes in usage can indicate that alternate services would be more optimal. For example, for higher data transfer rates a direct connect service may be cheaper than a VPN, and provide the required connectivity. Predict the potential impact of service changes, so you can monitor for these usage level triggers and implement the most cost-effective services sooner.
**Implementation steps**
+ ** Define predicted usage patterns: **Working with your organization, such as marketing and product owners, document what the expected and predicted usage patterns will be for the workload.
+ ** Perform cost analysis at predicted usage:** Using the usage patterns defined, perform the analysis at each of these points. The analysis effort should reflect the potential outcome. For example, if the change in usage is large, a thorough analysis should be performed to verify any costs and changes.
## Resources
**Related documents:**
+ [AWS Total Cost of Ownership (TCO) Calculator](https://aws.amazon.com/tco-calculator/)
+ [Amazon S3 storage classes](https://aws.amazon.com/s3/storage-classes/)
+ [Cloud products](https://aws.amazon.com/products/)
# COST 6 How do you meet cost targets when you select resource type, size and number?
Ensure that you choose the appropriate resource size and number of resources for the task at hand. You minimize waste by selecting the most cost effective type, size, and number.
**Topics**
+ [COST06-BP01 Perform cost modeling](cost_type_size_number_resources_cost_modeling.md)
+ [COST06-BP02 Select resource type, size, and number based on data](cost_type_size_number_resources_data.md)
+ [COST06-BP03 Select resource type, size, and number automatically based on metrics](cost_type_size_number_resources_metrics.md)
# COST06-BP01 Perform cost modeling
Identify organization requirements and perform cost modeling of the workload and each of its components. Perform benchmark activities for the workload under different predicted loads and compare the costs. The modeling effort should reflect the potential benefit. For example, time spent is proportional to component cost.
**Level of risk exposed if this best practice is not established:** High
## Implementation guidance
Perform cost modeling for your workload and each of its components to understand the balance between resources, and find the correct size for each resource in the workload, given a specific level of performance. Perform benchmark activities for the workload under different predicted loads and compare the costs. The modelling effort should reflect potential benefit; for example, time spent is proportional to component cost or predicted saving. For best practices, refer to the *Review* section of the [Performance Efficiency Pillar whitepaper](https://docs.aws.amazon.com/wellarchitected/latest/performance-efficiency-pillar/review.html).
[AWS Compute Optimizer](https://aws.amazon.com/compute-optimizer/) can assist with cost modelling for running workloads. It provides right-sizing recommendations for compute resources based on historical usage. This is the ideal data source for compute resources because it is a free service, and it utilizes machine learning to make multiple recommendations depending on levels of risk. You can also use [Amazon CloudWatch](https://aws.amazon.com/cloudwatch/) and [Amazon CloudWatch Logs](https://docs.aws.amazon.com/AmazonCloudWatch/latest/logs/WhatIsCloudWatchLogs.html) with custom logs as data sources for right sizing operations for other services and workload components.
The following are recommendations for cost modelling data and metrics:
+ The monitoring must accurately reflect the end-user experience. Select the correct granularity for the time period and thoughtfully choose the maximum or 99th percentile instead of the average.
+ Select the correct granularity for the time period of analysis that is required to cover any workload cycles. For example, if a two-week analysis is performed, you might be overlooking a monthly cycle of high utilization, which could lead to under-provisioning.
**Implementation steps **
+ ** Perform cost modeling: **Deploy the workload or a proof-of-concept, into a separate account with the specific resource types and sizes to test. Run the workload with the test data and record the output results, along with the cost data for the time the test was run. Then redeploy the workload or change the resource types and sizes and re-run the test.
## Resources
**Related documents:**
+ [AWS Auto Scaling](https://aws.amazon.com/autoscaling/)
+ [Amazon CloudWatch features](https://aws.amazon.com/cloudwatch/features/)
+ [Cost Optimization: Amazon EC2 Right Sizing](https://docs.aws.amazon.com/awsaccountbilling/latest/aboutv2/ce-rightsizing.html)
+ [AWS Compute Optimizer](https://aws.amazon.com/compute-optimizer/)
# COST06-BP02 Select resource type, size, and number based on data
Select resource size or type based on data about the workload and resource characteristics. For example, compute, memory, throughput, or write intensive. This selection is typically made using a previous (on-premises) version of the workload, using documentation, or using other sources of information about the workload.
**Level of risk exposed if this best practice is not established:** Medium
## Implementation guidance
Select resource size or type based on workload and resource characteristics, for example, compute, memory, throughput, or write intensive. This selection is typically made using cost modelling, a previous version of the workload (such as an on-premises version), using documentation, or using other sources of information about the workload (whitepapers, published solutions).
**Implementation steps**
+ **Select resources based on data:** Using your cost modeling data, select the expected workload usage level, then select the specified resource type and size.
## Resources
**Related documents:**
+ [AWS Auto Scaling](https://aws.amazon.com/autoscaling/)
+ [Amazon CloudWatch features](https://aws.amazon.com/cloudwatch/features/)
+ [Cost Optimization: EC2 Right Sizing](https://docs.aws.amazon.com/awsaccountbilling/latest/aboutv2/ce-rightsizing.html)
# COST06-BP03 Select resource type, size, and number automatically based on metrics
Use metrics from the currently running workload to select the right size and type to optimize for cost. Appropriately provision throughput, sizing, and storage for services such as Amazon Elastic Compute Cloud (Amazon EC2), Amazon DynamoDB, Amazon Elastic Block Store (Amazon EBS) (PIOPS), Amazon Relational Database Service (Amazon RDS), Amazon EMR, and networking. This can be done with a feedback loop such as automatic scaling or by custom code in the workload.
**Level of risk exposed if this best practice is not established:** Low
## Implementation guidance
Create a feedback loop within the workload that uses active metrics from the running workload to make changes to that workload. You can use a managed service, such as [AWS Auto Scaling](https://aws.amazon.com/autoscaling/), which you configure to perform the right sizing operations for you. AWS also provides [APIs, SDKs](https://aws.amazon.com/developer/tools/), and features that allow resources to be modified with minimal effort. You can program a workload to stop-and-start an Amazon Elastic Compute Cloud(Amazon EC2) instance to allow a change of instance size or instance type. This provides the benefits of right-sizing while removing almost all the operational cost required to make the change.
Some AWS services have built in automatic type or size selection, such as [Amazon Simple Storage Service(Amazon S3) Intelligent-Tiering](https://aws.amazon.com/about-aws/whats-new/2018/11/s3-intelligent-tiering/). Amazon S3 Intelligent-Tiering automatically moves your data between two access tiers: frequent access and infrequent access, based on your usage patterns.
**Implementation steps**
+ ** Configure workload metrics: **Ensure you capture the key metrics for the workload. These metrics provide an indication of the customer experience, such as the workload output, and align to the differences between resource types and sizes, such as CPU and memory usage.
+ ** View rightsizing recommendations: **Use the rightsizing recommendations in AWS Compute Optimizer to make adjustments to your workload.
+ ** Select resource type and size automatically based on metrics: **Using the workload metrics, manually or automatically select your workload resources. Configuring AWS Auto Scaling or implementing code within your application can reduce the effort required if frequent changes are needed, and it can potentially implement changes sooner than a manual process.
## Resources
**Related documents:**
+ [AWS Auto Scaling](https://aws.amazon.com/autoscaling/)
+ [AWS Compute Optimizer](https://aws.amazon.com/compute-optimizer/)
+ [Amazon CloudWatch features](https://aws.amazon.com/cloudwatch/features/)
+ [CloudWatch Getting Set Up](https://docs.aws.amazon.com/AmazonCloudWatch/latest/monitoring/GettingSetup.html)
+ [CloudWatch Publishing Custom Metrics](https://docs.aws.amazon.com/AmazonCloudWatch/latest/monitoring/publishingMetrics.html)
+ [Cost Optimization: Amazon EC2 Right Sizing](https://docs.aws.amazon.com/awsaccountbilling/latest/aboutv2/ce-rightsizing.html)
+ [Getting Started with Amazon EC2 Auto Scaling](https://docs.aws.amazon.com/autoscaling/ec2/userguide/GettingStartedTutorial.html)
+ [Amazon S3 Intelligent-Tiering](https://aws.amazon.com/about-aws/whats-new/2018/11/s3-intelligent-tiering/)
+ [Launch an EC2 Instance Using the SDK](https://docs.aws.amazon.com/sdk-for-net/v2/developer-guide/run-instance.html)
# COST 7 How do you use pricing models to reduce cost?
Use the pricing model that is most appropriate for your resources to minimize expense.
**Topics**
+ [COST07-BP01 Perform pricing model analysis](cost_pricing_model_analysis.md)
+ [COST07-BP02 Implement Regions based on cost](cost_pricing_model_region_cost.md)
+ [COST07-BP03 Select third-party agreements with cost-efficient terms](cost_pricing_model_third_party.md)
+ [COST07-BP04 Implement pricing models for all components of this workload](cost_pricing_model_implement_models.md)
+ [COST07-BP05 Perform pricing model analysis at the master account level](cost_pricing_model_master_analysis.md)
# COST07-BP01 Perform pricing model analysis
Analyze each component of the workload. Determine if the component and resources will be running for extended periods (for commitment discounts), or dynamic and short-running (for Spot or On-Demand Instances). Perform an analysis on the workload using the Recommendations feature in AWS Cost Explorer.
**Level of risk exposed if this best practice is not established:** High
## Implementation guidance
AWS has multiple [pricing models](https://aws.amazon.com/pricing/) that allow you to pay for your resources in the most cost-effective way that suits your organization’s needs.
**Implementation steps**
+ ** Perform a commitment discount analysis:** Using Cost Explorer in your account, review the Savings Plans and Reserved Instance recommendations. To verify that you implement the correct recommendations with the required discounts and risk, follow the [Well-Architected labs](https://wellarchitectedlabs.com/cost/costeffectiveresources/).
+ **Analyze workload elasticity: **Using the hourly granularity in Cost Explorer, or a custom dashboard. Analyze the workload elasticity. Look for regular changes in the number of instances that are running. Short duration instances are candidates for Spot Instances or Spot Fleet.
+ [Well-Architected Lab: Cost Explorer](https://wellarchitectedlabs.com/Cost/Cost_Fundamentals/100_5_Cost_Visualization/Lab_Guide.html#Elasticity)
+ [Well-Architected Lab: Cost Visualization](https://wellarchitectedlabs.com/Cost/Cost_Fundamentals/200_5_Cost_Visualization/README.html)
## Resources
**Related documents:**
+ [Accessing Reserved Instance recommendations](https://docs.aws.amazon.com/awsaccountbilling/latest/aboutv2/ri-recommendations.html)
+ [Instance purchasing options](https://docs.aws.amazon.com/AWSEC2/latest/UserGuide/instance-purchasing-options.html)
**Related videos:**
+ [Save up to 90% and run production workloads on Spot](https://www.youtube.com/watch?v=BlNPZQh2wXs)
**Related examples:**
+ [Well-Architected Lab: Cost Explorer](https://wellarchitectedlabs.com/Cost/Cost_Fundamentals/100_5_Cost_Visualization/Lab_Guide.html#Elasticity)
+ [Well-Architected Lab: Cost Visualization](https://wellarchitectedlabs.com/Cost/Cost_Fundamentals/200_5_Cost_Visualization/README.html)
+ [Well-Architected Lab: Pricing Models](https://wellarchitectedlabs.com/Cost/CostEffectiveResources.html)
# COST07-BP02 Implement Regions based on cost
Resource pricing can be different in each Region. Factoring in Region cost helps ensure that you pay the lowest overall price for this workload.
**Level of risk exposed if this best practice is not established:** Medium
## Implementation guidance
When you architect your solutions, a best practice is to seek to place computing resources closer to users to provide lower latency and strong data sovereignty. For global audiences, you should use multiple locations to meet these needs. You should select the geographic location that minimizes your costs.
The AWS Cloud infrastructure is built around [Regions and Availability Zones](https://docs.aws.amazon.com/AWSEC2/latest/UserGuide/using-regions-availability-zones.html). A Region is a physical location in the world where we have multiple Availability Zones. Availability Zones consist of one or more discrete data centers, each with redundant power, networking, and connectivity, housed in separate facilities.
Each AWS Region operates within local market conditions, and resource pricing is different in each Region. Choose a specific Region to operate a component of or your entire solution so that you can run at the lowest possible price globally. You can use the [AWS Pricing Calculator](https://calculator.aws/#/) to estimate the costs of your workload in various Regions.
**Implementation steps**
+ ** Review Region pricing: **Analyze the workload costs in the current Region. Starting with the highest costs by service and usage type, calculate the costs in other Regions that are available. If the forecasted saving outweighs the cost of moving the component or workload, migrate to the new Region.
## Resources
**Related documents:**
+ [Accessing Reserved Instance recommendations](https://docs.aws.amazon.com/awsaccountbilling/latest/aboutv2/ri-recommendations.html)
+ [Amazon EC2 pricing](https://aws.amazon.com/ec2/pricing/)
+ [Instance purchasing options](https://docs.aws.amazon.com/AWSEC2/latest/UserGuide/instance-purchasing-options.html)
+ [Region Table](https://aws.amazon.com/about-aws/global-infrastructure/regional-product-services/)
**Related videos:**
+ [Save up to 90% and run production workloads on Spot](https://www.youtube.com/watch?v=BlNPZQh2wXs)
# COST07-BP03 Select third-party agreements with cost-efficient terms
Cost efficient agreements and terms ensure the cost of these services scales with the benefits they provide. Select agreements and pricing that scale when they provide additional benefits to your organization.
**Level of risk exposed if this best practice is not established:** Medium
## Implementation guidance
When you utilize third-party solutions or services in the cloud, it is important that the pricing structures are aligned to Cost Optimization outcomes. Pricing should scale with the outcomes and value it provides. An example of this is software that takes a percentage of savings it provides, the more you save (outcome) the more it charges. Agreements that scale with your bill are typically not aligned to Cost Optimization, unless they provide outcomes for every part of your specific bill. For example, a solution that provides recommendations for Amazon Elastic Compute Cloud(Amazon EC2) and charges a percentage of your entire bill will increase if you use other services for which it provides no benefit. Another example is a managed service that is charged at a percentage of the cost of resources that are managed. A larger instance size may not necessarily require more management effort, but will be charged more. Ensure that these service pricing arrangements include a cost optimization program or features in their service to drive efficiency.
**Implementation steps**
+ ** Analyze third-party agreements and terms:** Review the pricing in third party agreements. Perform modeling for different levels of your usage, and factor in new costs such as new service usage, or increases in current services due to workload growth. Decide if the additional costs provide the required benefits to your business.
## Resources
**Related documents:**
+ [Accessing Reserved Instance recommendations](https://docs.aws.amazon.com/awsaccountbilling/latest/aboutv2/ri-recommendations.html)
+ [Instance purchasing options](https://docs.aws.amazon.com/AWSEC2/latest/UserGuide/instance-purchasing-options.html)
**Related videos:**
+ [Save up to 90% and run production workloads on Spot](https://www.youtube.com/watch?v=BlNPZQh2wXs)
# COST07-BP04 Implement pricing models for all components of this workload
Permanently running resources should utilize reserved capacity such as Savings Plans or Reserved Instances. Short-term capacity is configured to use Spot Instances, or Spot Fleet. On-Demand Instances are only used for short-term workloads that cannot be interrupted and do not run long enough for reserved capacity, between 25% to 75% of the period, depending on the resource type.
**Level of risk exposed if this best practice is not established:** Low
## Implementation guidance
Consider the requirements of the workload components and understand the potential pricing models. Define the availability requirement of the component. Determine if there are multiple independent resources that perform the function in the workload, and what the workload requirements are over time. Compare the cost of the resources using the default On-Demand pricing model and other applicable models. Factor in any potential changes in resources or workload components.
**Implementation steps**
+ **Implement pricing models: **Using your analysis results, purchase Savings Plans (SPs), Reserved Instances (RIs) or implement Spot Instances. If it is your first RI purchase then choose the top 5 or 10 recommendations in the list, then monitor and analyze the results over the next month or two. Purchase small numbers of commitment discounts regular cycles, for example every two weeks or monthly. Implement Spot Instances for workloads that can be interrupted or are stateless.
+ **Workload review cycle:** Implement a review cycle for the workload that specifically analyzes pricing model coverage. Once the workload has the required coverage, purchase additional commitment discounts every two to four weeks, or as your organization usage changes.
## Resources
**Related documents:**
+ [Accessing Reserved Instance recommendations](https://docs.aws.amazon.com/awsaccountbilling/latest/aboutv2/ri-recommendations.html)
+ [EC2 Fleet](https://aws.amazon.com/blogs/aws/ec2-fleet-manage-thousands-of-on-demand-and-spot-instances-with-one-request/)
+ [How to Purchase Reserved Instances](https://aws.amazon.com/ec2/pricing/reserved-instances/buyer/)
+ [Instance purchasing options](https://docs.aws.amazon.com/AWSEC2/latest/UserGuide/instance-purchasing-options.html)
+ [Spot Instances](https://docs.aws.amazon.com/AWSEC2/latest/UserGuide/using-spot-instances.html)
**Related videos:**
+ [Save up to 90% and run production workloads on Spot](https://www.youtube.com/watch?v=BlNPZQh2wXs)
# COST07-BP05 Perform pricing model analysis at the master account level
Use Cost Explorer Savings Plans and Reserved Instance recommendations to perform regular analysis at the management account level for commitment discounts.
**Level of risk exposed if this best practice is not established:** Low
## Implementation guidance
Performing regular cost modeling ensures that opportunities to optimize across multiple workloads can be implemented. For example, if multiple workloads use On-Demand Instances, at an aggregate level, the risk of change is lower, and implementing a commitment-based discount will achieve a lower overall cost. It is recommended to perform analysis in regular cycles of two weeks to one month. This allows you to make small adjustment purchases, so the coverage of your pricing models continues to evolve with your changing workloads and their components.
Use the [AWS Cost Explorer](https://aws.amazon.com/aws-cost-management/aws-cost-explorer/) recommendations tool to find opportunities for commitment discounts.
To find opportunities for Spot workloads, use an hourly view of your overall usage, and look for regular periods of changing usage or elasticity.
**Implementation steps**
+ ** Perform a commitment discount analysis: **Using Cost Explorer in your account review the Savings Plans and Reserved Instance recommendations. To verify you implement the correct recommendations with the required discounts and risk, follow the Well-Architected labs.
## Resources
**Related documents:**
+ [Accessing Reserved Instance recommendations](https://docs.aws.amazon.com/awsaccountbilling/latest/aboutv2/ri-recommendations.html)
+ [Instance purchasing options](https://docs.aws.amazon.com/AWSEC2/latest/UserGuide/instance-purchasing-options.html)
**Related videos:**
+ [Save up to 90% and run production workloads on Spot](https://www.youtube.com/watch?v=BlNPZQh2wXs)
**Related examples:**
+ [Well-Architected Lab: Pricing Models](https://wellarchitectedlabs.com/Cost/Cost_Fundamentals/200_3_Pricing_Models/README.html)
# COST 8 How do you plan for data transfer charges?
Ensure that you plan and monitor data transfer charges so that you can make architectural decisions to minimize costs. A small yet effective architectural change can drastically reduce your operational costs over time.
**Topics**
+ [COST08-BP01 Perform data transfer modeling](cost_data_transfer_modeling.md)
+ [COST08-BP02 Select components to optimize data transfer cost](cost_data_transfer_optimized_components.md)
+ [COST08-BP03 Implement services to reduce data transfer costs](cost_data_transfer_implement_services.md)
# COST08-BP01 Perform data transfer modeling
Gather organization requirements and perform data transfer modeling of the workload and each of its components. This identifies the lowest cost point for its current data transfer requirements.
**Level of risk exposed if this best practice is not established:** High
## Implementation guidance
Understand where the data transfer occurs in your workload, the cost of the transfer, and its associated benefit. This allows you to make an informed decision to modify or accept the architectural decision. For example, you may have a Multi-Availability Zone configuration where you replicate data between the Availability Zones. You model the cost of structure and decide that this is an acceptable cost (similar to paying for compute and storage in both Availability Zone) to achieve the required reliability and resilience.
Model the costs over different usage levels. Workload usage can change over time, and different services may be more cost effective at different levels.
Use [AWS Cost Explorer](https://aws.amazon.com/aws-cost-management/aws-cost-explorer/) or the [AWS Cost and Usage Report](https://aws.amazon.com/aws-cost-management/aws-cost-and-usage-reporting/) (CUR) to understand and model your data transfer costs. Configure a proof of concept (PoC) or test your workload, and run a test with a realistic simulated load. You can model your costs at different workload demands.
**Implementation steps**
+ ** Calculate data transfer costs: **Use the [AWS pricing pages](https://aws.amazon.com/pricing/) and calculate the data transfer costs for the workload. Calculate the data transfer costs at different usage levels, for both increases and reductions in workload usage. Where there are multiple options for the workload architecture, calculate the cost for each option for comparison.
+ ** Link costs to outcomes:** For each data transfer cost incurred, specify the outcome that it achieves for the workload. If it is transfer between components, it may be for decoupling, if it is between Availability Zones it may be for redundancy.
## Resources
**Related documents:**
+ [AWS caching solutions](https://aws.amazon.com/caching/aws-caching/)
+ [AWS Pricing](https://aws.amazon.com/pricing/)
+ [Amazon EC2 Pricing](https://aws.amazon.com/ec2/pricing/on-demand/)
+ [Amazon VPC pricing](https://aws.amazon.com/vpc/pricing/)
+ [Deliver content faster with Amazon CloudFront](https://aws.amazon.com/getting-started/tutorials/deliver-content-faster/)
# COST08-BP02 Select components to optimize data transfer cost
All components are selected, and architecture is designed to reduce data transfer costs. This includes using components such as wide-area-network (WAN) optimization and Multi-Availability Zone (AZ) configurations
**Level of risk exposed if this best practice is not established:** Low
## Implementation guidance
Architecting for data transfer ensures that you minimize data transfer costs. This may involve using content delivery networks to locate data closer to users, or using dedicated network links from your premises to AWS. You can also use WAN optimization and application optimization to reduce the amount of data that is transferred between components.
**Implementation steps**
+ **Select components for data transfer: **Using the data transfer modeling, focus on where the largest data transfer costs are or where they would be if the workload usage changes. Look for alternative architectures, or additional components that remove or reduce the need for data transfer, or lower its cost.
## Resources
**Related documents:**
+ [AWS caching solutions](https://aws.amazon.com/caching/aws-caching/)
+ [Deliver content faster with Amazon CloudFront](https://aws.amazon.com/getting-started/tutorials/deliver-content-faster/)
# COST08-BP03 Implement services to reduce data transfer costs
Implement services to reduce data transfer. For example, using a content delivery network (CDN) such as Amazon CloudFront to deliver content to end users, caching layers using Amazon ElastiCache, or using AWS Direct Connect instead of VPN for connectivity to AWS.
**Level of risk exposed if this best practice is not established:** Low
## Implementation guidance
[Amazon CloudFront](https://aws.amazon.com/cloudfront/) is a global content delivery network that delivers data with low latency and high transfer speeds. It caches data at edge locations across the world, which reduces the load on your resources. By using CloudFront, you can reduce the administrative effort in delivering content to large numbers of users globally, with minimum latency.
[Direct Connect](https://aws.amazon.com/directconnect/) allows you to establish a dedicated network connection to AWS. This can reduce network costs, increase bandwidth, and provide a more consistent network experience than internet-based connections.
[Site-to-Site VPN](https://aws.amazon.com/vpn/) allows you to establish a secure and private connection between your private network and the AWS global network. It is ideal for small offices or business partners because it provides quick and easy connectivity, and it is a fully managed and elastic service.
[VPC Endpoints](https://docs.aws.amazon.com/vpc/latest/privatelink/concepts.html) allow connectivity between AWS services over private networking and can be used to reduce public data transfer and [NAT gateways](https://docs.aws.amazon.com/vpc/latest/userguide/vpc-nat-gateway.html) costs. [Gateway VPC endpoints](https://docs.aws.amazon.com/vpc/latest/privatelink/gateway-endpoints.html) have no hourly charges, and support Amazon Simple Storage Service(Amazon S3) and Amazon DynamoDB. [Interface VPC endpoints](https://docs.aws.amazon.com/vpc/latest/privatelink/create-interface-endpoint.html) are provided by [AWS PrivateLink](https://docs.aws.amazon.com/vpc/latest/privatelink/privatelink-share-your-services.html) and have an hourly fee and per GB usage cost.
**Implementation steps**
+ ** Implement services: **Using the data transfer modeling, look at where the largest costs and highest volume flows are. Review the AWS services and assess whether there is a service that reduces or removes the transfer, specifically networking and content delivery. Also look for caching services where there is repeated access to data, or large amounts of data.
## Resources
**Related documents:**
+ [AWS Direct Connect](https://aws.amazon.com/directconnect/)
+ [AWS Explore Our Products](https://aws.amazon.com/)
+ [AWS caching solutions](https://aws.amazon.com/caching/aws-caching/)
+ [Amazon CloudFront](https://aws.amazon.com/cloudfront/)
+ [Deliver content faster with Amazon CloudFront](https://aws.amazon.com/getting-started/tutorials/deliver-content-faster/)