# Cost optimization
<a name="cost-optimization"></a>

 Cost optimization is a continual process of refinement and improvement over the span of a workload’s lifecycle. The practices in this paper help you build and operate cost-aware workloads that achieve business outcomes while minimizing costs and allowing your organization to maximize its return on investment. 

**Topics**
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# Design principles
](design-principles.md)
+ [

# Definition
](definition.md)

# Design principles
<a name="design-principles"></a>

 Consider the following design principles for cost optimization: 

 **Implement cloud financial management:** To achieve financial success and accelerate business value realization in the cloud, you must invest in Cloud Financial Management. Your organization must dedicate the necessary time and resources for building capability in this new domain of technology and usage management. Similar to your Security or Operations capability, you need to build capability through knowledge building, programs, resources, and processes to help you become a cost efficient organization. 

 **Adopt a consumption model:** Pay only for the computing resources you consume, and increase or decrease usage depending on business requirements. For example, development and test environments are typically only used for eight hours a day during the work week. You can stop these resources when they’re not in use for a potential cost savings of 75% (40 hours versus 168 hours). 

 **Measure overall efficiency:** Measure the business output of the workload and the costs associated with delivery. Use this data to understand the gains you make from increasing output, increasing functionality, and reducing cost. 

 **Stop spending money on undifferentiated heavy lifting:** AWS does the heavy lifting of data center operations like racking, stacking, and powering servers. It also removes the operational burden of managing operating systems and applications with managed services. This allows you to focus on your customers and business projects rather than on IT infrastructure. 

 **Analyze and attribute expenditure:** The cloud makes it easier to accurately identify the cost and usage of workloads, which then allows transparent attribution of IT costs to revenue streams and individual workload owners. This helps measure return on investment (ROI) and gives workload owners an opportunity to optimize their resources and reduce costs. 

# Definition
<a name="definition"></a>

 There are five focus areas for cost optimization in the cloud: 
+  Practice Cloud Financial Management 
+  Expenditure and usage awareness 
+  Cost-effective resources 
+  Manage demand and supplying resources 
+  Optimize over time 

 Similar to the other pillars within the Well-Architected Framework, there are trade-offs to consider for cost optimization. For example, whether to optimize for speed-to-market, or for cost. In some cases, it’s best to optimize for speed—going to market quickly, shipping new features, or meeting a deadline—rather than investing in upfront cost optimization. 

 Design decisions are sometimes directed by haste rather than data, and the temptation always exists to overcompensate, rather than spend time benchmarking for the most cost-optimal deployment. Overcompensation can lead to over-provisioned and under-optimized deployments. However, it may be a reasonable choice if you must “lift and shift” resources from your on-premises environment to the cloud and then optimize afterwards. 

 Investing the right amount of effort in a cost optimization strategy up front allows you to realize the economic benefits of the cloud more readily by ensuring a consistent adherence to best practices and avoiding unnecessary over provisioning. The following sections provide techniques and best practices for the initial and ongoing implementation of Cloud Financial Management and cost optimization for your workloads.