# 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
In most organizations, the information technology (IT) department is comprised of multiple small teams, each with its own agenda and focus area, that reflects the specialisies and skills of its team members. You need to understand your organization’s overall objectives, priorities, goals and how each department or project contributes to these objectives. Categorizing all essential resources, including personnel, equipment, technology, materials, and external services, is crucial for achieving organizational objectives and comprehensive budget planning. Adopting this systematic approach to cost identification and understanding is fundamental for establishing a realistic and robust cost plan for the organization.
When selecting services for your workload, it is key that you understand your organization priorities. Create a balance between cost optimization and other AWS Well-Architected Framework pillars, such as performance and reliability. This process should be conducted systematically and regularly to reflect changes in the organization's objectives, market conditions, and operational dynamics. 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 in your organization, such as product, business, technical, and finance to collect information. Evaluate the impact of tradeoffs between competing interests or alternative approaches to help make informed decisions when determining where to focus efforts or choosing a course of action.
For example, accelerating speed to market for new features may be emphasized over cost optimization, or you may choose a relational database for non-relational data to simplify the effort to migrate a system, rather than migrating to a database optimized for your data type and updating your application.
### 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 should be a list of the pillars in order. You can also add a weight to each pillar to indicate how much additional focus it has, or how similar the focus is between two pillars.
+ **Address the technical debt and document it:** During the workload review, address the technical debt. Document a backlog item to revisit the workload in the future, with the goal of refactoring or re-architecting to optimize it further. It's essential to clearly communicate the trade-offs that were made to other stakeholders.
## Resources
**Related best practices:**
+ [ REL11-BP07 Architect your product to meet availability targets and uptime service level agreements (SLAs) ](https://docs.aws.amazon.com/wellarchitected/latest/reliability-pillar/rel_withstand_component_failures_service_level_agreements.html)
+ [ OPS01-BP06 Evaluate tradeoffs ](https://docs.aws.amazon.com/wellarchitected/latest/operational-excellence-pillar/ops_priorities_eval_tradeoffs.html)
**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:** High
## Implementation guidance
Workload components, which are designed to deliver business value to the organization, may encompass various services. For each component, one might choose specific AWS Cloud services to address business needs. This selection could be influenced by factors such as familiarity with or prior experience using these services.
After identifying your organization's requirements as mentioned in [COST05-BP01 Identify organization requirements for cost](https://docs.aws.amazon.com/wellarchitected/latest/cost-optimization-pillar/cost_select_service_requirements.html), perform a thorough analysis on all components in your workload. Analyze each component considering current and projected costs and sizes. Consider the cost of analysis against any potential workload savings over its lifecycle. The effort expended on the analysis of all components of this workload should correspond to the potential savings or improvements anticipated from optimization of that specific component. For example, if the cost of the proposed resource is \$110 per month, and under forecasted loads would not exceed \$115 per month, spending a day of effort to reduce costs by 50% (five dollars per month) could exceed the potential benefit over the life of the system. Use a faster and more efficient data-based estimation to 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. For example, using EMR Serverless might be the appropriate choice initially. However, as consumption for that service increases, transitioning to EMR on EC2 could reduce costs for that component of the workload.
[AWS Cost Explorer](https://aws.amazon.com/aws-cost-management/aws-cost-explorer/) and the AWS Cost and Usage Reports ([CUR](https://aws.amazon.com/aws-cost-management/aws-cost-and-usage-reporting/)) 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.
Write a workflow to be followed by technical teams to review their workloads. Keep this workflow simple, but also cover all the necessary steps to make sure the teams understand each component of the workload and its pricing. Your organization can then follow and customize this workflow based on the specific needs of each team.
1. **List each service in use for your workload:** This is a good starting point. Identify all of the services currently in use and where costs are originate from.
1. **Understand how pricing works for those services:** Understand the [pricing model](https://aws.amazon.com/pricing/) of each service. Different AWS services have different pricing models based on factors like usage volume, data transfer, and feature-specific pricing.
1. **Focus on the services that have unexpected workload costs and that do not align with your expected usage and business outcome:** Identify outliers or services where the cost is not proportional to the value or usage by using AWS Cost Explorer or AWS Cost and Usage Reports. It's important to correlate costs with business outcomes to prioritize optimization efforts.
1. **AWS Cost Explorer, CloudWatch Logs, VPC Flow Logs, and Amazon S3 Storage Lens to understand the root cause of those high costs:** These tools are instrumental in the diagnosis of high costs. Each service offers a different lens to view and analyze usage and costs. For instance, Cost Explorer helps determine overall cost trends, CloudWatch Logs provides operational insights, VPC Flow Logs displays IP traffic, and Amazon S3 Storage Lens is useful for storage analytics.
1. **Use AWS Budgets to set budgets for certain amounts for services or accounts:** Setting budgets is a proactive way to manage costs. Use AWS Budgets to set custom budget thresholds and receive alerts when costs exceed those thresholds.
1. **Configure Amazon CloudWatch alarms to send billing and usage alerts:** Set up monitoring and alerts for cost and usage metrics. CloudWatch alarms can notify you when certain thresholds are breached, which improves intervention response time.
Facilitate notable enhancement and financial savings over time through strategic review of all workload components and irrespective of their present attributes. The effort invested in this review process should be deliberate, with careful consideration of the potential advantages that might be realized.
### Implementation steps
+ **List the workload components:** Build a list of your workload's components. Use this list to verify that each component was analyzed. The effort spent should reflect the criticality to the workload as defined by your organization's priorities. Group together resources functionally to improve efficiency (for example, production database storage, if there are multiple databases).
+ **Prioritize the 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 choose 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/)
+ [AWS Cloud products](https://aws.amazon.com/products/)
**Related videos:**
+ [AWS Cost Optimization Series: CloudWatch](https://www.youtube.com/watch?v=6imTJUGEzjU)
# COST05-BP03 Perform a thorough analysis of each component
Look at overall cost to the organization of each component. Calculate the total cost of ownership by factoring in cost of operations and management, especially when using managed services by cloud provider. 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:** High
## Implementation guidance
Consider the time savings that will allow your team to focus on retiring technical debt, innovation, value-adding features and building what differentiates the business. For example, you might need to lift and shift (also known as rehost) your databases from your on-premises environment to the cloud as rapidly as possible and optimize later. It is worth exploring the possible savings attained by using managed services on AWS that may remove or reduce license costs. Managed services on AWS remove the operational and administrative burden of maintaining a service, such as patching or upgrading the OS, and allow you to focus on innovation and business.
Since managed services operate at cloud scale, they can offer a lower cost per transaction or service. You can make potential optimizations in order to achieve some tangible benefit, without changing the core architecture of the application. For example, you may be looking to reduce the amount of time you spend managing database instances by migrating to a database-as-a-service platform like [Amazon Relational Database Service (Amazon RDS)](https://aws.amazon.com/rds/) or migrating your application to a fully managed platform like [AWS Elastic Beanstalk](https://aws.amazon.com/elasticbeanstalk/).
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 activate 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.
+ **Compare managed and unmanaged resources:** Consider the operational cost for the resources you manage and compare them with AWS managed resources. For example, review your databases running on Amazon EC2 instances and compare with Amazon RDS options (an AWS managed service) or Amazon EMR compared to running Apache Spark on Amazon EC2. When moving from a self-managed workload to a AWS fully managed workload, research your options carefully. The three most important factors to consider are the [type of managed service](https://aws.amazon.com/products/?&aws-products-all.q=managed) you want to use, the process you will use to [migrate your data](https://aws.amazon.com/big-data/datalakes-and-analytics/migrations/) and understand the [AWS shared responsibility model](https://aws.amazon.com/compliance/shared-responsibility-model/).
## 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/)
+ [AWS Cloud products](https://aws.amazon.com/products/)
+ [AWS Shared Responsibility Model ](https://aws.amazon.com/compliance/shared-responsibility-model/)
**Related videos:**
+ [ Why move to a managed database? ](https://www.youtube.com/watch?v=VRFdc-MVa4I)
+ [ What is Amazon EMR and how can I use it for processing data? ](https://www.youtube.com/watch?v=jylp2atrZjc)
**Related examples:**
+ [ Why to move to a managed database ](https://aws.amazon.com/getting-started/hands-on/move-to-managed/why-move-to-a-managed-database/)
+ [ Consolidate data from identical SQL Server databases into a single Amazon RDS for SQL Server database using AWS DMS](https://aws.amazon.com/blogs/database/consolidate-data-from-identical-sql-server-databases-into-a-single-amazon-rds-for-sql-server-database-using-aws-dms/)
+ [ Deliver data at scale to Amazon Managed Streaming for Apache Kafka (Amazon MSK) ](https://aws.amazon.com/getting-started/hands-on/deliver-data-at-scale-to-amazon-msk-with-iot-core/?ref=gsrchandson)
+ [ Migrate an ASP.NET web application to AWS Elastic Beanstalk](https://aws.amazon.com/getting-started/hands-on/migrate-aspnet-web-application-elastic-beanstalk/?ref=gsrchandson&id=itprohandson)
# 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
Open source originated in the context of software development to indicate that the software complies with certain free distribution criteria. Open source software is composed of source code that anyone can inspect, modify, and enhance. Based on business requirements, skill of engineers, forecasted usage, or other technology dependencies, organizations can consider using open source software on AWS to minimize their license costs. In other words, the cost of software licenses can be reduced through the use of [open source software](https://aws.amazon.com/what-is/open-source/). 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 optimize your 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.
For instance, operating an Amazon EC2 instance in us-east-1 with a Linux operating system allows you to cut costs by approximately 45%, compared to running another Amazon EC2 instance that runs on Windows.
The [AWS Pricing Calculator](https://calculator.aws/) offers a comprehensive way to compare the costs of various resources with different license options, such as Amazon RDS instances and different database engines. Additionally, the AWS Cost Explorer provides an invaluable perspective for the costs of existing workloads, especially those that come with different licenses. For license management, [AWS License Manager](https://aws.amazon.com/license-manager) offers a streamlined method to oversee and handle software licenses. Customers can deploy and operationalize their preferred open source software in the AWS Cloud.
### 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 align the cost of the software to the benefits 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 perform audits, and penalties that could be imposed.
## Resources
**Related documents:**
+ [ Open Source at AWS](https://aws.amazon.com/opensource/)
+ [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/)
**Related examples:**
+ [ Open Source Blogs ](https://aws.amazon.com/blogs/opensource/)
+ [AWS Open Source Blogs ](https://aws.github.io/)
+ [ Optimization and Licensing Assessment ](https://aws.amazon.com/optimization-and-licensing-assessment/)
# COST05-BP05 Select components of this workload to optimize cost in line with organization priorities
Factor in cost when selecting all components for your workload. This includes using application-level and managed services or serverless, containers, or event-driven architecture to reduce overall cost. Minimize license costs by using open-source software, software that does not have license fees, or alternatives to reduce spending.
**Level of risk exposed if this best practice is not established:** Medium
## Implementation guidance
Consider the cost of services and options when selecting all components. This includes using application level and managed services, such as [Amazon Relational Database Service](https://aws.amazon.com/rds/) (Amazon RDS), [Amazon DynamoDB](https://aws.amazon.com/dynamodb/), [Amazon Simple Notification Service](https://aws.amazon.com/sns/) (Amazon SNS), and [Amazon Simple Email Service](https://aws.amazon.com/ses/) (Amazon SES) to reduce overall organization cost.
Use serverless and containers for compute, such as [AWS Lambda](https://aws.amazon.com/lambda/) and [Amazon Simple Storage Service](https://aws.amazon.com/s3/) (Amazon S3) for static websites. Containerize your application if possible and use AWS Managed Container Services such as [Amazon Elastic Container Service](https://aws.amazon.com/ecs/) (Amazon ECS) or [Amazon Elastic Kubernetes Service](https://aws.amazon.com/eks/) (Amazon EKS).
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).
You can use serverless or application-level services such as [Lambda](https://aws.amazon.com/lambda/), [Amazon Simple Queue Service (Amazon SQS)](https://aws.amazon.com/sqs/), [Amazon SNS](https://aws.amazon.com/sqs/), and [Amazon SES](https://aws.amazon.com/ses/). 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.
Using [event-driven architecture](https://aws.amazon.com/what-is/eda/) is also possible with serverless services. Event-driven architectures are push-based, so everything happens on demand as the event presents itself in the router. This way, you’re not paying for continuous polling to check for an event. This means less network bandwidth consumption, less CPU utilization, less idle fleet capacity, and fewer SSL/TLS handshakes.
For more information on serverless, see [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. Instead of increasing the capacity to meet the demand, consider other options which may give you better performance with lower cost. For example, if you need to review expected traffic for your databases on AWS, consider either increasing the instance size or using Amazon ElastiCache services (Redis or Memcached) to provide cached mechanisms for your databases.
+ **Evaluate event-driven architecture:** Using serverless architecture also allows you to build event-driven architecture for distributed microservice-based applications, which helps you build scalable, resilient, agile and cost-effective solutions.
## Resources
**Related documents:**
+ [AWS Total Cost of Ownership (TCO) Calculator](https://aws.amazon.com/tco-calculator/)
+ [AWS Serverless](https://aws.amazon.com/serverless/)
+ [What is Event-Driven Architecture](https://aws.amazon.com/what-is/eda/)
+ [Amazon S3 storage classes](https://aws.amazon.com/s3/storage-classes/)
+ [Cloud products](https://aws.amazon.com/products/)
+ [Amazon ElastiCache (Redis OSS)](https://aws.amazon.com/elasticache/redis)
**Related examples:**
+ [Getting started with event-driven architecture](https://aws.amazon.com/blogs/compute/getting-started-with-event-driven-architecture/)
+ [Event-driven architecture](https://aws.amazon.com/event-driven-architecture/)
+ [How Statsig runs 100x more cost-effectively using Amazon ElastiCache (Redis OSS)](https://aws.amazon.com/blogs/database/how-statsig-runs-100x-more-cost-effectively-using-amazon-elasticache-for-redis/)
+ [Best practices for working with AWS Lambda functions](https://docs.aws.amazon.com/lambda/latest/dg/best-practices.html)
# 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:** Medium
## 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 initiation for review is change in usage patterns. Significant changes in usage can indicate that alternate services would be more optimal.
If you need to move data into AWS Cloud, you can select any wide variety of services AWS offers and partner tools to help you migrate your data sets, whether they are files, databases, machine images, block volumes, or even tape backups. For example, to move a large amount of data to and from AWS or process data at the edge, you can use one of the AWS purpose-built devices to cost effectively move petabytes of data offline. Another example is for higher data transfer rates, a direct connect service may be cheaper than a VPN which provides the required consistent connectivity for your business.
Based on the cost analysis for different usage over time, review your scaling activity. Analyze the result to see if the scaling policy can be tuned to add instances with multiple instance types and purchase options. Review your settings to see if the minimum can be reduced to serve user requests but with a smaller fleet size, and add more resources to meet the expected high demand.
Perform cost analysis for different usage over time by discussing with stakeholders in your organization and use [AWS Cost Explorer’s](https://docs.aws.amazon.com/cost-management/latest/userguide/ce-forecast.html) forecast feature to predict the potential impact of service changes. Monitor usage level launches using AWS Budgets, CloudWatch billing alarms and AWS Cost Anomaly Detection to identify 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. Discuss with business stakeholders about both historical and forecasted cost and usage increases and make sure increases align with business requirements. Identify calendar days, weeks, or months where you expect more users to use your AWS resources, which indicate that you should increase the capacity of the existing resources or adopt additional services to reduce the cost and increase performance.
+ ** Perform cost analysis at predicted usage:** Using the usage patterns defined, perform 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. In other words, when cost increases, usage should increase for business as well.
## 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/)
+ [ Amazon EC2 Auto Scaling ](https://docs.aws.amazon.com/autoscaling/ec2/userguide/what-is-amazon-ec2-auto-scaling.html)
+ [ Cloud Data Migration ](https://aws.amazon.com/cloud-data-migration/)
+ [AWS Snow Family](https://aws.amazon.com/snow/)
**Related videos:**
+ [AWS OpsHub for Snow Family](https://www.youtube.com/watch?v=0Q7s7JiBCf0)
# COST 6. How do you meet cost targets when you select resource type, size and number?
Verify 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-BP04 Consider using shared resources
](cost_type_size_number_resources_shared.md)
# COST06-BP01 Perform cost modeling
Identify organization requirements (such as business needs and existing commitments) and perform cost modeling (overall costs) 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. Understanding cost considerations can inform your organizational business case and decision-making process when evaluating the value realization outcomes for planned workload deployment.
Perform benchmark activities for the workload under different predicted loads and compare the costs. The modeling 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 of the AWS Well-Architected Framework](https://docs.aws.amazon.com/wellarchitected/latest/performance-efficiency-pillar/review.html).
As an example, to create cost modeling for a workload consisting of compute resources, [AWS Compute Optimizer](https://aws.amazon.com/compute-optimizer/) can assist with cost modeling for running workloads. It provides right-sizing recommendations for compute resources based on historical usage. Make sure CloudWatch Agents are deployed to the Amazon EC2 instances to collect memory metrics which help you with more accurate recommendations within AWS Compute Optimizer. This is the ideal data source for compute resources because it is a free service that uses machine learning to make multiple recommendations depending on levels of risk.
There are [multiple services](https://docs.aws.amazon.com/whitepapers/latest/cost-optimization-right-sizing/identifying-opportunities-to-right-size.html) you can use with custom logs as data sources for rightsizing operations for other services and workload components, such as [AWS Trusted Advisor](https://aws.amazon.com/premiumsupport/technology/trusted-advisor/), [Amazon CloudWatch](https://aws.amazon.com/cloudwatch/) and [Amazon CloudWatch Logs](https://docs.aws.amazon.com/AmazonCloudWatch/latest/logs/WhatIsCloudWatchLogs.html). AWS Trusted Advisor checks resources and flags resources with low utilization which can help you rightsize your resources and create cost modeling.
The following are recommendations for cost modeling data and metrics:
+ The monitoring must accurately reflect the 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.
+ Choose the right AWS services for your planned workload by considering your existing commitments, selected pricing models for other workloads, and ability to innovate faster and focus on your core business value.
**Implementation steps **
+ ** Perform cost modeling for resources:** 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. Afterwards, redeploy the workload or change the resource types and sizes and run the test again. Include license fees of any products you may use with these resources and estimated operations (labor or engineer) costs for deploying and managing these resources while creating cost modeling. Consider cost modeling for a period (hourly, daily, monthly, yearly or three years).
## Resources
**Related documents:**
+ [AWS Auto Scaling](https://aws.amazon.com/autoscaling/)
+ [ Identifying Opportunities to Right Size ](https://docs.aws.amazon.com/whitepapers/latest/cost-optimization-right-sizing/identifying-opportunities-to-right-size.html)
+ [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/)
+ [AWS Pricing Calculator ](https://calculator.aws/#/)
**Related examples:**
+ [ Perform a Data-Driven Cost modeling ](https://aws.amazon.com/blogs/mt/how-to-use-aws-well-architected-with-aws-trusted-advisor-to-achieve-data-driven-cost-optimization/)
+ [ Estimate the cost of planned AWS resource configurations ](https://aws.amazon.com/premiumsupport/knowledge-center/estimating-aws-resource-costs/)
+ [ Choose the right AWS tools ](https://www.learnaws.org/2019/09/27/choose-right-aws-tools/)
# 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
Amazon EC2 provides a wide selection of instance types with different levels of CPU, memory, storage, and networking capacity to fit different use cases. These instance types feature different blends of CPU, memory, storage, and networking capabilities, giving you versatility when selecting the right resource combination for your projects. Every instance type comes in multiple sizes, so that you can adjust your resources based on your workload’s demands. To determine which instance type you need, gather details about the system requirements of the application or software that you plan to run on your instance. These details should include the following:
+ Operating system
+ Number of CPU cores
+ GPU cores
+ Amount of system memory (RAM)
+ Storage type and space
+ Network bandwidth requirement
Identify the purpose of compute requirements and which instance is needed, and then explore the various Amazon EC2 instance families. Amazon offers the following instance type families:
+ General Purpose
+ Compute Optimized
+ Memory Optimized
+ Storage Optimized
+ Accelerated Computing
+ HPC Optimized
For a deeper understanding of the specific purposes and use cases that a particular Amazon EC2 instance family can fulfill, see [AWS Instance types](https://docs.aws.amazon.com/AWSEC2/latest/UserGuide/instance-types.html).
System requirements gathering is critical for you to select the specific instance family and instance type that best serves your needs. Instance type names are comprised of the family name and the instance size. For example, the t2.micro instance is from the T2 family and is micro-sized.
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 modeling, a previous version of the workload (such as an on-premises version), using documentation, or using other sources of information about the workload (whitepapers or published solutions). Using AWS pricing calculators or cost management tools can assist in making informed decisions about instance types, sizes, and configurations.
### Implementation steps
+ **Select resources based on data:** Use your cost modeling data to select the anticipated workload usage level, and choose the specified resource type and size. Relying on the cost modeling data, determine the number of virtual CPUs, total memory (GiB), the local instance store volume (GB), Amazon EBS volumes, and the network performance level, taking into account the data transfer rate required for the instance. Always make selections based on detailed analysis and accurate data to optimize performance while managing costs effectively.
## Resources
**Related documents:**
+ [AWS Instance types](https://docs.aws.amazon.com/AWSEC2/latest/UserGuide/instance-types.html)
+ [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)
**Related videos:**
+ [ Selecting the right Amazon EC2 instance for your workloads ](https://www.youtube.com/watch?v=q5Dn9gcmpJg)
+ [ Right size your service ](https://youtu.be/wcp1inFS78A)
**Related examples:**
+ [ It just got easier to discover and compare Amazon EC2 instance types ](https://aws.amazon.com/blogs/compute/it-just-got-easier-to-discover-and-compare-ec2-instance-types/)
# 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 compute, storage, data, and networking services. 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 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 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**
+ **Increase your observability by configuring workload metrics:** Capture key metrics for the workload. These metrics provide an indication of the customer experience, such as workload output, and align to the differences between resource types and sizes, such as CPU and memory usage. For compute resource, analyze performance data to right size your Amazon EC2 instances. Identify idle instances and ones that are underutilized. Key metrics to look for are CPU usage and memory utilization (for example, 40% CPU utilization at 90% of the time as explained in [Rightsizing with AWS Compute Optimizer and Memory Utilization Enabled](https://www.wellarchitectedlabs.com/cost/200_labs/200_aws_resource_optimization/5_ec2_computer_opt/)). Identify instances with a maximum CPU usage and memory utilization of less than 40% over a four-week period. These are the instances to right size to reduce costs. For storage resources such as Amazon S3, you can use [Amazon S3 Storage Lens](https://aws.amazon.com/getting-started/hands-on/amazon-s3-storage-lens/), which allows you to see 28 metrics across various categories at the bucket level, and 14 days of historical data in the dashboard by default. You can filter your Amazon S3 Storage Lens dashboard by summary and cost optimization or events to analyze specific metrics.
+ **View rightsizing recommendations:** Use the rightsizing recommendations in AWS Compute Optimizer and the Amazon EC2 rightsizing tool in the Cost Management console, or review AWS Trusted Advisor right-sizing your resources to make adjustments on your workload. It is important to use the [right tools](https://docs.aws.amazon.com/whitepapers/latest/cost-optimization-right-sizing/identifying-opportunities-to-right-size.html) when right-sizing different resources and follow [right-sizing guidelines](https://docs.aws.amazon.com/whitepapers/latest/cost-optimization-right-sizing/identifying-opportunities-to-right-size.html) whether it is an Amazon EC2 instance, AWS storage classes, or Amazon RDS instance types. For storage resources, you can use Amazon S3 Storage Lens, which gives you visibility into object storage usage, activity trends, and makes actionable recommendations to optimize costs and apply data protection best practices. Using the contextual recommendations that [Amazon S3 Storage Lens](https://aws.amazon.com/getting-started/hands-on/amazon-s3-storage-lens/) derives from analysis of metrics across your organization, you can take immediate steps to optimize your storage.
+ **Select resource type and size automatically based on metrics:** Using the workload metrics, manually or automatically select your workload resources. For compute 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. You can launch and automatically scale a fleet of On-Demand Instances and Spot Instances within a single Auto Scaling group. In addition to receiving discounts for using Spot Instances, you can use Reserved Instances or a Savings Plan to receive discounted rates of the regular On-Demand Instance pricing. All of these factors combined help you optimize your cost savings for Amazon EC2 instances and determine the desired scale and performance for your application. You can also use an [attribute-based instance type selection (ABS)](https://docs.aws.amazon.com/autoscaling/ec2/userguide/create-asg-instance-type-requirements.html) strategy in [Auto Scaling Groups (ASG)](https://docs.aws.amazon.com/autoscaling/ec2/userguide/create-asg-instance-type-requirements.html), which lets you express your instance requirements as a set of attributes, such as vCPU, memory, and storage. You can automatically use newer generation instance types when they are released and access a broader range of capacity with Amazon EC2 Spot Instances. Amazon EC2 Fleet and Amazon EC2 Auto Scaling select and launch instances that fit the specified attributes, removing the need to manually pick instance types. For storage resources, you can use the [Amazon S3 Intelligent Tiering](https://aws.amazon.com/s3/storage-classes/intelligent-tiering/) and [Amazon EFS Infrequent Access](https://aws.amazon.com/efs/features/infrequent-access/) features, which allow you to select storage classes automatically that deliver automatic storage cost savings when data access patterns change, without performance impact or operational overhead.
## Resources
**Related documents:**
+ [AWS Auto Scaling](https://aws.amazon.com/autoscaling/)
+ [AWS Right-Sizing](https://aws.amazon.com/aws-cost-management/aws-cost-optimization/right-sizing/)
+ [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)
+ [Getting Started with Amazon EC2 Auto Scaling](https://docs.aws.amazon.com/autoscaling/ec2/userguide/GettingStartedTutorial.html)
+ [Amazon S3 Storage Lens](https://aws.amazon.com/getting-started/hands-on/amazon-s3-storage-lens/)
+ [Amazon S3 Intelligent-Tiering](https://aws.amazon.com/about-aws/whats-new/2018/11/s3-intelligent-tiering/)
+ [Amazon EFS Infrequent Access](https://aws.amazon.com/efs/features/infrequent-access/)
+ [Launch an Amazon EC2 Instance Using the SDK](https://docs.aws.amazon.com/sdk-for-net/v2/developer-guide/run-instance.html)
**Related videos:**
+ [Right Size Your Services](https://www.youtube.com/watch?v=wcp1inFS78A)
**Related examples:**
+ [Attribute based Instance Type Selection for Auto Scaling for Amazon EC2 Fleet](https://aws.amazon.com/blogs/aws/new-attribute-based-instance-type-selection-for-ec2-auto-scaling-and-ec2-fleet/)
+ [Optimizing Amazon Elastic Container Service for cost using scheduled scaling ](https://aws.amazon.com/blogs/containers/optimizing-amazon-elastic-container-service-for-cost-using-scheduled-scaling/)
+ [Predictive scaling with Amazon EC2 Auto Scaling](https://aws.amazon.com/blogs/compute/introducing-native-support-for-predictive-scaling-with-amazon-ec2-auto-scaling/)
+ [Optimize Costs and Gain Visibility into Usage with Amazon S3 Storage Lens](https://aws.amazon.com/getting-started/hands-on/amazon-s3-storage-lens/)
# COST06-BP04 Consider using shared resources
For already-deployed services at the organization level for multiple business units, consider using shared resources to increase utilization and reduce total cost of ownership (TCO). Using shared resources can be a cost-effective option to centralize the management and costs by using existing solutions, sharing components, or both. Manage common functions like monitoring, backups, and connectivity either within an account boundary or in a dedicated account. You can also reduce cost by implementing standardization, reducing duplication, and reducing complexity.
**Level of risk exposed if this best practice is not established:** Medium
## Implementation guidance
Where multiple workloads cause the same function, use existing solutions and shared components to improve management and optimize costs. Consider using existing resources (especially shared ones), such as non-production database servers or directory services, to mitigate cloud costs by following security best practices and organizational regulations. For optimal value realization and efficiency, it is crucial to allocate costs back (using showback and chargeback) to the pertinent areas of the business driving consumption.
*Showback* refers to reports that break down cloud costs into attributable categories, such as consumers, business units, general ledger accounts, or other responsible entities. The goal of showback is to show teams, business units, or individuals the cost of their consumed cloud resources.
*Chargeback* means to allocate central service spend to cost units based on a strategy suitable for a specific financial management process. For customers, chargeback charges the cost incurred from one shared services account to different financial cost categories suitable for a customer reporting process. By establishing chargeback mechanisms, you can report costs incurred by different business units, products, and teams.
Workloads can be categorized as critical and non-critical. Based on this classification, use shared resources with general configurations for less critical workloads. To further optimize costs, reserve dedicated servers solely for critical workloads. Share resources or provision them across several accounts to manage them efficiently. Even with distinct development, testing, and production environments, secure sharing is feasible and does not compromise organizational structure.
To improve your understanding and optimize cost and usage for containerized applications, use split cost allocation data which helps you allocate costs to individual business entities based on how the application consumes shared compute and memory resources. Split cost allocation data helps you achieve task-level showback and chargeback in container workloads running on Amazon Elastic Container Service (Amazon ECS) or Amazon Elastic Kubernetes Service (Amazon EKS).
For distributed architectures, build a shared services VPC, which provides centralized access to shared services required by workloads in each of the VPCs. These shared services can include resources such as directory services or VPC endpoints. To reduce administrative overhead and cost, share resources from a central location instead of building them in each VPC.
When you use shared resources, you can save on operational costs, maximize resource utilization, and improve consistency. In a multi-account design, you can host some AWS services centrally and access them using several applications and accounts in a hub to save cost. You can use [AWS Resource Access Manager (AWS RAM)](https://aws.amazon.com/ram/) to share other common resources, such as [VPC subnets and AWS Transit Gateway attachments](https://docs.aws.amazon.com/ram/latest/userguide/shareable.html#shareable-vpc), [AWS Network Firewall](https://docs.aws.amazon.com/ram/latest/userguide/shareable.html#shareable-network-firewall), or [Amazon SageMaker AI pipelines](https://docs.aws.amazon.com/ram/latest/userguide/shareable.html#shareable-sagemaker). In a multi-account environment, use AWS RAM to create a resource once and share it with other accounts.
Organizations should tag shared costs effectively and verify that they do not have a significant portion of their costs untagged or unallocated. If you do not allocate shared costs effectively and no one takes accountability for shared costs management, shared cloud costs can spiral. You should know where you have incurred costs at the resource, workload, team, or organization level, as this knowledge enhances your understanding of the value delivered at the applicable level when compared to the business outcomes achieved. Ultimately, organizations benefit from cost savings as a result of sharing cloud infrastructure. Encourage cost allocation on shared cloud resources to optimize cloud spend.
### Implementation steps
+ **Evaluate existing resources:** Review existing workloads that use similar services for your workload. Depending on the workload’s components, consider existing platforms if business logic or technical requirement allow.
+ **Use resource sharing in AWS RAM and restrict accordingly:** Use AWS RAM to share resources with other AWS accounts within your organization. When you share resources, you don’t need to duplicate resources in multiple accounts, which minimizes the operational burden of resource maintenance. This process also helps you securely share the resources that you have created with roles and users in your account, as well as with other AWS accounts.
+ **Tag resources:** Tag resources that are candidates for cost reporting and categorize them within cost categories. Activate these cost related resource tags for cost allocation to provide visibility of AWS resources usage. Focus on creating an appropriate level of granularity with respect to cost and usage visibility, and influence cloud consumption behaviors through cost allocation reporting and KPI tracking.
## Resources
**Related best practices:**
+ [ SEC03-BP08 Share resources securely within your organization ](https://docs.aws.amazon.com/wellarchitected/latest/security-pillar/sec_permissions_share_securely.html)
**Related documents:**
+ [ What is AWS Resource Access Manager? ](https://docs.aws.amazon.com/ram/latest/userguide/what-is.html)
+ [AWS services that you can use with AWS Organizations](https://docs.aws.amazon.com/organizations/latest/userguide/orgs_integrate_services_list.html)
+ [ Shareable AWS resources ](https://docs.aws.amazon.com/ram/latest/userguide/shareable.html)
+ [AWS Cost and Usage (CUR) Queries ](https://catalog.workshops.aws/cur-query-library/en-US)
**Related videos:**
+ [AWS Resource Access Manager - granular access control with managed permissions ](https://www.youtube.com/watch?v=X3HskbPqR2s)
+ [ How to design your AWS cost allocation strategy ](https://pages.awscloud.com/aws-cfm-talks-how-to-design-your-AWS-cost-allocation-strategy-01122022.html)
+ [AWS Cost Categories ](https://www.youtube.com/watch?v=84GYnBBM0Cg)
**Related examples:**
+ [ How-to chargeback shared services: An AWS Transit Gateway example ](https://aws.amazon.com/blogs/aws-cloud-financial-management/gs-chargeback-shared-services-an-aws-transit-gateway-example/)
+ [ How to build a chargeback/showback model for Savings Plans using the CUR ](https://aws.amazon.com/blogs/aws-cloud-financial-management/how-to-build-a-chargeback-showback-model-for-savings-plans-using-the-cur/)
+ [ Using VPC Sharing for a Cost-Effective Multi-Account Microservice Architecture ](https://aws.amazon.com/blogs/architecture/using-vpc-sharing-for-a-cost-effective-multi-account-microservice-architecture/)
+ [ Improve cost visibility of Amazon EKS with AWS Split Cost Allocation Data ](https://aws.amazon.com/blogs/aws-cloud-financial-management/improve-cost-visibility-of-amazon-eks-with-aws-split-cost-allocation-data/)
+ [ Improve cost visibility of Amazon ECS and AWS Batch with AWS Split Cost Allocation Data ](https://aws.amazon.com/blogs/aws-cloud-financial-management/la-improve-cost-visibility-of-containerized-applications-with-aws-split-cost-allocation-data-for-ecs-and-batch-jobs/)
# 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 Choose 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 management 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). Perform an analysis on the workload using the recommendations in cost management tools and apply business rules to those recommendations to achieve high returns.
**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 and depending on product. Work with your teams to determine the most appropriate pricing model. Often your pricing model consists of a combination of multiple options, as determined by your availability
**On-Demand Instances** allow you to pay for compute or database capacity by the hour or by the second (60 seconds minimum) depending on which instances you run, without long-term commitments or upfront payments.
**Savings Plans** are a flexible pricing model that offers low prices on Amazon EC2, Lambda, and AWS Fargate usage, in exchange for a commitment to a consistent amount of usage (measured in dollars per hour) over one year or three years terms.
**Spot Instances** are an Amazon EC2 pricing mechanism that allows you request spare compute capacity at discounted hourly rate (up to 90% off the on-demand price) without upfront commitment.
**Reserved Instances** allow you up to 75 percent discount by prepaying for capacity. For more details, see [Optimizing costs with reservations](https://docs.aws.amazon.com/whitepapers/latest/how-aws-pricing-works/aws-cost-optimization.html).
You might choose to include a Savings Plans for the resources associated with the production, quality, and development environments. Alternatively, because sandbox resources are only powered on when needed, you might choose an on-demand model for the resources in that environment. Use Amazon [Spot Instances](https://docs.aws.amazon.com/whitepapers/latest/how-aws-pricing-works/amazon-elastic-compute-cloud-amazon-ec2.html#spot-instances) to reduce Amazon EC2 costs or use [Compute Savings Plans](https://docs.aws.amazon.com/whitepapers/latest/how-aws-pricing-works/amazon-elastic-compute-cloud-amazon-ec2.html#savings-plans) to reduce Amazon EC2, Fargate, and Lambda cost. The [AWS Cost Explorer](https://aws.amazon.com/aws-cost-management/aws-cost-explorer/) recommendations tool provides opportunities for commitment discounts with Saving plans.
If you have been purchasing [Reserved Instances](https://aws.amazon.com/aws-cost-management/aws-cost-optimization/reserved-instances/?track=costop) for Amazon EC2 in the past or have established cost allocation practices inside your organization, you can continue using Amazon EC2 Reserved Instances for the time being. However, we recommend working on a strategy to use Savings Plans in the future as a more flexible cost savings mechanism. You can refresh Savings Plans (SP) Recommendations in AWS Cost Management to generate new Savings Plans Recommendations at any time. Use Reserved Instances (RI) to reduce Amazon RDS, Amazon Redshift, Amazon ElastiCache, and Amazon OpenSearch Service costs. Saving Plans and Reserved Instances are available in three options: all upfront, partial upfront and no upfront payments. Use the recommendations provided in AWS Cost Explorer RI and SP purchase recommendations.
To find opportunities for Spot workloads, use an hourly view of your overall usage, and look for regular periods of changing usage or elasticity. You can use Spot Instances for various fault-tolerant and flexible applications. Examples include stateless web servers, API endpoints, big data and analytics applications, containerized workloads, CI/CD, and other flexible workloads.
Analyze your Amazon EC2 and Amazon RDS instances whether they can be turned off when you don’t use (after hours and weekends). This approach will allow you to reduce costs by 70% or more compared to using them 24/7. If you have Amazon Redshift clusters that only need to be available at specific times, you can pause the cluster and later resume it. When the Amazon Redshift cluster or Amazon EC2 and Amazon RDS Instance is stopped, the compute billing halts and only the storage charge applies.
Note that [On-Demand Capacity reservations](https://docs.aws.amazon.com/AWSEC2/latest/UserGuide/capacity-reservations-pricing-billing.html) (ODCR) are not a pricing discount. Capacity Reservations are charged at the equivalent On-Demand rate, whether you run instances in reserved capacity or not. They should be considered when you need to provide enough capacity for the resources you plan to run. ODCRs don't have to be tied to long-term commitments, as they can be cancelled when you no longer need them, but they can also benefit from the discounts that Savings Plans or Reserved Instances provide.
**Implementation steps**
+ **Analyze workload elasticity: **Using the hourly granularity in Cost Explorer or a custom dashboard, analyze your workload's 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)
+ **Review existing pricing contracts:** Review current contracts or commitments for long term needs. Analyze what you currently have and how much those commitments are in use. Leverage pre-existing contractual discounts or enterprise agreements. [Enterprise Agreements](https://aws.amazon.com/pricing/enterprise/) give customers the option to tailor agreements that best suit their needs. For long term commitments, consider reserved pricing discounts, Reserved Instances or Savings Plans for the specific instance type, instance family, AWS Region, and Availability Zones.
+ ** 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/).
## 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)
+ [AWS Enterprise ](https://aws.amazon.com/pricing/enterprise/)
**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 Choose Regions based on cost
Resource pricing may be different in each Region. Identify Regional cost differences and only deploy in Regions with higher costs to meet latency, data residency and data sovereignty requirements. Factoring in Region cost helps you pay the lowest overall price for this workload.
**Level of risk exposed if this best practice is not established:** Medium
## Implementation guidance
The [AWS Cloud Infrastructure](https://aws.amazon.com/about-aws/global-infrastructure/) is global, hosted in [multiple locations world-wide](https://docs.aws.amazon.com/AWSEC2/latest/UserGuide/using-regions-availability-zones.html), and built around AWS Regions, Availability Zones, Local Zones, AWS Outposts, and Wavelength Zones. A Region is a physical location in the world and each Region is a separate geographic area where AWS has multiple Availability Zones. Availability Zones which are multiple isolated locations within each Region consist of one or more discrete data centers, each with redundant power, networking, and connectivity.
Each AWS Region operates within local market conditions, and resource pricing is different in each Region due to differences in the cost of land, fiber, electricity, and taxes, for example. Choose a specific Region to operate a component of or your entire solution so that you can run at the lowest possible price globally. Use [AWS Calculator](https://calculator.aws/#/) to estimate the costs of your workload in various Regions by searching services by location type (Region, wave length zone and local zone) and Region.
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. Select the geographic location based on your business, data privacy, performance, and security requirements. For applications with global end users, use multiple locations.
Use Regions that provide lower prices for AWS services to deploy your workloads if you have no obligations in data privacy, security and business requirements. For example, if your default Region is Asia Pacific (Sydney) (`ap-southwest-2`), and if there are no restrictions (data privacy, security, for example) to use other Regions, deploying non-critical (development and test) Amazon EC2 instances in US East (N. Virginia) (`us-east-1`) will cost you less.
![\[Chart showing different Regions with compliance, latency, cost, and services and features.\]](http://docs.aws.amazon.com/wellarchitected/latest/framework/images/region-feature-matrix.png)
The preceding matrix table shows us that Region 6 is the best option for this given scenario because latency is low compared to other Regions, service is available, and it is the least expensive Region.
## Implementation steps
+ ** Review AWS 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.
+ **Review requirements for multi-Region deployments:** Analyze your business requirements and obligations (data privacy, security, or performance) to find out if there are any restrictions for you to not to use multiple Regions. If there are no obligations to restrict you to use single Region, then use multiple Regions.
+ **Analyze required data transfer:** Consider data transfer costs when selecting Regions. Keep your data close to your customer and close to the resources. Select less costly AWS Regions where data flows and where there is minimal data transfer. Depending on your business requirements for data transfer, you can use [Amazon CloudFront](https://aws.amazon.com/cloudfront/), [AWS PrivateLink](https://aws.amazon.com/privatelink/), [AWS Direct Connect](https://aws.amazon.com/directconnect/), and [AWS Virtual Private Network](https://aws.amazon.com/vpn/) to reduce your networking costs, improve performance, and enhance security.
## 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)
**Related examples:**
+ [ Overview of Data Transfer Costs for Common Architectures ](https://aws.amazon.com/blogs/architecture/overview-of-data-transfer-costs-for-common-architectures/)
+ [ Cost Considerations for Global Deployments ](https://aws.amazon.com/blogs/aws-cloud-financial-management/cost-considerations-for-global-deployments/)
+ [ What to Consider when Selecting a Region for your Workloads ](https://aws.amazon.com/blogs/architecture/what-to-consider-when-selecting-a-region-for-your-workloads/)
# 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
There are multiple products on the market that can help you manage costs in your cloud environments. They may have some differences in terms of features that depend on customer requirements, such as some focusing on cost governance or cost visibility and others on cost optimization. One key factor for effective cost optimization and governance is using the right tool with necessary features and the right pricing model. These products have different pricing models. Some charge you a certain percentage of your monthly bill, while others charge a percentage of your realized savings. Ideally, you should pay only for what you need.
When you use third-party solutions or services in the cloud, it's important that the pricing structures are aligned to your desired outcomes. Pricing should scale with the outcomes and value it provides. For example, in software that takes a percentage of savings it provides, the more you save (outcome), the more it charges. License agreements where you pay more as your expenses increase might not always be in your best interest for optimizing costs. However, if the vendor offers clear benefits for all parts of your bill, this scaling fee might be justified.
For example, a solution that provides recommendations for Amazon EC2 and charges a percentage of your entire bill can become more expensive if you use other services that provide no benefit. Another example is a managed service that is charged at a percentage of the cost of managed resources. A larger instance size may not necessarily require more management effort, but can be charged more. Verify that these service pricing arrangements include a cost optimization program or features in their service to drive efficiency.
Customers may find these products on the market more advanced or easier to use. You need to consider the cost of these products and think about potential cost optimization outcomes in the long term.
### 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
To improve cost efficiency, AWS provides multiple commitment recommendations based on your past usage. You can use these recommendations to understand what you can save, and how the commitment will be used. You can use these services as On-Demand, Spot, or make a commitment for a certain period of time and reduce your on-demand costs with Reserved Instances (RIs) and Savings Plans (SPs). You need to understand not only each workload components and multiple AWS services, but also commitment discounts, purchase options, and Spot Instances for these services to optimize your workload.
Consider the requirements of your workload’s components, and understand the different pricing models for these services. Define the availability requirement of these components. 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.
For example, let’s look at this Web Application Architecture on AWS. This sample workload consists of multiple AWS services, such as Amazon Route 53, AWS WAF, Amazon CloudFront, Amazon EC2 instances, Amazon RDS instances, Load Balancers, Amazon S3 storage, and Amazon Elastic File System (Amazon EFS). You need to review each of these services, and identify potential cost saving opportunities with different pricing models. Some of them may be eligible for RIs or SPs, while some of them may be available only on-demand. As the following image shows, some of the AWS services can be committed using RIs or SPs.
![\[Chart of AWS services committed using Reserved Instances and Savings Plans\]](http://docs.aws.amazon.com/wellarchitected/latest/framework/images/ri-sp-services.png)
### Implementation steps
+ **Implement pricing models:** Using your analysis results, purchase Savings Plans, Reserved Instances, or implement Spot Instances. If it is your first commitment purchase, choose the top five or ten recommendations in the list, then monitor and analyze the results over the next month or two. AWS Cost Management Console guides you through the process. Review the RI or SP recommendations from the console, customize the recommendations (type, payment, and term), and review hourly commitment (for example \$120 per hour), and then add to cart. Discounts apply automatically to eligible usage. Purchase a small amount of commitment discounts in regular cycles (for example every 2 weeks or monthly). Implement Spot Instances for workloads that can be interrupted or are stateless. Finally, select on-demand Amazon EC2 instances and allocate resources for the remaining requirements.
+ **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 partially (every few months), or as your organization usage changes.
## Resources
**Related documents:**
+ [ Understanding your Savings Plans recommendations ](https://docs.aws.amazon.com/savingsplans/latest/userguide/sp-recommendations.html)
+ [Accessing Reserved Instance recommendations](https://docs.aws.amazon.com/awsaccountbilling/latest/aboutv2/ri-recommendations.html)
+ [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)
+ [ Reservation models for other AWS services ](https://docs.aws.amazon.com/whitepapers/latest/cost-optimization-reservation-models/reservation-models-for-other-aws-services.html)
+ [ Savings Plans Supported Services ](https://docs.aws.amazon.com/savingsplans/latest/userguide/sp-services.html)
**Related videos:**
+ [Save up to 90% and run production workloads on Spot](https://www.youtube.com/watch?v=BlNPZQh2wXs)
**Related examples:**
+ [ What should you consider before purchasing Savings Plans? ](https://repost.aws/knowledge-center/savings-plans-considerations)
+ [ How can I use Cost Explorer to analyze my spending and usage? ](https://repost.aws/knowledge-center/cost-explorer-analyze-spending-and-usage)
# COST07-BP05 Perform pricing model analysis at the management account level
Check billing and cost management tools and see recommended discounts with commitments and reservations to perform regular analysis at the management account level.
**Level of risk exposed if this best practice is not established:** Low
## Implementation guidance
Performing regular cost modeling helps you implement opportunities to optimize across multiple workloads. 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 can 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 in your management account. Recommendations at the management account level are calculated considering usage across all of the accounts in your AWS organization that have Reserve Instances (RI) or Savings Plans (SP). They're also calculated when discount sharing is activated to recommend a commitment that maximizes savings across accounts.
While purchasing at the management account level optimizes for max savings in many cases, there may be situations where you might consider purchasing SPs at the linked account level, like when you want the discounts to apply first to usage in that particular linked account. Member account recommendations are calculated at the individual account level, to maximize savings for each isolated account. If your account owns both RI and SP commitments, they will be applied in this order:
1. Zonal RI
1. Standard RI
1. Convertible RI
1. Instance Savings Plan
1. Compute Savings Plan
If you purchase an SP at the management account level, the savings will be applied based on highest to lowest discount percentage. SPs at the management account level look across all linked accounts and apply the savings wherever the discount will be the highest. If you wish to restrict where the savings are applied, you can purchase a Savings Plan at the linked account level and any time that account is running eligible compute services, the discount will be applied there first. When the account is not running eligible compute services, the discount will be shared across the other linked accounts under the same management account. Discount sharing is turned on by default, but can be turned off if needed.
In a Consolidated Billing Family, Savings Plans are applied first to the owner account's usage, and then to other accounts' usage. This occurs only if you have sharing enabled. Your Savings Plans are applied to your highest savings percentage first. If there are multiple usages with equal savings percentages, Savings Plans are applied to the first usage with the lowest Savings Plans rate. Savings Plans continue to apply until there are no more remaining uses or your commitment is exhausted. Any remaining usage is charged at the On-Demand rates. You can refresh Savings Plans Recommendations in AWS Cost Management to generate new Savings Plans Recommendations at any time.
After analyzing flexibility of instances, you can commit by following recommendations. Create cost modeling by analyzing the workload’s short-term costs with potential different resource options, analyzing AWS pricing models, and aligning them with your business requirements to find out total cost of ownership and [cost optimization](https://docs.aws.amazon.com/whitepapers/latest/how-aws-pricing-works/aws-cost-optimization.html) opportunities.
### Implementation steps
**Perform a commitment discount analysis**: Use Cost Explorer in your account review the Savings Plans and Reserved Instance recommendations. Make sure you understand Saving Plan recommendations, and estimate your monthly spend and monthly savings. Review recommendations at the management account level, which are calculated considering usage across all of the member accounts in your AWS organization that have RI or Savings Plans discount sharing enabled for maximum savings across accounts. You can verify that you implemented the correct recommendations with the required discounts and risk by following the Well-Architected labs.
## Resources
**Related documents:**
+ [How does AWS pricing work?](https://aws.amazon.com/pricing/?nc2=h_ql_pr_ln)
+ [Instance purchasing options](https://docs.aws.amazon.com/AWSEC2/latest/UserGuide/instance-purchasing-options.html)
+ [Saving Plan Overview](file:///Users/mergenf/Documents/WELL%20ARCHITECTED/COST%20OPT%20PILLAR/phase3a/COST06/•%09https:/docs.aws.amazon.com/savingsplans/latest/userguide/sp-overview.html)
+ [Saving Plan recommendations](https://docs.aws.amazon.com/savingsplans/latest/userguide/sp-recommendations.html)
+ [Accessing Reserved Instance recommendations](https://docs.aws.amazon.com/awsaccountbilling/latest/aboutv2/ri-recommendations.html)
+ [Understanding your Saving Plans recommendation](https://docs.aws.amazon.com/savingsplans/latest/userguide/sp-recommendations.html)
+ [How Savings Plans apply to your AWS usage](https://docs.aws.amazon.com/savingsplans/latest/userguide/sp-applying.html)
+ [Saving Plans with Consolidated Billing](https://aws.amazon.com/premiumsupport/knowledge-center/savings-plans-consolidated-billing/)
+ [Turning on shared reserved instances and Savings Plans discounts](https://docs.aws.amazon.com/awsaccountbilling/latest/aboutv2/ri-turn-on-process.html)
**Related videos:**
+ [Save up to 90% and run production workloads on Spot](https://www.youtube.com/watch?v=BlNPZQh2wXs)
**Related examples:**
+ [What should I consider before purchasing a Savings Plan?](https://aws.amazon.com/premiumsupport/knowledge-center/savings-plans-considerations/)
+ [How can I use rolling Savings Plans to reduce commitment risk?](https://aws.amazon.com/blogs/aws-cloud-financial-management/how-can-i-use-rolling-savings-plans-to-reduce-commitment-risk/)
+ [When to Use Spot Instances](https://docs.aws.amazon.com/whitepapers/latest/cost-optimization-leveraging-ec2-spot-instances/when-to-use-spot-instances.html)
# COST 8. How do you plan for data transfer charges?
Verify 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
When designing a solution in the cloud, data transfer fees are usually neglected due to habits of designing architecture using on-premises data centers or lack of knowledge. Data transfer charges in AWS are determined by the source, destination, and volume of traffic. Factoring in these fees during the design phase can lead to cost savings. Understanding where the data transfer occurs in your workload, the cost of the transfer, and its associated benefit is very important to accurately estimate total cost of ownership (TCO). 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 components of services which transfer the data in your workload, and decide that this is an acceptable cost (similar to paying for compute and storage in both Availability Zones) 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.
While modeling your data transfer, think about how much data is ingested and where that data comes from. Additionally, consider how much data is processed and how much storage or compute capacity is needed. During modeling, follow networking best practices for your workload architecture to optimize your potential data transfer costs.
The AWS Pricing Calculator can help you see estimated costs for specific AWS services and expected data transfer. If you have a workload already running (for test purposes or in a pre-production environment), use [AWS Cost Explorer](https://aws.amazon.com/aws-cost-management/aws-cost-explorer/) or [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
+ **Identify requirements:** What is the primary goal and business requirements for the planned data transfer between source and destination? What is the expected business outcome at the end? Gather business requirements and define expected outcome.
+ **Identify source and destination:** What is the data source and destination for the data transfer, such as within AWS Regions, to AWS services, or out to the internet?
+ [ Data transfer within an AWS Region](https://docs.aws.amazon.com/cur/latest/userguide/cur-data-transfers-charges.html#data-transfer-within-region)
+ [ Data transfer between AWS Regions](https://docs.aws.amazon.com/cur/latest/userguide/cur-data-transfers-charges.html#data-transfer-between-regions)
+ [ Data transfer out to the internet ](https://docs.aws.amazon.com/cur/latest/userguide/cur-data-transfers-charges.html#data-transfer-out-internet)
+ **Identify data classifications:** What is the data classification for this data transfer? What kind of data is it? How big is the data? How frequently must data be transferred? Is data sensitive?
+ **Identify AWS services or tools to use:** Which AWS services are used for this data transfer? Is it possible to use an already-provisioned service for another workload?
+ ** Calculate data transfer costs: **Use [AWS Pricing](https://aws.amazon.com/pricing/) the data transfer modeling you created previously to 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.
+ **Create data transfer modeling:** After gathering all information, create a conceptual base data transfer modeling for multiple use cases and different workloads.
## 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/)
+ [ Understanding data transfer charges ](https://docs.aws.amazon.com/cur/latest/userguide/cur-data-transfers-charges.html)
**Related videos:**
+ [ Monitoring and Optimizing Your Data Transfer Costs ](https://www.youtube.com/watch?v=UjliYz25_qo)
+ [ S3 Transfer Acceleration ](https://youtu.be/J2CVnmUWSi4)
**Related examples:**
+ [ Overview of Data Transfer Costs for Common Architectures ](https://aws.amazon.com/blogs/architecture/overview-of-data-transfer-costs-for-common-architectures/)
+ [AWS Prescriptive Guidance for Networking ](https://aws.amazon.com/prescriptive-guidance/?apg-all-cards.sort-by=item.additionalFields.sortDate&apg-all-cards.sort-order=desc&awsf.apg-new-filter=*all&awsf.apg-content-type-filter=*all&awsf.apg-code-filter=*all&awsf.apg-category-filter=categories%23network&awsf.apg-rtype-filter=*all&awsf.apg-isv-filter=*all&awsf.apg-product-filter=*all&awsf.apg-env-filter=*all)
# 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:** Medium
## Implementation guidance
Architecting for data transfer minimizes 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.
When transferring data to or within the AWS Cloud, it is essential to know the destination based on varied use cases, the nature of the data, and the available network resources in order to select the right AWS services to optimize data transfer. AWS offers a range of data transfer services tailored for diverse data migration requirements. Select the right [data storage](https://aws.amazon.com/products/storage/) and [data transfer](https://aws.amazon.com/cloud-data-migration/) options based on the business needs within your organization.
When planning or reviewing your workload architecture, consider the following:
+ **Use VPC endpoints within AWS:** VPC endpoints allow for private connections between your VPC and supported AWS services. This allows you to avoid using the public internet, which can lead to data transfer costs.
+ **Use a NAT gateway:** Use a [NAT gateway](https://docs.aws.amazon.com/vpc/latest/userguide/vpc-nat-gateway.html) so that instances in a private subnet can connect to the internet or to the services outside your VPC. Check whether the resources behind the NAT gateway that send the most traffic are in the same Availability Zone as the NAT gateway. If they are not, create new NAT gateways in the same Availability Zone as the resource to reduce cross-AZ data transfer charges.
+ **Use AWS Direct Connect** Direct Connect bypasses the public internet and establishes a direct, private connection between your on-premises network and AWS. This can be more cost-effective and consistent than transferring large volumes of data over the internet.
+ **Avoid transferring data across Regional boundaries:** Data transfers between AWS Regions (from one Region to another) typically incur charges. It should be a very thoughtful decision to pursue a multi-Region path. For more detail, see [Multi-Region scenarios](https://docs.aws.amazon.com/wellarchitected/latest/reliability-pillar/multi-region-scenarios.html).
+ **Monitor data transfer:** Use Amazon CloudWatch and [VPC flow logs](https://docs.aws.amazon.com/vpc/latest/userguide/flow-logs.html) to capture details about your data transfer and network usage. Analyze captured network traffic information in your VPCs, such as IP address or range going to and from network interfaces.
+ **Analyze your network usage:** Use metering and reporting tools such as AWS Cost Explorer, CUDOS Dashboards, or CloudWatch to understand data transfer cost of your workload.
### Implementation steps
+ **Select components for data transfer:** Using the data transfer modeling explained in [COST08-BP01 Perform data transfer modeling](cost_data_transfer_modeling.md), 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 best practices:**
+ [COST08-BP01 Perform data transfer modeling](cost_data_transfer_modeling.md)
+ [COST08-BP03 Implement services to reduce data transfer costs](cost_data_transfer_implement_services.md)
**Related documents:**
+ [ Cloud Data Migration ](https://aws.amazon.com/cloud-data-migration/)
+ [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/)
**Related examples:**
+ [ Overview of Data Transfer Costs for Common Architectures ](https://aws.amazon.com/blogs/architecture/overview-of-data-transfer-costs-for-common-architectures/)
+ [AWS Network Optimization Tips ](https://aws.amazon.com/blogs/networking-and-content-delivery/aws-network-optimization-tips/)
+ [ Optimize performance and reduce costs for network analytics with VPC Flow Logs in Apache Parquet format ](https://aws.amazon.com/blogs/big-data/optimize-performance-and-reduce-costs-for-network-analytics-with-vpc-flow-logs-in-apache-parquet-format/)
# COST08-BP03 Implement services to reduce data transfer costs
Implement services to reduce data transfer. For example, use edge locations or content delivery networks (CDN) to deliver content to end users, build caching layers in front of your application servers or databases, and use dedicated network connections instead of VPN for connectivity to the cloud.
**Level of risk exposed if this best practice is not established:** Medium
## Implementation guidance
There are various AWS services that can help you to optimize your network data transfer usage. Depending on your workload components, type, and cloud architecture, these services can assist you in compression, caching, and sharing and distribution of your traffic on the cloud.
+ [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. The [security savings bundle](https://aws.amazon.com/about-aws/whats-new/2021/02/introducing-amazon-cloudfront-security-savings-bundle/?sc_channel=em&sc_campaign=Launch_mult_OT_awsroadmapemail_20200910&sc_medium=em_whats_new&sc_content=launch_ot_ot&sc_country=mult&sc_geo=mult&sc_category=mult&sc_outcome=launch) can help you to save up to 30% on your CloudFront usage if you plan to grow your usage over time.
+ [AWS 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 simplified connectivity, and it is a fully managed and elastic service.
+ [VPC Endpoints](https://docs.aws.amazon.com/vpc/latest/userguide/vpc-endpoints.html) allow connectivity between AWS services over private networking and can be used to reduce public data transfer and [NAT gateway](https://docs.aws.amazon.com/vpc/latest/userguide/vpc-nat-gateway.html) costs. [Gateway VPC endpoints](https://docs.aws.amazon.com/vpc/latest/userguide/vpce-gateway.html) have no hourly charges, and support Amazon S3 and Amazon DynamoDB. [Interface VPC endpoints](https://docs.aws.amazon.com/vpc/latest/userguide/vpce-interface.html) are provided by [AWS PrivateLink](https://docs.aws.amazon.com/vpc/latest/userguide/endpoint-service.html) and have an hourly fee and per-GB usage cost.
+ [NAT gateways](https://docs.aws.amazon.com/vpc/latest/userguide/vpc-nat-gateway.html) provide built-in scaling and management for reducing costs as opposed to a standalone NAT instance. Place NAT gateways in the same Availability Zones as high traffic instances and consider using VPC endpoints for the instances that need to access Amazon DynamoDB or Amazon S3 to reduce the data transfer and processing costs.
+ Use [AWS Snow Family](https://aws.amazon.com/snow/) devices which have computing resources to collect and process data at the edge. AWS Snow Family devices ([Snowball Edge](https://aws.amazon.com/snowcone/), [Snowball Edge](https://aws.amazon.com/snowball/) and [Snowmobile](https://aws.amazon.com/snowmobile/)) allow you to move petabytes of data to the AWS Cloud cost effectively and offline.
### Implementation steps
+ **Implement services:** Select applicable AWS network services based on your service workload type using the data transfer modeling and reviewing VPC Flow Logs. 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/)
+ [AWS Snow Family](https://aws.amazon.com/snow/)
+ [Amazon CloudFront Security Savings Bundle](https://aws.amazon.com/about-aws/whats-new/2021/02/introducing-amazon-cloudfront-security-savings-bundle/)
**Related videos:**
+ [Monitoring and Optimizing Your Data Transfer Costs](https://www.youtube.com/watch?v=UjliYz25_qo)
+ [AWS Cost Optimization Series: CloudFront](https://www.youtube.com/watch?v=k8De2AfAN3k)
+ [How can I reduce data transfer charges for my NAT gateway?](https://www.youtube.com/watch?v=hq4KtPRezus)
**Related examples:**
+ [How-to chargeback shared services: An AWS Transit Gateway example](https://aws.amazon.com/blogs/aws-cloud-financial-management/gs-chargeback-shared-services-an-aws-transit-gateway-example/)
+ [Understand AWS data transfer details in depth from cost and usage report using Athena query and QuickSight](https://aws.amazon.com/blogs/networking-and-content-delivery/understand-aws-data-transfer-details-in-depth-from-cost-and-usage-report-using-athena-query-and-quicksight/)
+ [Overview of Data Transfer Costs for Common Architectures](https://aws.amazon.com/blogs/architecture/overview-of-data-transfer-costs-for-common-architectures/)
+ [Using AWS Cost Explorer to analyze data transfer costs](https://aws.amazon.com/blogs/mt/using-aws-cost-explorer-to-analyze-data-transfer-costs/)
+ [Cost-Optimizing your AWS architectures by utilizing Amazon CloudFront features](https://aws.amazon.com/blogs/networking-and-content-delivery/cost-optimizing-your-aws-architectures-by-utilizing-amazon-cloudfront-features/)
+ [How can I reduce data transfer charges for my NAT gateway?](https://aws.amazon.com/premiumsupport/knowledge-center/vpc-reduce-nat-gateway-transfer-costs/)