Demystifying Your Monthly AWS Cloud Usage Cost

Over the last few years, AWS has seen some great cloud adoption across industries. This is definitely not surprising given how well it works. One important aspect of using AWS for your business is to figure out the billing process so that you can estimate the amount that you’ll need to spend on it. Understanding how the AWS billing process works is important in order to optimize AWS cloud usage cost. The great thing about AWS is that its allows you to pay only for the services that you use. At the same time, you have flexibility and agility to scale up and scale down your computing infrastructure based on your business needs.

Besides, AWS also offers several innovative services at a fraction of what similar on-premises solutions would cost. Amazon RDS for Aurora and Amazon Redshift are great examples of solutions that can help you run enterprise-grade solutions at one tenth of the cost of comparable on-premises solutions.

Most IT managers need to walk the delicate tight rope, balancing both performance and cost. Therefore, a thorough understanding of how AWS costing works can be extremely valuable.

Features of AWS Cloud Usage Cost Structure

AWS’ pricing philosophy has remained unchanged despite the deluge of new products that they’ve launched over the years. Basically, you’re billed at the end of every month, and you pay for what you use. Also, there are no long-term contracts required. This means you can start or stop using a product at any time. The pricing for each service is listed clearly on the AWS Pricing page.

Immense flexibility: Since each service is priced individually, users can choose only the services they need for their businesses and pay only for those.

Optimum Infrastructure: There are no minimum commitments or long-term contracts. This means that businesses have the liberty to choose. They only get the required services that they need, at the time they need it. You don’t have to pay. Not only do you not pay upfront for excess capacity, but  also pay no penalty for underestimating your needs. Your money is not locked in because you pay a low, lesser variable cost rather than an incurring upfront capital expense. You pay for compute resources on an hourly basis, counting from the time you launch a resource until the time you terminate it. On the other hand, for data storage and transfer, the cost is determined on gigabyte use. Similarly, AWS charges underlying infrastructure and services are based on the actual consumption.

Volume Advantage: Because pricing is tiered for storage and data transfer, users can accrue the benefit of lower prices per gigabyte as usage grows. The bigger you grow, the more you save. For compute too, you get volume discounts of up to 10% when you reserve greater volumes.

Reserve Option: Users can save up to 60% on reserve options when compared to On-Demand capacity.

AWS grows, you win: As AWS grows, it gains from economies of scale by reducing its data center hardware costs, improving operational efficiency and, lowering power consumption and overall cost of doing business. And these get passed on to users!

Complimentary offerings: AWS has some amazing services that it offers at no extra cost. Amazon Virtual Private Cloud (Amazon VPC), AWS Elastic Beanstalk, AWS CloudFormation, AWS Identity and Access Management (IAM) and Auto Scaling are some great examples.

AWS Pricing Fundamentals

When it comes to AWS pricing, you essentially pay for three things: compute, storage, and data transfer out; although this may differ slightly depending on the AWS product that you are using, these have the highest impact on your AWS cloud usage cost.

One interesting characteristic is that AWS charges for data transfer out, but not on inbound data transfer or data transfer between other Amazon Web Services within the same region.  The outbound data transfer is aggregated across Amazon EC2, Amazon S3, Amazon RDS, Amazon SimpleDB, Amazon SQS, Amazon SNS, and Amazon VPC and then charged at the outbound data transfer rate. It is important to note that this charge appears as AWS Data Transfer Out on the monthly statement. When it comes to Inbound Data Transfer, there is no charge for inbound data transfer for all Amazon Web Services across all regions.

Price Estimation for various AWS services

Amazon Elastic Compute Cloud (Amazon EC2) Amazon EC2 is great because it provides complete control of your computing resources. An added advantage is that AWS charges only for the capacity that you actually use. There are several factors that you need to consider when it comes to estimating the AWS cloud usage cost of EC2. These include clock hours of Server Time; Machine Configuration (Instance pricing varies with the AWS region, OS, number of cores, and memory); Machine Purchase Type; Number of Instances, etc. The number of hours the Elastic Load Balancer runs and the amount of data it processes contribute to the monthly cost. Factors such as auto scaling, IP Addresses, Operating Systems and Software Packages also play a role in influencing AWS cloud usage cost.

The most important component is usually the Elastic Cloud Compute (EC2), which contributes to 70 to 75% of the AWS bill for an average AWS user. When used in conjunction with other AWS services, it may appear in the AWS bill in the form of several line items, making it challenging to figure out what exactly is driving usage and costs. Analyzing this usage and breaking it up by various dimensions like resource, instance type, services and accounts can help in optimization of AWS cloud usage cost. The “EC2 Cost Analysis” available in the ‘All-New’ Botmetric platform as part of it’s ‘Cost Management’ can help in achieving this.

Amazon Simple Storage Service (Amazon S3): The great thing about Amazon S3 is that it provides a simple web services’ interface that can be used to store and retrieve any amount of data, at any time, from anywhere on the web. Some of the factors that need to be considered while estimating this project are storage class, number and size of objects stored, number and type of requests and the amount of data transferred out of the Amazon S3 region.

Amazon Elastic Block Store (Amazon EBS): EBS has three volume types: General Purpose (SSD), Provisioned IOPS (SSD), and Magnetic. Each of these varies in terms of performance characteristics and cost, allowing you to choose the right storage performance and price for the needs of your applications. The factors that matter are volume (amount you provision in GB per month); Input Output Operations per Second (IOPS); and whether you have opted for Snapshot backup and the amount of data transferred out of your application.

Amazon Relational Database Service (Amazon RDS): Amazon RDS provides cost-efficient and re-sizable capacity while managing time-consuming database administration tasks. You can estimate the AWS cloud usage cost of RDS based on factors including Clock Hours of Server Time; Database Characteristics (database engine, size, and memory class); Database Purchase Type; Number of Database Instances; Provisioned Storage; Additional Storage; number of input and output requests to the database; Deployment Type (number of Availability Zones) and Data Transfer.  

Amazon CloudFront: The cost can be estimated by considering factors such as Traffic Distribution, the number and type of requests (HTTP or HTTPS) made and the geographic region in which the requests are made, and finally, the amount of data transferred out of the user’s Amazon CloudFront edge locations.

Being proactive about AWS Cost Management

Some of the most attractive characteristics of AWS are Agility, Flexibility and the Pay-on-Demand features. But to get the most out of your AWS investment, proactive AWS Cost Management is a must. As with most things, maintaining the balance between performance and cost is of utmost importance. Cost/spend tracking and optimization are the most important considerations to actively manage cost. Some of the ways to go about cost management are:

  • Monitor reports & alerts around set-up, spend, usage, billing, etc.
  • Identify idle resources
  • Use AWS trusted advisor to run multiple configuration checks and recommend savings
  • Use Amazon Cloudwatch for resource utilization information
  • Match resources and workloads by choosing the right instance types that meet basic requirements

Additionally, using a cost-management tool can help in several ways. It can help in detecting unused and underused resources. With tools such as the Botmetric Intelligent Cloud Platform for AWS Cost Management, you don’t need to stop at just detecting; you can actually remove unused resources without even going to the AWS console. You can not only save cost by automating start/stop for your instances, but also drill down cost to a granular level.

One way to optimize your AWS cloud usage cost of EC2 is by purchasing EC2 Reserved Instances or Spot Instances. While on-demand instances work great if you need to run your Amazon EC2 Instances for a couple of hours a day or a few days a week; Reserved Instances work much better when you need to run your Amazon EC2 Instances more often than that. Reserved Instances enable you to reserve capacity and receive a discount on your instance usage. Reliable Reserved Instances provide a capacity reservation so that you can confidently launch instances you have reserved when you need them.


To sum up, the number and type of services offered by AWS may have increased dramatically over the last few years, but the philosophy of pricing has not changed. This means that you still pay as you go, pay for what you use, pay less as you use more, and pay even less when you reserve capacity.

Having said, projecting AWS cloud usage cost for specific use cases can sometimes get pretty challenging because it typically involves the use of multiple features across multiple AWS products. In turn, this means that there are more factors and purchase options to consider. For such instances, it may make sense to examine the fundamental characteristics for each AWS product, and estimate usage for each of these characteristics. Once you have a better sense of how much each feature or characteristic is likely to be used, figuring out the AWS cloud usage cost is just a matter of looking up prices posted on the AWS website. Additionally, there are tools such as the AWS Simple Monthly Calculator that you can use to estimate your monthly bill. It works well because it allows you to breakdown the AWS cloud usage cost per service and also get an aggregate monthly estimate.