AWS Cost Efficiency
8 steps to Master AWS EC2 Cost Optimization

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With it's offering of a wide and deep range of instance types for various use cases such as compute-optimized, memory-optimized, iops-optimized etc, EC2 provides the most optimal choice of compute resources for your unique workload requirements. However, as your organization’s computing requirements increase, the cost of EC2 instances can also go up significantly.This article provides best practices and strategies to optimize AWS EC2 costs and maximize your return on investment.

1. Choose the Right EC2 Instance Type & Size

Choosing the right EC2 instance type and size that works for your workloads is important, so that you are not over-provisioning your resources. Study the specifications that come with the applications that you plan to run, for determining the instance type and size. Considering factors such as expected CPU, memory, storage, and network performance can help in choosing the right kind of EC2 instance required. AWS also introduces new instance types regularly with improved capabilities. Taking advantage of new generation instance types can help you in reducing your costs, while offering similar performance.

2. Leverage Spot Instances

EC2 spot instances enable access to spare Amazon EC2 capacity in AWS Data centers with costs up to 90% less than that of on-demand instances and provide a great way to achieve cost optimization while having same performance of On-demand instances. Spot instances are ideal for tasks with dynamic workloads such as batch processing, CI/CD, ad hoc data analysis, and for development or testing environments.

Though Spot instances offer significant cost savings, it is very important to note that they are not suitable for workloads which need to have high availability. This is because spot instances can be terminated within a two-minute period, if that spare capacity is reclaimed. Therefore, it is crucial to design your applications running on spot instances to handle interruptions gracefully. You can use AWS features like Spot Fleet, a combination of On-demand and Spot instances in your auto scaling group to make sure workloads that are interrupted by spot instance termination, are handled by on-demand instances.

3. Utilize Reserved Instances and Savings Plans

Opting for acombination of Reserved Instances and Savings Plans can help in optimizing your AWS EC2 spending. Reserved Instances provide capacity reservation for a period of one to three years based on an hourly rate. RIs (Reserved Instances) can be used when you have predictable workloads and can save up to 72% on your EC2 costs.

Forsteady-state applications, Savings Plan offers flexibility by reserving compute capacity at an hourly rate regardless of instance family, size, region and operating system.

4. Right size Your Instances

Right sizing involves upsizing or downsizing the resources of your EC2 instances to the actual needs of your workload. AWS provides tools such as Cost Explorer and Compute Optimizer that can analyze historical usage patterns and provide recommendations for instance optimization. With Cost Explorer, you can get a single view of underutilized EC2 instances across all member accounts and take necessary rightsizing actions. Compute Optimizer can provide you recommendations to upsize or downsize your instance after analyzing your usage data for a period of at least 14 days to 3 months.

5. Implement Auto Scaling

Using autoscaling ensures that you have the right number of instances to handle the required workload efficiently at any point in time. During non-peak periods, auto scaling can scale down your instances, eliminating the need to pay for idle resources. Conversely, during peak periods, auto scaling can scale up your instances to meet the increased demand, ensuring optimal performance without over provisioning.

6. Optimize Your EC2 Storage Costs

Storage costs are a significant part of the overall AWS bill. To optimize your EC2 storage costs, you must consider the following strategies:

Choose the correct volume type: AWS offers several types of storage volumes such as General PurposeSSD (GP2), Provisioned IOPS SSD (IO1), and Magnetic (Standard). Selecting the volume type that best aligns with the performance and durability of your workload can reduce your costs significantly.

Leverage Amazon S3 storage classes: Amazon S3 provides different storage classes such as Standard, Intelligent-Tiering, Infrequent Access (IA), Glacier, and Deep Archive. Depending on your data access patterns and retrieval requirements, you can optimize costs by moving less frequently accessed data to lower-cost storage classes like IA, Glacier, or Deep Archive. By enabling Intelligent tiering at a bucket level, AWS takes care of moving objects in your bucket to in frequent access classes (like Glacier and Deep Archive) automatically and significantly reduces your S3 storage costs.

Monitor your EBS snapshots: EBS snapshots are a great way to back up your data and create point-in-time copies, but they can also contribute to storage costs. Regularly review your EBS snapshots and delete any unnecessary or outdated snapshots to avoid unnecessary storage costs.

7. Monitor Your EC2 Usage

As your business grows, and priorities change, it is critical to monitor your EC2 usage regularly and take data-driven decisions for cost optimization. AWS provides several tools and utilities to analyze and optimize your EC2 usage.

AWS Trusted Advisor: Trusted Advisor is a service offered by AWS to provide real-time guidance to optimize your AWS EC2 resources. Trusted Advisor can analyze your account and provide actionable cost optimization recommendations based on your usage, configuration, and expenditure.

AWS Cost and Usage Reports (CUR): This tool provides a comprehensive set of cost and usage-based reports to break down costs by hour, day, month, or by product, resource and user-defined tags. Leverage CUR to gain visibility into usage patterns, identify underutilized resources, and take appropriate action to maximize utilization and minimize costs.

8. Leverage ARM or AMD-based Instances

AWS offers instances based on ARM or AMD processors which can provide cost savings compared to Intel-based instances while offering similar performance. ARM-based instances, such as the AWS Graviton2, offer excellent price-performance ratios for certain workloads. Similarly, AMD-based instances provide cost savings while delivering similar performance of Intel-based instances. By leveraging alternative processors, you can achieve significant cost savings without compromising performance.


Amazon EC2 provides highly scalable and reliable computing capacity in the AWS cloud so that businesses can run their internal and customer facing applications with minimal disruption. However, it is important for businesses to routinely monitor and optimize their EC2 resources using various strategies listed, to ensure that no EC2 resources are underutilized, and the costs are reduced to the maximum extent possible.

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