Amazon Web Services (AWS) helps you move faster, reduce IT costs, and attain global scale through a
broad set of global compute, storage, database, analytics, application, and deployment services. One of
the main benefits of cloud services is the ability it gives you to optimize costs to match your needs,
even as those needs change.
AWS offers on-demand, pay-as-you-go, and reservation-based payment models, enabling you to obtain
the best return on your investment for each specific use case. AWS services do not have complex
dependencies or licensing requirements, so you can get exactly what you need to build innovative, costeffective solutions using the latest technology. In this whitepaper, we’ll provide an overview of how
AWS pricing works across some of our most widely used services.
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Key Principles
While pricing models vary across services, it’s worthwhile to review key principles and best practices
that are broadly applicable.
Understand the fundamentals of pricing
There are three fundamental drivers of cost with AWS: compute, storage, and outbound data transfer.
These characteristics vary somewhat, depending on the AWS product and pricing model you choose.
In most cases, there is no charge for inbound data transfer or for data transfer between other AWS
services within the same region. There are some exceptions, so be sure to verify data transfer rates
before beginning. Outbound data transfer is aggregated across services and then charged at the
outbound data transfer rate. This charge appears on the monthly statement as AWS Data Transfer Out.
The more data you transfer, the less you pay per GB. For compute resources, you pay hourly from the
time you launch a resource until the time you terminate it, unless you have made a reservation for
which the cost is agreed upon beforehand. For data storage and transfer, you typically pay per GB.
Start early with cost optimization
Adopting cloud services is not just a technical evolution. It also requires changes to how organizations
operate. As you move from IT being treated as a capital investment that happens periodically to a world
where pricing is closely tied to efficient use of resources, it pays to understand what drives cloud pricing. so you can build a strategy for optimizing it.
When it comes to understanding pricing and optimizing your costs, it’s never too early to start. It’s
easiest to put cost visibility and control mechanisms in place before the environment grows large and
complex. Managing cost-effectively from the start ensures that managing cloud investments doesn’t
become an obstruction as you grow and scale.
Maximize the power of flexibility
AWS services are priced independently and transparently, so you can choose and pay for exactly what
you need and no more. No minimum commitments or long-term contracts are required unless you
choose to save money through a reservation model. By paying for services on an as-needed basis, you
can redirect your focus to innovation and invention, reducing procurement complexity and enabling
your business to be fully elastic.
One of the key advantages of cloud-based resources is that you don’t pay for them when they’re not
running. By turning off instances you don’t use, you can reduce costs by 70 percent or more compared
to using them 24/7. This enables you to be cost-efficient and, at the same time, have all the power you
need when workloads are active.
Use the right pricing model for the job
AWS offers several pricing models depending on product. These include:
• On Demand means you pay for compute or database capacity with no long-term commitments
or upfront payments.
• Dedicated Instances (available with Amazon Elastic Compute Cloud (Amazon EC2)) run in a
virtual private cloud (VPC) on hardware that’s dedicated to a single customer.
• Spot Instances are an Amazon EC2 pricing mechanism that lets you purchase spare computing
capacity with no upfront commitment at discounted hourly rates.
• Reservations provide you with the ability to receive a greater discount, up to 75 percent, by
paying for capacity ahead of time. More detail is provided in the section, “Optimizing costs with reservations.”
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