# 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 Implement 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 master 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 Instances). Perform an analysis on the workload using the Recommendations feature in AWS Cost Explorer. **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. **Implementation steps** + ** 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/). + **Analyze workload elasticity: **Using the hourly granularity in Cost Explorer, or a custom dashboard. Analyze the workload 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) ## 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) **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 Implement Regions based on cost Resource pricing can be different in each Region. Factoring in Region cost helps ensure that you pay the lowest overall price for this workload. **Level of risk exposed if this best practice is not established:** Medium ## Implementation guidance 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. For global audiences, you should use multiple locations to meet these needs. You should select the geographic location that minimizes your costs. The AWS Cloud infrastructure is built around [Regions and Availability Zones](https://docs.aws.amazon.com/AWSEC2/latest/UserGuide/using-regions-availability-zones.html). A Region is a physical location in the world where we have multiple Availability Zones. Availability Zones consist of one or more discrete data centers, each with redundant power, networking, and connectivity, housed in separate facilities. Each AWS Region operates within local market conditions, and resource pricing is different in each Region. Choose a specific Region to operate a component of or your entire solution so that you can run at the lowest possible price globally. You can use the [AWS Pricing Calculator](https://calculator.aws/#/) to estimate the costs of your workload in various Regions. **Implementation steps** + ** Review 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. ## 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) # 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 When you utilize third-party solutions or services in the cloud, it is important that the pricing structures are aligned to Cost Optimization outcomes. Pricing should scale with the outcomes and value it provides. An example of this is software that takes a percentage of savings it provides, the more you save (outcome) the more it charges. Agreements that scale with your bill are typically not aligned to Cost Optimization, unless they provide outcomes for every part of your specific bill. For example, a solution that provides recommendations for Amazon Elastic Compute Cloud(Amazon EC2) and charges a percentage of your entire bill will increase if you use other services for which it provides no benefit. Another example is a managed service that is charged at a percentage of the cost of resources that are managed. A larger instance size may not necessarily require more management effort, but will be charged more. Ensure that these service pricing arrangements include a cost optimization program or features in their service to drive efficiency. **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 Consider the requirements of the workload components and understand the potential pricing models. Define the availability requirement of the component. 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. **Implementation steps** + **Implement pricing models: **Using your analysis results, purchase Savings Plans (SPs), Reserved Instances (RIs) or implement Spot Instances. If it is your first RI purchase then choose the top 5 or 10 recommendations in the list, then monitor and analyze the results over the next month or two. Purchase small numbers of commitment discounts regular cycles, for example every two weeks or monthly. Implement Spot Instances for workloads that can be interrupted or are stateless. + **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 every two to four weeks, or as your organization usage changes. ## Resources **Related documents:** + [Accessing Reserved Instance recommendations](https://docs.aws.amazon.com/awsaccountbilling/latest/aboutv2/ri-recommendations.html) + [EC2 Fleet](https://aws.amazon.com/blogs/aws/ec2-fleet-manage-thousands-of-on-demand-and-spot-instances-with-one-request/) + [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) **Related videos:** + [Save up to 90% and run production workloads on Spot](https://www.youtube.com/watch?v=BlNPZQh2wXs) # COST07-BP05 Perform pricing model analysis at the master account level Use Cost Explorer Savings Plans and Reserved Instance recommendations to perform regular analysis at the management account level for commitment discounts. **Level of risk exposed if this best practice is not established:** Low ## Implementation guidance Performing regular cost modeling ensures that opportunities to optimize across multiple workloads can be implemented. 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 will 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. To find opportunities for Spot workloads, use an hourly view of your overall usage, and look for regular periods of changing usage or elasticity. **Implementation steps** + ** Perform a commitment discount analysis: **Using Cost Explorer in your account review the Savings Plans and Reserved Instance recommendations. To verify you implement the correct recommendations with the required discounts and risk, follow the Well-Architected labs. ## 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) **Related examples:** + [Well-Architected Lab: Pricing Models](https://wellarchitectedlabs.com/Cost/Cost_Fundamentals/200_3_Pricing_Models/README.html)