# 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
When selecting services for your workload, it is key that you understand your organization priorities. Ensure that you have a balance between cost and other Well-Architected pillars, such as performance and reliability. 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 within your organization to collect information, such as product, business, technical, and finance.
**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 is a list of the pillars in order. You can also add a weighting to each, which can indicate how much additional focus a pillar has, or how similar the focus is between two pillars.
## 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/)
# 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
Perform a thorough analysis on all components in your workload. Ensure that balance between the cost of analysis and the potential savings in the workload over its lifecycle. You must find the current impact, and potential future impact, of the component. For example, if the cost of the proposed resource is \$110 a month, and under forecasted loads would not exceed \$115 a month, spending a day of effort to reduce costs by 50% (\$15 a month) could exceed the potential benefit over the life of the system. Using a faster and more efficient data-based estimation will 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.
[AWS Cost Explorer](https://aws.amazon.com/aws-cost-management/aws-cost-explorer/) and the [AWS Cost and Usage Report](https://aws.amazon.com/aws-cost-management/aws-cost-and-usage-reporting/) (CUR) 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.
**Implementation steps**
+ **List the workload components: **Build the list of all the workload components. This is used as verification to check that each component was analyzed. The effort spent should reflect the criticality to the workload as defined by your organization’s priorities. Grouping together resources functionally improves efficiency, for example production database storage, if there are multiple databases.
+ **Prioritize 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 chose 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/)
+ [Cloud products](https://aws.amazon.com/products/)
# 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
The cost of software licenses can be eliminated through the use of open-source software. 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 ensure that you have the most optimized 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.
**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 will align the cost of the software to the benefit 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 run audits, and penalties that could be imposed.
## 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/)
# 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 the cost.
**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 (Amazon RDS)](https://aws.amazon.com/rds/), [Amazon DynamoDB](https://aws.amazon.com/dynamodb/), [Amazon Simple Notification Service (Amazon SNS)](https://aws.amazon.com/sns/), and [Amazon Simple Email Service (Amazon SES)](https://aws.amazon.com/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 (Amazon S3)](https://aws.amazon.com/s3/) for static websites. Containerize your application if possible and use AWS Managed Container Services such as [Amazon Elastic Container Service (Amazon ECS)](https://aws.amazon.com/ecs/) or [Amazon Elastic Kubernetes Service (Amazon EKS)](https://aws.amazon.com/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 [AWS Lambda](https://aws.amazon.com/lambda/), [Amazon Simple Queue Service (Amazon SQS)](https://aws.amazon.com/sqs/), [Amazon SNS](https://docs.aws.amazon.com/sns/?id=docs_gateway), and [Amazon SES](https://docs.aws.amazon.com/ses/?id=docs_gateway). These services remove the need for you to manage a resource, and provide the function of running code, 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 (EDA)](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, refer to the [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, you need to review expected traffic for your databases on AWS and 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/)
+ [What is an 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)