Cost Economics on AWS
Tags: cloud, architecture, beginners, management
Published: 2024-02-10 17:15:00

Welcome, adventurer, to the often misunderstood realm of AWS billing. At first glance, it might seem like a simple ledger  – charges in, payments out. But hidden within those line items lie treasures of insights and potential savings.  Think of this blog as your explorer's guide. We'll unravel common misconceptions about AWS costs, venture into uncharted territories, and maybe even unearth some cost optimization surprises along the way.

## Spending Types in AWS: A Comparative Exploration

We'll start by breaking down AWS resource expenses based on their cost structures, drawing insightful parallels with a manufacturing company's spending habits.

1. Upfront Spending: This is the initial investment required to kickstart operations, akin to setting up a factory in the manufacturing world. Imagine building a fully automated factory equipped with cutting-edge robotics. The promise? Lower labor costs in the long term. The catch? It's a hefty upfront investment. This scenario is fraught with risks. Will the demand for your products justify the high initial outlay? What if the market response is lukewarm, leading to enormous sunk costs? Conversely, underestimating demand could mean turning away customers due to inadequate production capacity, a missed opportunity with its own set of opportunity costs.

This analogy extends to software infrastructure spending. In the era of data center investments, splurging on expensive hardware was a bet on your company's future growth. Misjudging this could mean underutilizing resources or scrambling to scale up to meet unexpected demand. Moreover, demand can be seasonal, yet data centers offer little flexibility. This often leads to overprovisioning for peak times and underuse during off-peak periods.On AWS, the most common example are resources purchased annually as part of the AWS savings plan or the AWS reserved instances. 

2. Time-based Spending: Think of equipment you rent out for your manufacturing processes in manufacturing firms. You pay a certain amount of rent, and regardless of whether the machines are used or not, you are liable to pay the rent. Similarly, server costs in this category are incurred by your infrastructure regardless of whether you get requests or not. 

On AWS, while finding resources, the keyword to look for is “hourly costs”. In my experience, most server-based resources have hourly costs. For e.g., at the time of writing, an Application Load Balancer (ALU) costs $0.0225 per hour regardless of the amount of traffic you receive. 

If you are a hobbyist, hourly costs are what you hate the most since you end up paying for the resource in spite of not receiving any traffic. To help in this situation, AWS has a “AWS Free Tier” where certain resources, belonging to specific categories are provided for free so that you can play around and try them out. 

3. Capacity-based spending: Finally, these are costs that are incurred based on the usage of certain AWS resources. AWS has various metrics to calculate usage depending on the resource, and you are billed as per your usage. Usage can be calculated based on CPU usage, bandwidth usage, or the pure number of requests per second. In either case, your bill increases as your usage increases, leading to a fair billing policy. 

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## Secrets of Your AWS Bill: A Treasure Hunt Beyond the Basics

Think of AWS instances as having different billing personalities. Some play it safe and steady, while others thrive on bursts of activity.

The Predictable Monthly Plan: Services like AWS ACM Private CA and AWS Route 53 hosted zones are like seasoned theater troupes. You pay a monthly subscription, ensuring their performance no matter how often you attend. The first tier of Route53's pricing practically makes it a free show for smaller audiences – enjoy those million queries without sweating the cost. The first million queries are priced at a friendly $0.40.

The 'Bursts Only' Billing: AWS Lambda and AWS On-Demand DynamoDB occupy the opposite end of the spectrum. These are the pay-as-you-go stars. No requests? No bill. They're great for unpredictable workloads or those spiky, high-intensity use cases.

The "Best of Both Worlds" Balance: The line often gets blurred because many AWS services blend these models.  You might have a baseline "always-on" fee coupled with additional charges that increase depending on the resources you use. This strikes a balance between predictability and flexibility.

The key is finding a suitable pricing model for your specific needs. 

## Conclusion

As cloud architects, we're in the business of lean design – squeezing out costs without sacrificing a hair of performance. Resource management in this game is like picking the right tool for the job. Take savings plans:  lock in a known workload and watch your bill shrink. But beware! That commitment can bite back if your environment needs to twist and turn on a dime. Finally, spot instances can help shrink bills on instances that are used in non production environments.

Then there's the wild card of traffic. Apps that spike and crash need on-demand instances, flexing like an accordion to match demand. This saves you from paying for servers humming along with nothing to do. But wait, steady-state apps? Those are perfect candidates for carefully sized instances – no need to throw money away on flexibility you won't use.

Finally, the math behind your cloud bill might seem crystal clear in the rearview mirror, but forecasting those costs is like driving through fog. Startups, understandably, sometimes crawl along with on-demand pricing, terrified of long-term commitments. Yet, there's a difference between savvy navigation and just being paralyzed by fear. The freedom of on-demand comes at a hefty toll, so take a stab at seeing through the haze of future usage –  you might avoid paying a fortune for flexibility you don't need.