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What are the Cost Of AWS Cloud & Pricing Model?

Amazon Web Services or the AWS Cloud has emerged as the most successful Cloud platform. A notable trend that has developed over the years is that there is a huge increase in the amount of bandwidth which comes with a dedicated server in the industry. The rise in Server Bandwidth Ten years ago, the a

Amazon Web Services or the AWS Cloud has emerged as the most successful Cloud platform. A notable trend that has developed over the years is that there is a huge increase in the amount of bandwidth which comes with a dedicated server in the industry.

The rise in Server Bandwidth

Ten years ago, the amount of data which was transferred monthly was around 1000 GB, which gradually moved up to 2000GB, 3000 GB, and so on. The current limit exhibited by most of the simple hosting servers is between 5TB to around 20 TB with many times the same it comes on a 1Gbps port. Thus, in the last couple of years, the data center and the whole industry undertaking hosting have been increasing the server bandwidth, which has been included due to two main reasons:

  • There has been an increase in the use of the services of the world wide web every day consistently building up. The increase in the use of the above has led to streaming of more content in terms of more videos, more data, etc. which flows across the web. Thus, an average customer who had been happy with 1000GB in bandwidth a decade ago or even as less as 500GB now needs around thousands of gigabytes transfer per month at the rate of more than 100 Mbps.
  • Another reason is that the cost of the transit, i.e., the bandwidth has significantly reduced as most of the companies who provide the hosting services can honor huge commitments with various network providers like Verizon, Comcast, Airtel, Level 3, etc. The increase in the network throughout which is committed by a data center every month leads to a relative drop in the price per Mbps from the same. It has also been noticed that there has been a considerable slash in the base price on even a small 1Gbps from $15-$30 per Mbps in 2005 to less than $5 per Mbps. Also, in case the demand touches around 10Gbps+ commits, the price can further fall below $1 every Mbps.

Thus, it has been basically the increase in supply, which has considerably brought down the prices yet improved the user experience.

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AWS Pricing Model

Amazon has wonderfully described its pricing model by putting the following information on its website, “AWS pricing is similar to how you pay for utilities like water or electricity. You only pay for the services you consume, and once you stop using them, there are no additional costs or termination fees”. In other words, AWS basically offers a pay-as-you-go payment structure for more than 70 services. Thus, you have to pay for these on an individual basis as much as you have used them. There are many benefits associated with this model like

  • There are no upfront expenses underlying the project or application infrastructure, and the resources can be increased or decreased depending upon your business requirements from time to time. This model thus completely rules out any kind of upfront expenses.
  • This is also a more flexible approach as you can adjust with the changing needs of your own business.
  • There is no requirement for you to get into any kind of long-term contract or services.

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How to work around the AWS Pricing effectively?

The best approach to work around your AWS Pricing to bring down the costs involved is by picking up the right pricing model for paying for the Amazon EC2 instances.  Amazon broadly has four methods to make payments. These are

  • On-Demand: This model completely rules out any kind of upfront payments, which means that you do not have to commit for a long period, but Amazon will be charging for the computer capacity on an hourly basis. The usage of the latter can be increased or brought down as per your requirements. The model is also highly beneficial to you if you are expecting flexibility in your business demands in the form of an unexpected shift in workloads like a sudden high or sudden drop. In this case, the on-demand model offers a cheap solution. Also, it gives you a chance to be well-versed with your business needs before you buy any committed plan. This plan works best for the businesses you are testing their solutions for the first time on Amazon EC2.
  • Reserved Instances: In this case, you need to pay 30 percent less when compared to the on-demand model. The reserved instances are always assigned to a particular Availability Zone which allows capacity reservation. Thus, in this case, you do not have to think about the capacity for starting any new instances.
    • The pricing in comparison to the On-Demand model is low because there are many instances which are reserved up front, i.e. you have to commit to a one or more years for bringing your costs down significantly. But, a three-year lock-in period is a huge period in these competitive days in IT as there can be a sea-change in the way things work like resource demand, pricing, etc.
    • Thus, designing a complete infrastructure for that kind of time is difficult. Thus, you can avoid the clause. However, one should not ignore the fact that the model also provides a sense of security that the computing resources which are needed by your business will always be there. Thus, you should be aware of your computing resource usage for driving full benefit from your model.
    • Amazon has made it a Standard Reserved Instance and also introduced a new type of instance called the Schedules Reserved instance designed particularly for the businesses which run their most critical tasks regularly.
  • Spot Instances: These involve bidding for all the empty EC2 computing capacity at a price 90 percent less than the regular On-Demand price. These are primarily only for the use cases which satisfy urgent computing needs and for those applications which are only possible to run by making use of computing capacity at a very low price. This acts as an awesome way to bring down costs as you can get the computing resources at a very less price.
  • Dedicated Hosts: This is basically a physical EC2 server where you can also use your existing server-bound software licenses. You have the choice to buy it on-demand or on reserved capacity with the latter up to 70 percent cheap.

You should remember that AWS regularly makes new instance types available to the market and thus you have to always make use of the latest version of the instance types as the pricing for each is optimized much more effectively when compared to the same instance type of the previous generation.

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Optimization for Reduction in Costs

The biggest pricing drain on AWS is the EC2 instance, i.e. the computer resources. This is why you have to pick the best instance for your workflow as there is a huge difference between instance families. It is also important for you to monitor your resource usage as by doing the same, you can ensure that compute resources are not used. In case your need for computing resources is for only a short period, and there is little risk associated, then you may prefer spot instances and can bring down your costs by 90 percent as compared to the on-demand instances.

Another method to optimize your costs is by reviewing frequently and eliminate any kind of unused resources. Even though the production instances have to auto-scale in response to the demand but the development and even the testing instances can be easily shut down in the off-work hours or even during the weekends. This will also bring down your costs by about 65 percent.

Also, the instances which have been used for AWS training or demos have to be stopped after the completion of these projects.

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AWS Calculators

It is quite possible that you completely lose track of the services which you are using after you are into many AWS services. Although there are many ways to optimize your usa

ge, all these plans will not be able to work effectively is a clear and concise overview of your AWS usage is known. Thus, this creates the need for using the AWS Total Cost of Ownership (TCO) calculator, which is a wonderful tool for prediction and monitoring of your expenses. The tool is easy to use. It helps you to estimate your cost savings and gives you detailed reports of the same based on the assumptions you have punched in. Thus, you must enter the present configuration of your hosting environment, and the TCO calculator will provide you with an elaborate cost comparison and other estimated savings if you have to migrate your application to AWS cloud.


The costing for AWS Cloud depends on the extent of your knowledge, other pricing models, and the way you optimize your expenses for avoiding any kind of price shocks at the end of the month. AWS regularly lowers the pricing of its services and resources. So this typically means that going forward both AWS services and resources will be more affordable.

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