Cost Management Explained

Key Concepts

• Cost Allocation Tags: Tags used to categorize and track AWS costs.
• AWS Budgets: Tools to set custom budgets and receive alerts when costs exceed thresholds.
• Cost Explorer: A tool to visualize, understand, and manage AWS costs and usage over time.
• Reserved Instances (RI): Pre-purchased capacity reservations that offer significant discounts.
• Spot Instances: Instances that use spare EC2 capacity at a lower cost.

Detailed Explanation

Cost Allocation Tags

Cost Allocation Tags are used to categorize and track AWS costs. By applying tags to your resources, you can group and filter costs based on specific criteria. This helps in understanding and managing your AWS spending more effectively.

AWS Budgets

AWS Budgets allows you to set custom budgets and receive alerts when your costs or usage exceed (or are forecasted to exceed) your budgeted amount. This helps in proactively managing your AWS spending and avoiding unexpected costs.

Cost Explorer

Cost Explorer is a tool that provides a visual representation of your AWS costs and usage over time. It allows you to analyze your costs by service, region, and other dimensions. Cost Explorer helps in identifying cost trends and optimizing your AWS spending.

Reserved Instances (RI)

Reserved Instances (RI) are pre-purchased capacity reservations that offer significant discounts compared to On-Demand pricing. RIs provide cost savings for predictable workloads and can be purchased with different payment options (No Upfront, Partial Upfront, All Upfront).

Spot Instances

Spot Instances allow you to use spare EC2 capacity at a lower cost. Spot Instances are ideal for workloads that can be interrupted, such as batch processing jobs. However, they can be terminated by AWS if the demand for capacity increases, so it's important to design your applications to handle interruptions.

Examples and Analogies

Example: Cost Allocation Tags

Here is an example of applying Cost Allocation Tags to an EC2 instance:

aws ec2 create-tags --resources i-1234567890abcdef0 --tags Key=Environment,Value=Production Key=Project,Value=MyProject
    

Example: AWS Budgets

Here is an example of creating a budget in AWS Budgets:

aws budgets create-budget --account-id 123456789012 --budget file://budget.json --notifications-with-subscribers file://notifications.json
    

Where budget.json contains:

{
    "BudgetLimit": {
        "Amount": "1000",
        "Unit": "USD"
    },
    "BudgetName": "MonthlyBudget",
    "BudgetType": "COST",
    "TimeUnit": "MONTHLY"
}
    

Example: Cost Explorer

Here is an example of using Cost Explorer to analyze costs by service:

aws ce get-cost-and-usage --time-period Start=2023-01-01,End=2023-01-31 --granularity MONTHLY --metrics "UnblendedCost" --group-by Type=DIMENSION,Key=SERVICE
    

Example: Reserved Instances (RI)

Here is an example of purchasing a Reserved Instance:

aws ec2 purchase-reserved-instances-offering --reserved-instances-offering-id 87654321-1234-5678-9012-345678901234 --instance-count 1 --limit-price Amount=500,CurrencyCode=USD
    

Example: Spot Instances

Here is an example of requesting Spot Instances:

aws ec2 request-spot-instances --spot-price "0.05" --instance-count 2 --type "one-time" --launch-specification file://launch-specification.json
    

Where launch-specification.json contains:

{
    "ImageId": "ami-12345678",
    "InstanceType": "t2.micro",
    "KeyName": "my-key-pair",
    "SecurityGroupIds": [
        "sg-12345678"
    ]
}
    

Analogy: Cost Management

Think of cost management as managing a household budget. Cost Allocation Tags are like categorizing your expenses (e.g., groceries, utilities). AWS Budgets are like setting a monthly spending limit and getting alerts if you exceed it. Cost Explorer is like reviewing your bank statements to understand where your money is going. Reserved Instances are like pre-paying for a year's worth of groceries to get a discount. Spot Instances are like taking advantage of sales to buy items at a lower cost, but you might miss out if the sale ends.