The document provides an overview of AWS billing fundamentals, focusing on managing and analyzing cloud costs effectively. It outlines stages of cost management including visibility, allocation, efficiency, savings, and unit cost, while emphasizing the importance of tagging resources and utilizing reserved instances for cost savings. Key metrics and detailed billing reports are discussed to enhance understanding of AWS expenses and optimize financial management.

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AWS Billing Fundamentals

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Dev/Test
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Exec team starts
really caringLoadtest
A story of growth

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About Us
Cloud Cost Management & Analytics
$2B+
in tracked AWS costs

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Dashboards Spend
Alerts
API Reports
Cloudwatch
EC2 Usage API
Detailed Billing
Report Files
We generate custom
dashboards, reports,
recommendations and
alerts
We retrieve your data
using read only IAM
credentials
AWS provides complex
billing and usage data
We organize & analyze
your cost & usage data
How It Works

6. Visibility Allocation
Efficiency
Savings
Unit
Cost
Cloud Cost Management Lifecyle
Stage I: Visibility (No Surprises)
Stage II: Allocation (Where are the dollars going?)
Stage III: Efficiency (Don’t run cloud like a
datacenter)
Stage IV: Savings (Lower hourly rate with RIs)
Stage V: Unit Cost (Tying spending to margins)

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How does AWS charge?

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cost = usage x rate

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cost = usage x rate

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cost = usage x rate
Pay for instances“by _________”
Instance Hour
… data transfer per“GB”
Pay for EBS per“_______”
GB Month
… IO per“I/O requests”
…Snapshots per“GB Month”
Pay for S3 storage per“________”
Byte (GB) Hour
… put, copy, post, list per“request”
… data transfer per“GB”
Requires Engineering/Ops work

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EC2 (compute)
spending generally accounts for
80%+ of the bill…
(Followed by EBS, S3, RDS, etc.)

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cost = usage x rate

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EC2 Pricing Options

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cost = usage x rate
Pay as you go with On-demand or “BoxUsage”
Commit to lower rates with Reserved Instances “HeavyUsage”
Architect for instability with Spot Instances“SpotUsage”
Single tenancy with Dedicated Instances“DedicatedUsage”
etc
Can be autonomously controlled by Finance
without engineering work

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Let’s look under the hood
at the Detailed Billing Report
(DBR)…

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Originating account
for the charges
Linked Account
Data Sources
AWS Product Name
e.g. Amazon Elastic
Compute Cloud
Product Name
The type of usage
charge applied
e.g.
heavyusage:m3.large
Usage Type
A human readable
field showing the
resource type used as
well as the rate
applied
Item Description
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Key Dimensions in the DBR

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Total Blended Cost
for the time period,
represented in
Cloudability as
“Total Invoiced Cost”
Blended Cost
Data Sources
Total Unblended Cost
for the time period
Unblended Cost
Amount of individual
units used of that
resource type
Usage Quantity
Unblended rate for a
single unit of the
resource type
Unblended Rate
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Key Metrics in the DBR

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Data Sources
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Example report in Cloudability

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Data Sources
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More info on data sources:
1. http://blog.cloudability.com/aws-101-data-sources/

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Data Sources
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More info on unblended rates:
1. https://support.cloudability.com/hc/en-us/articles/206972637-Vlog-How-to-calculate-
AWS-blended-and-unblended-rates

22. Visibility
Allocation Efficiency
Savings
Unit Cost
I. Cost visibility

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Transaction Types in Your Bill
Stage I: Basic Cost Visibility
Usage
On-demand instances
Storage
Data Transfer
Recurring Charges
Prepaid Monthly RI Hours
Support Charges
One-Time Charges
RI Sign-Up Charges
Direct Connect

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Cost Visibility
Create custom
dashboards and
alerts

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Allocation Efficiency
Savings
Unit Cost
II. Allocation

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@cloudabi
lity
Tools for
splitting costs

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1. Tags are key value pairs (key = value)
2. You can apply up to 10 tags per resource
3. Tag keys and values are case sensitive
#1: Tags
Tools for splitting costs

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#2: Linked Accounts
Use linked accounts to split up things that really matter
Tools for splitting costs

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Cost Allocation
Spending segmented by tags and accounts
Customize report columns

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Cost Allocation
Segment spending
by tags and accounts

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@cloudability
Tag everything you can

32. Visibility
Allocation Efficiency
Savings
Unit Cost
III. Efficiency

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hours in a week
168

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nights & weekends
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Don’t run the cloud like a data center:
65% of the hours in a month
are nights and weekends

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Usage Optimization
Find unused and
underutilized
instances

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Allocation Efficiency
Savings
Unit Cost
IV. Savings

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Reserved Instances
“Reservations”require no engineering work,
enabling finance to autonomously reduce costs
by 30-60% over on-demand

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Cost Savings Capacity Reservation
Reservations have two parts

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An RI gives you 744 coupons that can be applied
a relevant instance in any given hour

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RI Mechanics
What Makes Up a Reservation?
Instance
RI Term RI Type
Instance Family Size OS Location (AZ)
m1 large Linux us-east-1a 1 year No upfront
r3 8xlarge RHEL us-west-2b 3 years Partial upfront
m3 medium Windows ap-northeast-1b 1 year All upfront

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RI Mechanics
The difference is in the payment structure
Upfront Fee Monthly Fee Savings
No upfront NO YES 28.6%
Partial upfront YES YES 38.1%
All upfront YES NO 39.4%
m3.medium:us-east:linux

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All RI types are a commitment to pay for full utilization
(even if you don’t use it)

44. Reservations Infrastructure

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RI Portfolio Management
Reserved Instance
recommendations
and analysis

46. Visibility
Allocation Efficiency
Savings
Unit Cost
V. Unit Cost

47. Why does unit cost matter?
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Hiccup

48. An increasing bill isn’t necessarily a bad thing
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The bill still
goes up!
StageIII
Efficiency
StageIV
RIs

49. Unit cost is
cost per X

50. cost per subscriber
cost per pageview
cost per customer
cost per API call

51. Focus on reducing unit cost, even at total cost grows
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Unit cost Total cost

52. Unit cost =
total cost / business metric

53. $1000 / 1000 customers =
$1 unit cost

54. Visibility Allocation
Efficiency
Savings
Unit
Cost
Cloud Cost Management Lifecyle
Stage I: Visibility (No Surprises)
Stage II: Allocation (Where are the dollars going?)
Stage III: Efficiency (Don’t run cloud like a
datacenter)
Stage IV: Savings (Lower hourly rate with RIs)
Stage V: Unit Cost (Tying spending to margins)

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The Road Ahead
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1) AWS data is complex. Get your hands on your DBR file to start understanding what’s in it.
2) Tagging is hard. Sit down with key stakeholders and agree a basic taxonomy (3-5 required tags),
consider linked accounts for most important items.
3) Instances are easy to spin up. Start sharing reports of underutilized instances to spark a
conversation about potential waste.
4) RIs are frequently misunderstood. Educate yourself then make a small, uncontroversial purchase.
Buy, Measure, Learn each month.
5) The bill going up may not be a bad thing. Start setting expectations with your team that more apps
& more traffic mean more dollars. That may be OK in the context of margins.
Things to remember (and do) after this webinar

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