COST07-BP01: Perform pricing model analysis

Analyze different pricing models available for your workloads and select the most cost-effective options based on usage patterns, commitment levels, and business requirements. Comprehensive pricing analysis enables informed decisions about Reserved Instances, Savings Plans, Spot Instances, and other pricing options.

Implementation guidance

Pricing model analysis involves systematically evaluating different AWS pricing options to identify the most cost-effective combinations for your specific workloads. This includes analyzing usage patterns, commitment requirements, and business constraints to optimize your pricing strategy.

Pricing Model Categories

On-Demand Pricing: Pay-as-you-go pricing with no upfront commitments, providing maximum flexibility but typically higher per-unit costs.

Reserved Instances: Commit to specific instance types in specific regions for 1 or 3 years in exchange for significant discounts (up to 75% off On-Demand prices).

Savings Plans: Flexible pricing model that provides savings (up to 72% off On-Demand) in exchange for a commitment to a consistent amount of usage for 1 or 3 years.

Spot Instances: Use spare EC2 capacity at discounts of up to 90% off On-Demand prices, with the trade-off of potential interruption.

Dedicated Hosts/Instances: Physical servers dedicated for your use, often required for compliance or licensing requirements.

Analysis Framework

Usage Pattern Analysis: Examine historical usage data to understand consumption patterns, peak usage, and baseline requirements.

Commitment Analysis: Evaluate your ability to make long-term commitments based on business stability and growth projections.

Risk Assessment: Assess the risk tolerance for different pricing models, especially for Spot Instances and long-term commitments.

Total Cost of Ownership: Consider all costs including management overhead, operational complexity, and opportunity costs.

AWS Services to Consider

AWS Cost Explorer

Analyze historical costs and usage patterns. Use Cost Explorer's Reserved Instance and Savings Plans recommendations to identify optimization opportunities.

AWS Compute Optimizer

Get rightsizing recommendations that complement pricing model optimization. Use insights to ensure you're purchasing the right Reserved Instances.

AWS Pricing Calculator

Model different pricing scenarios and compare total costs. Use the calculator to evaluate the financial impact of different pricing model combinations.

AWS Cost and Usage Reports

Access detailed cost and usage data for comprehensive analysis. Use CUR data to perform advanced pricing model analysis and optimization.

AWS Budgets

Track spending against pricing model commitments and targets. Set up alerts for Reserved Instance and Savings Plans utilization.

AWS Trusted Advisor

Get recommendations for cost optimization including Reserved Instance opportunities. Use Trusted Advisor insights to identify pricing model improvements.

Implementation Steps

1. Collect Usage Data

Gather historical usage data for all AWS services
Analyze usage patterns and trends over time
Identify baseline and peak usage requirements
Document seasonal variations and growth patterns

2. Analyze Current Pricing Models

Audit existing Reserved Instances and Savings Plans
Calculate current effective rates and utilization
Identify underutilized commitments and gaps
Assess current pricing model performance

3. Evaluate Pricing Options

Compare different pricing models for each service
Calculate potential savings for various commitment levels
Assess risk and flexibility trade-offs
Model different scenarios and business conditions

4. Develop Pricing Strategy

Create comprehensive pricing model strategy
Define commitment levels and terms
Plan implementation timeline and approach
Establish monitoring and optimization processes

5. Implement Optimized Pricing

Purchase recommended Reserved Instances and Savings Plans
Implement Spot Instance usage where appropriate
Set up monitoring and alerting for utilization
Document decisions and rationale

6. Monitor and Optimize

Track pricing model performance and utilization
Regularly review and adjust commitments
Identify new optimization opportunities
Refine strategy based on business changes
Comprehensive Pricing Model Analysis Framework

Pricing Model Analyzer

Pricing Analysis Templates

Pricing Model Analysis Report Template

Common Challenges and Solutions

Challenge: Complex Pricing Model Combinations

Solution: Use systematic analysis frameworks and tools. Start with high-impact, low-risk optimizations. Implement gradual changes with monitoring and validation.

Challenge: Changing Usage Patterns

Solution: Regularly review and adjust pricing models. Use flexible options like Savings Plans when usage patterns are uncertain. Implement monitoring to detect pattern changes.

Challenge: Commitment Risk Management

Solution: Start with shorter-term commitments. Use a portfolio approach mixing different commitment levels. Regularly assess business stability and growth projections.

Challenge: Spot Instance Complexity

Solution: Start with fault-tolerant workloads. Implement proper interruption handling. Use Spot Fleet for diversification across instance types and availability zones.

Challenge: ROI Calculation Complexity

Solution: Use comprehensive TCO models that include all costs. Consider opportunity costs and operational overhead. Implement tracking and measurement systems.