AWS Billing - A Detailed Overview

Overview of AWS Pricing Models

• Charges are based on actual usage of AWS services with no long-term commitments or upfront payments.

• It offers discounted pricing for EC2 instances with a one or three-year term commitment.

• It allows users to bid on unused EC2 capacity by offering potential cost savings for workloads with flexible start and end times.

Billing Metrics and Terminology

• Usage: The amount of AWS resources consumed, typically measured in hours, GB, requests, etc.

• Rate: The cost per usage unit for a specific AWS service or resource.

• Billable Events: Actions or operations that incur charges such as running an EC2 instance, storing data in S3, or transferring data between AWS regions.

• Billing Period: The period for which AWS usage is calculated and billed, typically monthly.

• Cost Allocation Tags: Tags assigned to AWS resources for cost tracking and allocation purposes, enabling organizations to attribute costs to specific projects, departments, or teams.

AWS Free Tier

Explanation of Free Services and Usage Limits:

• AWS Free Tier offers a limited amount of free usage for a selection of services for 12 months.

• Free Tier usage limits vary by service and It is designed to allow customers to explore the AWS services at no cost.

• Standard AWS pricing applies once the usage limits are exceeded or the 12-month period expires.

Identifying Free-Tier Eligible Services

AWS provides a list of services eligible for the Free Tier along with their respective usage limits and durations on the AWS Free Tier webpage.

Common free-tier eligible services include:

• Amazon EC2

• Amazon S3 (5GB storage)

• Amazon RDS (limited database instance hours)

• AWS Lambda (1 million free requests per month) and more.

Eligible services may vary by region and certain services may offer extended free usage beyond the initial 12-month period.

AWS Billing Dashboard

Overview of the AWS Billing and Cost Management Console

• The AWS Billing and Cost Management Console provides a dashboard for monitoring and managing your spending and usage of services.

  

It offers an overview of your current month's spending such as:

• Total costs

• Forecasted costs

• Spending trends.

• The dashboard displays summary charts and graphs that allow users to visualize costs by service, linked accounts, and usage patterns.

Navigating billing reports and cost explorer

Accessing the Billing & Cost Management Console

• Log in to the AWS Management Console.

• Navigate to the Billing & Cost Management service

• In the Billing & Cost Management Console, select Reports.

• Click on Reports to expand the options, then choose Billing Reports.

It contains various billing reports, such as

• Cost and Usage Report

• AWS Budgets

• Click on the desired billing report to view its details.

For example:

(i) Select the Cost and Usage Report to view detailed usage and spending data.

(ii) Customize the report settings to specify the period and data filters as needed.

Navigating to Cost Explorer

• To access Cost Explorer, go to the Billing & Cost Management Console.

• Click on Cost Explorer to access the tool for visualizing and analyzing your AWS spending

• In the Cost Explorer dashboard, you can visualize your AWS spending over time using various charts and graphs.

• Customize the view by selecting different periods, services, regions, instance types, etc.

• Utilize filtering options to analyze specific cost dimensions and identify spending trends or anomalies.

Cost Allocation Tags

Importance of cost allocation tags

• Granular Cost Attribution: Enables attribution of costs to specific projects, teams, or departments.

• Cost Reporting and Analysis: Provides detailed cost reporting and analysis based on tag values.

• Resource Optimization: Helps identify and optimize unused resources or cost outliers.

Tagging strategies for cost management

• Standardized Tagging Schema: Establishes consistent tagging practices across resources.

• Automated Tagging Policies: Enforces tagging compliance and consistency through automation.

• Hierarchical Tagging Hierarchy: Represents relationships between organizational structures.

• Cost-Aware Resource Provisioning: Tags resources at creation to ensure accurate cost attribution.

• Regular Review and Optimization: Ensures tagging accuracy and relevance over time.

Monitoring Cost and Usage Reports

Generating and interpreting cost and usage reports

• Navigate to Reports and select Cost and Usage Reports.

• Customize the report settings including time period, granularity, and data filters.

• Generate the report to retrieve detailed cost and usage data for analysis.

Analyzing cost trends and patterns

• Review the summary section to understand total costs and usage for the selected period.

• Analyze cost breakdowns by service, linked accounts, and usage types to identify cost drivers.

• Explore detailed line items to understand individual resource costs and usage patterns.

• Identify cost trends over time by comparing data across different reporting periods.

• Look for patterns in resource utilization, such as spikes or anomalies, that may impact costs.

• Analyze cost allocation tags to understand how costs are distributed across projects, teams, or departments.

Setting Budgets

Creating AWS Budgets to Monitor Spending

• Click on Create Budget to begin creating a new budget.

• Specify budget details like budget name, budget period, budget amount, and optional filters (e.g., service, tag).

• Choose the desired budget type (e.g., usage, cost, RI utilization).

• Review and confirm the budget settings before creating the budget.

Configuring Budget Notifications

• After creating a budget, configure notifications to receive alerts when budget thresholds are reached or exceeded.

• Select the desired notification options like email, SNS (Simple Notification Service) topic, or AWS Chatbot integration.

• Specify the notification thresholds (e.g., percentage of budget) and frequency (e.g., daily, weekly).

• Review and confirm the notification settings before saving the budget.

Setting Up Billing Alarms

Configuring CloudWatch Billing Alarms

• Access the AWS Management Console and navigate to the CloudWatch service.

• In the CloudWatch dashboard, select Alarms from the left-hand menu.

• Click on Create Alarm to begin configuring a new alarm.

• Choose the "Billing" metric namespace and select the Total Estimated Charge metric.

• Specify the metric's period, statistic, and threshold conditions for triggering the alarm.

Defining Billing Thresholds for Alerts

• Set the threshold values for the billing alarm based on your budget or cost tolerance.

• Define threshold conditions such as Threshold is greater than or Threshold is greater than or equal to and enter the threshold value.

• Choose the appropriate actions to take when the alarm state changes (e.g., notify via SNS, trigger an AWS Lambda function).

• Provide a name and description for the alarm to distinguish it from others.

• Review the alarm configuration settings to ensure accuracy.

• Confirm the creation of the billing alarm to activate monitoring for AWS billing metrics.

Implementing Service Limits

Understanding AWS Service Limits

• AWS imposes service limits on various resources and services to ensure fair usage and prevent abuse.

• Service limits define the maximum number of resources or operations allowed within a specific AWS account, region, or service.

• Limits vary by service and resource type and may be based on factors such as account type, usage history, and performance considerations.

Managing Service Limits and Quotas

• Access the AWS Service Quotas console to view and manage service limits for your AWS account.

• Identify the service limits relevant to your workload and usage patterns.

• Request limit increases for specific services or resources if your workload requires additional capacity beyond the default limits.

• Monitor service limits regularly and adjust resource usage or request limit increases as needed to avoid service disruptions.

Practical Exercises

Creating and Configuring Billing Alerts using CloudWatch

• Access the AWS Management Console and navigate to the CloudWatch service.

• Create a new billing alarm by selecting Alarms and clicking on Create Alarm.

• Configure the alarm to monitor the Total Estimated Charge metric and set threshold conditions for triggering alerts.

• Define actions to take when the alarm state changes (e.g., notify via SNS, trigger an AWS Lambda function).

• Test the billing alarm by intentionally exceeding the threshold to ensure alerts are triggered correctly.

Setting Up Budgets and Cost Allocation Tags

• Create a new budget by specifying budget details such as name, period, amount, and optional filters.

• Configure budget notifications to receive alerts when spending exceeds defined thresholds.

• Explore cost allocation tags and apply them to AWS resources to track spending by project, team, or department.

• Review and analyze budget reports to monitor spending trends and identify cost-saving opportunities.

Exploring AWS Free Tier-Eligible Services

• Visit the AWS Free Tier webpage to review the list of services eligible for the Free Tier.

• Explore the usage limits and duration of free usage for each eligible service.

• Create a new AWS account or use an existing account to experiment with Free Tier-eligible services.

• Deploy and configure resources within the Free Tier limits to gain hands-on experience with AWS services at no cost.

• Monitor usage and spending to ensure usage remains within the Free Tier limits to avoid unexpected charges.