Cost management is essential for optimizing operations within AWS environments. As organizations increase the usage of cloud services, understanding cost allocation becomes increasingly important. This article highlights the differences between two core AWS cost types — Unblended & Amortized Costs, and their significance in effective budgeting.
Let’s unpack the complexities of AWS billing together.
What are Unblended Costs?
Unblended costs are the default cost view in the AWS Cost Explorer. We will be charged for them on the day that they are incurred. As far as finance is concerned, they represent our cash-basis costs.
What are Amortized Costs?
We’ll choose to see our costs as Amortized Costs when we have purchased Compute SP (Saving Plan) or any RI (Reserved Instance) commitments. We want to see the commitments’ different cost allocations for both partial and full upfront costs and the cost allocation for the services impacted by these commitments.
How to filter the costs in the AWS Console
Console Home? Billing and Cost Management
Cost Analysis? Cost Explorer
On the right, you’ll find a filter bar ? scroll down to Advanced Options
Aggregate Costs by?
Where can we see the differences between the two cost types?
The difference between the 2 cost types is visible when we purchase a reservation with Partial/ Full Upfront costs and want to see its monthly allocation, for example, when a customer purchases an RDS RI with a Partial Upfront charge.
For Unblended Costs, we’ll see a one-time Partial Upfront charge of 50% or a Full Upfront charge when we pay 100% of the commitment at the moment of the purchase.
Amortized costs will have a one-time charge distributed for the entire commitment term (1 or 3 years).
The difference between the two cost types will be only for the services impacted by the commitment, such as EC2, Fargate, Lambda, and ECS services under the Compute Saving Plan (SP). If we exclude these services – the cost should remain the same.
Let’s take a customer with a Compute Saving Plan. Even if they paid No Upfront Costs, the costs would be allocated differently for the two cost types.
When using Unblended Cost,- we can view the total amount of the Saving Plan ($21k). These are the monthly charges for the commitment (hourly commitment * 730 hours per month).
Under Amortized Costs, we can see that the Saving Plan charge has decreased negatively. Instead, the other service charges have increased – the Compute SP discount was allocated to the different services. The negative Compute SP stands for the discount we receive for this commitment.
Unused Reservations – Within the Amortized Costs, there will be times when we’ll see a positive Saving Plan charge. These are Saving Plans that have not been allocated to any service. You can always follow your commitments’ utilization in the following AWS Reports- Compute SP Utilization and RI Utilization.
In conclusion, effectively managing AWS costs requires a clear understanding of both Unblended and Amortized Costs. While Unblended Costs provide immediate visibility into cash expenses, Amortized Costs offer a more nuanced view by spreading commitment charges over time. By carefully analyzing these costs and utilizing AWS’s filtering tools, organizations can make more informed budgeting decisions, ensuring they maximize the value of their cloud investments. Understanding these differences is crucial for optimizing financial strategies and maintaining cost efficiency in AWS environments.
