AWS Cost Savings Tips for AWS Usage - Part 3, Consolidated Billing

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AWS Cost Savings Tips for AWS Usage - Part 3, Consolidated Billing

Taral Shah // August 20, 2021 //6 comments

In the first part of this series of AWS cost savings, we presented 15 tips for optimizing your AWS costs, while the second part focused on the Reserved Instance concept. This time, we will talk how you can optimize your AWS cost by using consolidated billing.

Consolidated billing enables you to consolidate payment for multiple AWS accounts within your company by designating a single paying account. Consolidated billing enables you to see a combined view of AWS costs incurred by all accounts, as well as obtain a detailed cost report for each of the individual AWS accounts associated with your “Paying Account”.

Suppose your organization has multiple projects or departments using AWS, and each department or project has their own cost center. Though final payment is being made by your organization, you want to track how much AWS cost each cost center is incurring. If you have only one AWS account, it will not be possible to track usage by cost center because Amazon lists your total AWS usage and not per instance or per storage usage. AWS provides a facility whereby you can create an AWS account for each cost center, create a Master Payee account, and then link all the cost center accounts to your Master Payee account. This is achieved through the “Consolidated Billing” functionality.

Using IAM you can separate the functionality of each group, but again AWS does not currently provide usage per IAM user so it will still not be possible to track individual usage with IAM. Below are a few tips on how you can save some money using consolidated billing.

Top 5 things to look for when you are using consolidated billing

1 - If you have multiple AWS accounts, use consolidated billing. All accounts consolidated in the bill will be treated as a single account, and all usage will be combined to save some costs. For example, if one account does 4 GB of data transfer while other account does 8 GB of data transfer. AWS charges $0.17 per GB for the first 10 TB of data transfer out used, and $0.13 per GB for the next 40 TB used. So, in this case, AWS will charge $0.13 for 2 GB of data while $0.17 for 10 GB of data instead of separately charging for 4 and 8 GB at $0.17.

2 - All accounts on a Consolidated Bill can receive the hourly cost benefit of Amazon EC2 Reserved Instances purchased by any other account. So if you have two accounts running two instances of the same size in the same availability zone, they will get the benefit of reserved instance as mentioned above.

    1. So, as per above, if your total usage of both instances of two accounts is more than 2150 hours (i.e., around 6-7 weeks for each account) you should purchase a reserved instance.
    2. This is also applicable for RDS reserved instances provided that the RDS instances of both accounts have the same attributes, such as instance size, deployment type, license model, and DB engine.

Reserved Instances Decision Making Tool by Newvem

3 - If you are using consolidated billing, you will not get the benefit of the AWS free usage tier. If you want to use the AWS free usage tier, use it before you add your account to consolidated billing.

4 - To give the paying account owner the lowest bill, any AWS credits the paying and linked accounts have are applied to the Consolidated Bill. For example, you have 5 accounts in consolidated billing. Each account has usage as $1000, $500, $1000, $500, $2000. If you apply a coupon worth $1000 to the third account ($1000). It will apply the coupon to each account proportionally per their usage. i.e. They will be discounted as follows:

Account Name Current Usage Discount Applied
Account 1 $1000 $200
Account 2 $500 $100
Account 3 $1000 $200
Account 4 $500 $100
Account 5 $2000 $400

Here total usage is $5000. The coupon is applied based on the usage of each account, i.e., for Account3, it will get discount of $(1000/5000) = 0.20%.

This discount varies throughout your monthly billing cycle. For example, after 10 days in the same billing cycle, if all accounts have usage as $2000, $500, $2500, $2000, $3000, they will be discounted as follows:

Account Name Current Usage Discount Applied
Account 1 $2000 $200
Account 2 $500 $50
Account 3 $2500 $250
Account 4 $2000 $200
Account 5 $3000 $300

As shown above, because the monthly billing cycle is not complete yet, it will keep changing your discount amount as per usage and % of total usage.If a linked account is removed from a Consolidated Bill, any unused credits belonging to that account go with it.

5 - When an account is added to your consolidated billing, you will be responsible for its billing only from the moment it is added. Any usage in same billing cycle before its addition will be charged to the account owner.

AWS User? Analyze Your AWS Financial Efficiency with Newvem

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About the Author

Taral Shah

Cloud architect for more than 2 years with around 12 years of IT Experience. His area of focus is Amazon Cloud and I have written a couple of White papers using AWS. Responsible for designing or migrating HA, scalable application on Cloud. In his past worked as Consultant, Developer, Technical Leader, Project Leader and Account Manager with various global clients.

Contact him

Keywords: Amazon web services, Amazon AWS console, Amazon AWS instances, EC2 Service, Amazon cloud computing, EC2 EBS, S3 storage, AWS cloud cost savings, Reserved instances utilization, Cloud cost efficient, EC2 CPU utilization, AWS Infrastructure elasticity, Amazon EC2 capacity, Cloud overspend, Consolidate billing

There are 6 comments .

Gadd Barchana Lorand —

Great post - the opportunity to benefit from consolidated tiers across accounts and using reserved instances across accounts.
How does the reserved instances discount work? Is it first applied (if possible) to the purchasing account and then to other accounts (in what manner)?  

Taral Shah —

For the reserved instance discount it is blended rate for all accounts. e.g. As per RI purchase your 1 large instance cost is $0.096 / Hour. The On-Demand price of same instance is $0.32.
Now if you have two large instance running simultaneously in same zone where you have purchased Reserved Instance. It will charge you blended rate of $ 0.208[ (0.096 + 0.32) / 2]. 
So both the instance will get benifit of RI charge. If both instance are running at separate time and not togather(e.g. one is running from 9 AM - 5 PM and other from 8 PM - 3 AM), they both will be charged at RI price of $0.096 only.

I hope this clarifies your doubt.

Thanks,
Taral

    Gadd Barchana Lorand —

    The truth is I am still a bit confused. 
    Looking at Amazon’s FAQ - 
    http://aws.amazon.com/ec2/faqs/#How_do_Reserved_Instances_work_with_Consolidated_Billing - the first paragraph says:”When using Consolidated Billing, the account that purchases a Reserved Instance will receive the instance reservation. Our system will also automatically optimize which instances are charged at the lower Reserved Instance rate to ensure the “payer” account always pay the lowest amount.  ”
    The way I read it Amazon gives priority to the “payer” account to get the discounted price, and only then will apply the rest of the reserved instances (if not fully used by the “payer” account) to the other accounts.

      Taral Shah —

      Hi
      Gadd,

      You
      are right the AWS says the payer account gets full benifit but not in terms of
      rate but in terms of total payment. I will explain with my practical case.

      We
      have a payer account and it has 4 accounts part of it.

      Now
      we purchased 3 large high utilized linux Reserved Instances so my hourly cost
      comes to 0.12 for these instances.
      I am running these instances 24 Hours so my monthly total usage of large
      instance is 2232 Hours (744 x 3). My total bill for these three instances is
      $267.84.
      Now three of my sub accounts also ran the large linux instance in same
      availability zone.
      One used for 111 Hours, one for 11 and one for 1 Hour. Total 123 Hours.

      They
      should be charged at $0.32 at on-demand instance price. The total usage will
      come for them as $39.36.

      My
      total AWS usage is $307.2 ($39.36 + $267.84).  If you go to AWS account activity, it shows
      $307.2 as per above configuration.

      If
      you see, this is as expected. When you download billing activity report, you
      may see a column named ‘blended rate’. It shows amount $0.1304 against each
      usage instead of $0.12.

      If
      you do math again, (2232 + 123) * 0.1304 = $307.2

      So
      we have the same bill amount as in AWS account section.  The blended rate does not make change to total
      billing, it just ensures that payee account does not pay more and at the same
      time all accounts get advantage of reserved instance rate. Suppose you have to
      charge each account separately internally, you can charge them at the rate of
      $0.1304 / Hour.

      Now
      the difference would come only when I do not use all my instances 24 Hours and
      other accounts are running their instances when my instances are stopped.

      Suppose
      I have run them 600 Hours / month so my total Hours are 600 * 3 = 1800 Hours.

      If
      the other three accounts have run the 123 Hours at the time when my instance
      were stopped

      My
      Billing would come at (1923 * 0.12) = $230.76.

      As shown
      above, the blended rate is just a Math calculation from AWS and you will get
      real benefits of RI purchase in consolidated billing only when the instances of
      separate accounts not running simultaneously.
      I am also uploading snapshot of billing report for your reference

      Thanks,
      Taral

      Taral Shah —

      Hi,

      Adding some more data from AWS doscumenation. Please refer Reserved Insatnce at http://docs.amazonwebservices.com/awsaccountbilling/latest/about/consolidatedbilling.html#consolidatedbilling-other

      It says
      ——————————————————————————————-
      For billing purposes, Consolidated Billing treats all the accounts on the
      Consolidated Bill as one account. This means that all accounts on a Consolidated
      Bill can receive the hourly cost benefit of Amazon EC2 Reserved Instances
      purchased by any other account.

      For example, Bob and Susan each have an account on Bob’s Consolidated Bill.
      Susan has 5 Reserved Instances, and Bob has none. During one particular hour,
      Susan uses 3 instances and Bob uses 6, for a total of 9 instances used on Bob’s
      Consolidated Bill. We bill 5 as Reserved Instances, and the remaining 4 as
      normal instances.

      Let’s say the Reserved Instances cost $0.02 per instance-hour. For these
      instances, we charge 5 x $0.02 = $0.10.

      Let’s say the normal Amazon EC2 rate is $0.10 per instance-hour. For the
      remaining 4 instances, we charge 4 x $0.10 = $0.40.

      So, the total amount Bob is charged for the 9 instances is $0.10 + $0.40 =
      $0.50. If we hadn’t applied the cost benefit of Susan’s 5 Reserved Instances to
      the 9 instances on Bob’s Consolidated Bill, he would have instead paid $0.64
      total.

      In terms of cost attribution, we attribute a dollar amount to Bob and Susan
      based on each person’s usage. Susan used 3 of the 9 instances (one-third), and
      Bob used 6 (two-thirds). Therefore on the bill, one-third of the $0.50 is
      attributed to Susan, and the other two-thirds is attributed to Bob.
      ——————————————————————————————-

      As I mentioned in my example, my total cost was $307.2.
      AWS distributed it considering 2232+123 hours and found the belnded rate from [$307.2 / (2232+123)] = $0.1304…

      Thus blended rate is just for dsiplay purpose and cost distribution.
      As mentioned in above URL,
      ———————————————————————-
      Bob receives the cost benefit from Susan’s Reserved Instances only if he
      launches his instances in the Availability Zone where Susan purchased her
      Reserved Instances
      ————————————————————————-

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