How AWS Pricing Works: Save 10% Or More

May 3, 2023

AWS Pricing and Pay-As-You-Go pricing model

AWS pricing optimizes your amazon cloud services consumption costs to match your needs while providing the flexibility to adjust your cloud pricing model as those needs evolve. Amazon Web Services pricing is based on a pay-as-you-go model. This means that you only pay for the AWS services that you use and stop paying when you no longer use them. There are no upfront costs or long-term commitments.

There are also various discounts and promotions based on who you buy from, duration of commitment and other criteria. If you are embarking on a cloud transformation journey then our AWS Consulting Services can help you navigate the complex pricing structure as well as the plethora of AWS services that keeps growing rapidly in the age of AI.

AWS Amazon Pricing Features

AWS Pricing Options

Direct and indirect are the two primary ways you can price and purchase AWS services like ec2, lambda, s3, DynamoDB, RDS, cloudfront, etc. While buying directly from Amazon is always an option, you could gain some pricing, support and commitment flexibility when purchasing via the indirect route.  

AWS Billing

Compute, storage and outbound data transfer are the 3 essential ways in which AWS prices its services. You encounter these in your billing and consumption, for example, as aws ec2 pricing, lambda pricing (compute), aws s3 pricing, backup pricing or DynamoDB pricing (storage) and AWS Data Transfer Out (outbound data transfer). These may vary across services and pricing models you choose. 

Need Based Pricing

It is important to understand that when migrating from on-prem or data center physical servers to Amazon AWS Cloud services, you are moving from a fixed cost and pricing model to a consumption or variable AWS pricing model. The best way to optimize your costs is to understand your real-time needs and closely monitor and adjust to changes in consumption thereby actively managing your cloud costs.

Pricing Models Explained

AWS resources are offered through the following pricing models including AWS Free Tier, On Demand Instances, Savings Plans, Spot Instances, and Reservations. Each of these pricing models are explained below:

On Demand Instances

On-demand instances require no long term commitment nor upfront costs. Using this model enables you to consume compute and database capacity by the hour and second with a minimum of 60 seconds.


Reservations enables you to receive up to 75% discount by paying for resources ahead of time. You can switch from on-demand to reservation at any time as long as it is the same sized resource, as reservation is a billing concept, not a specific resource being reserved.

Spot Instances

Spot instances lets you utilize spare unutilized compute capacity via a discounted aws pricing model of up to 90%. In turn, you could be evicted from the assigned resource with short notice of less than 30 seconds.

Popular AWS Services Pricing

EC2 Pricing

Amazon EC2 follows a flexible, pay-as-you-go pricing approach. Customers only pay for the compute capacity they actually consume. It provides four ways to pay for Amazon EC2 instances: On-Demand, Reserved Instances, and Spot Instances.

On-Demand Instances let you pay for compute capacity per hour or per second with no long-term commitments. Reserved Instances provide you with a significant discount (up to 75%) compared to On-Demand Instance pricing. Spot Instances allow you to request spare Amazon EC2 computing capacity for up to 90% off the On-Demand price.

On top of these, Amazon EC2 also offers Dedicated Hosts for users who require physical servers for compliance requirements. Combined with AWS Support, navigating and managing EC2 pricing becomes streamlined and efficient.

Lambda Pricing

AWS Lambda follows a pay-per-use pricing model, meaning you only pay for the compute time you consume. There is no charge when your code isn’t running. Pricing is based on two main components: the number of requests (invocations of your Lambda function) and the duration (the compute time in milliseconds it takes for your code to execute).

Lambda users get 1 million requests for free each month. Beyond that, each request is charged at a flat rate per million requests. As for the duration, it depends on the amount of memory you allocate to your function. You are charged for every 100ms your code executes and the number of times your code is triggered. This makes AWS Lambda a cost-efficient choice for businesses running microservices or real-time file processing services.

Storage Pricing

Amazon S3 offers cost-effective and flexible pricing for storage services. It follows a pay-as-you-go approach, meaning customers only pay for the storage they actually use. The cost is determined based on the storage class chosen (Standard, Intelligent-Tiering, One Zone-IA, Glacier, and Glacier Deep Archive) and the amount of data stored. Management and data transfer costs may also apply.

It’s important to note that pricing can vary by region and that AWS provides a pricing calculator to assist in estimating costs. Complementing the AWS Support, businesses can effectively manage and optimize their storage costs on AWS.

Database Pricing

AWS offers flexible pricing models for its database services, catering to diverse business needs and budget constraints. Amazon RDS, Amazon DynamoDB, Amazon DocumentDB, and Amazon Keyspaces are some of the database services that follow a pay-as-you-go pricing model, meaning customers only pay for the capacity they use.

Amazon RDS pricing is based on instance hours, storage capacity, data transfer, and optional features like provisioned IOPS and snapshot storage. DynamoDB’s pricing depends on read/write capacity mode, storage, data transfer, backup and restore, and optional features like DynamoDB Streams and global tables.

DocumentDB, a MongoDB compatible database service, calculates costs based on instance class, storage, I/O, and backup storage. Amazon Keyspaces (for Apache Cassandra), prices based on read and write capacity units, storage, and data transfer.

Note that pricing can vary by region and AWS provides a comprehensive cost calculator to help estimate costs. With AWS Support, managing and optimizing these costs can be significantly simplified, ensuring efficient resource utilization.

Savings Plans

Savings plans provide the flexibility via aws pricing model to avail of discounted prices on AWS services including EC2, AWS Lambda, AWS Fargate, etc. provided you commit to a $ threshold usage over a period of time, usually a one to three year commitment.

AWS Service Evaluation Pricing

AWS Free Tier

For evaluation purposes AWS provides an AWS Free Tier that enables you to gain hands-on experience on over 60+ AWS services at no charge based on the offer type including 12-months free tier, always free tier and trials.

AWS Pricing Calculator

AWS pricing calculator is a free tool that helps you calculate the estimated cost to use AWS services like ec2 and s3 that constitute the particular use case you have in mind. This tool can be used both for initial migration as well as existing cloud services with the intent of either re-architecting or adjusting/optimizing AWS services.

AWS Cost Optimization

AWS offers a variety of tools to help you optimize your costs. These tools can help you track and report your cloud spend, identify areas where you can optimize your cloud costs, and make changes and suggestions to your current cloud architecture.

AWS Cost Explorer 

This tool provides a graphical view of your AWS costs over time. You can use Cost Explorer to identify trends, track your spending against budgets, and identify areas where you can save.

AWS Budgets 

This tool allows you to set budgets for your AWS costs. When you exceed a budget, you will receive an alert. This can help you avoid unexpected costs.

AWS Trusted Advisor 

This service provides recommendations for improving the performance, security, and cost-effectiveness of your AWS environment. Trusted Advisor can help you identify areas where you can save money.

AWS Support

AWS Support offers a broad range of benefits to help businesses optimize their cloud services usage. It provides 24/7 access to cloud support engineers, ensuring any issues are promptly addressed. With a dedicated Technical Account Manager, businesses receive proactive guidance tailored to their specific needs, facilitating efficient cloud operations.

AWS Support also offers resources and tools for best practices, troubleshooting, and training, enabling businesses to stay ahead of the learning curve. The flexible billing on a per-account or aggregate basis allows businesses to choose the plan that best suits their budget and requirements, making AWS Support a cost-effective solution for maintaining high-performance cloud services.

To learn more about our AWS Consulting Services please reach out to one of our Cloud Advisors.


While various AWS pricing models provide you flexibility to utilize cloud resources while optimizing costs, in general, time and price are inversely proportional in that the longer the commitment, the lower the cost of an AWS service. However you can gain pricing and commitment flexibility by evaluating all your available direct and indirect buying options.

As always we are here to help and our Amazon AWS Consultants and experts can help migrate and manage your sprawling cloud foot print.


  1. AWS Pricing Calculator: 
  2. AWS EC2 Spot Instances: