Do you know your SaaS Cost-Per-Tenant?
Are your AWS SaaS Costs optimized?
Optimizing AWS (Amazon Web Services) cloud costs is essential for SaaS businesses to ensure operating costs do not impact profit margins.
The AWS Well-Architected SaaS Lens is a framework designed to help Software as a Service (SaaS) providers optimize the cost of their AWS environments. It provides best practices and guidelines specifically tailored to SaaS architectures. The lens focuses on cost optimization strategies, offering recommendations to identify areas for cost savings and improve efficiency in SaaS solutions running on AWS.
By following the SaaS Lens, SaaS providers can better align their AWS infrastructure with cost-effective practices and enhance the overall performance and cost efficiency of their SaaS applications.
SaaS Costs-Per-Tenant metrics are complex to calculate. However, it’s very critical that you have insight into this metric to ensure you can optimize your SaaS business. For e.g. are tenants in the bronze plan driving higher costs than tenants in the gold tier? Are tenant consumption patterns or features changing the cost profile of your environment?
To determine cost-per-tenant, it’s important to follow the 2 steps below:
Step 1: Define a consumption metric: Is it number of requests or some other metric such as data storage the key consumption indicator in your SaaS. Develop clarity around this so you can identify the key metric that can be used to track cost-per-tenant.
Step 2: Develop cost-allocations: Divide the total AWS costs for your production workload by the consumption metric for each tenant to identify cost-per-tenant. For e.g. if Tenant A has 1000 requests this month, Total requests across all Tenants is 10000 and your AWS bill is $10,000, Tenant A costs should be allocated as $1000 (Cost per request is $1).
Needless to say to ensure your gross and operating margins are not impacted due to your AWS costs, you should not only have an accurate picture of your cost-per-tenant but also proactively focus on optimizing your overall AWS cloud costs to maximize profitability.
Here are several strategies and best practices to help you control and reduce your AWS costs:
Use AWS Cost Explorer: Start by using AWS Cost Explorer to gain visibility into your spending patterns. Analyze your historical data, set budgets, and create cost and usage reports to track expenses.
Rightsize Resources: Assess your existing EC2 instances, RDS databases, and other AWS resources to ensure they are appropriately sized. Use AWS Trusted Advisor or third-party tools to identify over-provisioned or underutilized resources and resize or terminate them. Monitor and remove unused EBS volumes and underutilized instances to avoid paying for resources not being leveraged.
Reserved Instances: AWS offers Reserved Instances (RIs) that provide significant cost savings over on-demand pricing. Analyze your usage patterns and commit to Reserved Instances (RIs) for instances with steady workloads. This can lead to savings of up to 75% compared to on-demand instances. Purchase reserved capacity for services like AWS RDS, Elasticsearch, etc. to get significant discounts over on-demand.
Use Spot Instances: For non-critical workloads that can be interrupted, consider using EC2 Spot Instances. These can offer substantial cost savings compared to on-demand instances. Savings can be as high as 90% over on-demand.
Utilize Auto Scaling: Implement auto-scaling policies to adjust resources based on demand. This ensures you're not over provisioning during periods of low usage and can automatically scale up when needed.
Manage Elastic Load Balancers (ELBs): Monitor ELB usage and consider scaling down or removing load balancers for idle or low-traffic applications.
Storage Optimization:
Implement data lifecycle policies to automatically move less frequently used data to lower-cost storage classes (e.g., S3 to Glacier).
Remove unused EBS volumes and snapshots.
Enable S3 Object Lifecycle Policies to delete or transition objects as they age.
Review Database Costs:
Use Amazon Aurora or Amazon RDS Reserved Instances for databases.
Optimize query performance to reduce database load and save costs.
Implement automated database start/stop schedules for development and testing environments.
Use Serverless Architectures: Consider AWS Lambda and other serverless services for workloads that don't require persistent servers. You only pay for the compute time used.
Implement Cost Allocation Tags: Assign tags to resources to track costs by project, department, or team. This helps identify where costs are incurred and allocate them accordingly.
Monitor and Set Alerts: Implement CloudWatch alarms to notify you of unexpected cost spikes or resource utilization patterns. This allows for proactive cost control.
Optimize Data Transfer Costs: Minimize data transfer between AWS regions and between AWS and the internet. Use AWS Direct Connect or AWS Transit Gateway for predictable, lower-cost data transfer. Enable AWS data compression features to reduce the amount of data stored and transferred.
Stay Informed: Keep up-to-date with AWS pricing changes and new services that can help reduce costs. AWS regularly introduces cost-effective features and offerings.
Regularly Review and Audit: Continuously review your AWS infrastructure and costs. Conduct regular cost audits and optimize your resources accordingly.
Leverage AWS Cost Management Tools: AWS offers a suite of tools, including AWS Cost Explorer, AWS Budgets, and AWS Cost and Usage Reports, to help manage and optimize costs effectively. Use consolidated billing to get volume pricing discounts and reserved instance discounts across multiple accounts.
By implementing these strategies and closely monitoring your AWS environment, you can control overall SaaS cloud costs while ensuring your cost-per-tenant is also optimized. Remember that AWS cost optimization and Cost-Per-Tenant analysis is an ongoing process that requires regular attention and adjustments.