Understanding the AWS Pricing: Model, Principles, Overview

Roman Kolodiy
Delivery Manager, AWS Expert at TechMagic, big fan of SRE practices. Helps teams to improve system reliability, optimise testing efforts, speed up release cycles & build confidence in product quality.
Understanding the AWS Pricing: Model, Principles, Overview

Wondering how to decide on the Amazon Web Services pricing plan that will suit your business? Discover the essence of AWS pricing model and its main principles.

Using cloud solutions to meet your business goals and store valuable data safely is the right strategy. However, you should also consider the price for using them, correlate it with your financial plan, and clearly understand the perspective of a value proposition you get in exchange for your money.

Amazon Web Services offers the ultimate set of effective cloud solutions, each of which has been developed with different business goals and specifics in mind. But before getting started with this cloud software provider, let’s begin with understanding the AWS pricing and finding the AWS pricing plan that will match your company’s expectations and best AWS consulting services.

How Does AWS Pricing Work?

Even though AWS services pricing may seem a bit confusing at first glance, it works according to the best Software as a Service pricing strategies. Amazon Web Services are built and offered according to the SaaS business model; that is, you may use the ready-made cloud solutions and pay for the storage and features you actually need and use to meet your business goal.

There are three key AWS pricing principles that allow for using cloud services in the smartest way possible.

  • AWS cost optimization. Before you even start using AWS, Amazon welcomes your business to think about your expenses optimization in advance. According to the AWS cost optimization guide, you should start with analyzing your current business necessities, carefully matching the storage capacity with your demands, and paying attention to Saving Plans and EC2 Spot Instances. You are also welcome to carefully monitor the ways your business uses the cloud services to find out the resource waste and optimize it immediately.
  • The power of flexibility. Billing flexibility is one of the best features of using Software as a Service. In the case of AWS, you may carefully tailor the features of the chosen solution to your business needs and either use them on an on-demand basis or make a long-term commitment.
  • The opportunity to choose the right pricing model for you. Depending on your business specifics, you can choose from four AWS pricing models.

4 Key AWS Pricing Models to Choose From

Let’s take a more detailed look at the pricing models you may follow when using Amazon Web Services.

4 Key AWS Pricing Models to Choose From | TechMagic


This is the most intuitive pricing model that is behind most of the SaaS services. According to it, you are paying for the resources you are actually using day after day. In terms of AWS, you have to pay for computing capacity per hour or per second. The model seems clear, but it has its pros and cons as well.


  • You aren’t obliged to make a long-term commitment
  • This model is good when you expect that the working load on the cloud may change
  • This is the most flexible pricing approach


  • Your saving opportunities are limited
  • You may quickly run out of budget, and in this case, this model can turn into the most expensive one, even despite its flexibility

Spot Instances

This is quite an interesting pricing model since, in this case, you should request a spare computing capacity and use it almost for free. Compared to the on-demand pricing model, Spot Instances allow you to save up to 90%. However, the model is tricky since your instance may be terminated any time — you will get a notification about the termination two minutes before.


  • This is the cheapest AWS pricing model
  • The approach is suitable for failure-resistant operations, for example, for web servers or CI/CD


  • Following this model is challenging, especially if you are just getting started with cloud management
  • Your instance may be terminated at any time

Reserved Instances

This model is a bit similar to the previous one. In this case, you also use a requested instance, but you shouldn’t request it any time you need to use it. How AWS pricing works in this case is that instead of requesting an instance, you reserve it for a long term (1-3 years) and pay for it regardless of the actual use.


  • Your costs are predictable
  • You may save up to 72% by making a long term commitment
  • This model is more user-friendly compared to Spot Instances


  • You have to make a long-term commitment
  • You have to pay for an instance regardless of the actual usage

Savings Plans

The saving plans pricing model was developed and launched in 2019. In this case, you have to choose the computing capacity you need (measured in a fixed price per hour) and make an instant commitment for 1-3 years. That’s, this model is an even more advanced embodiment of an on-demand approach, which in this case, is better predictable.


  • The easiest model to get started and proceed with
  • Your expenses are predictable


  • You have to make a long-term commitment
  • If you are using the resources that go beyond the chosen capacity, it will be charged according to an on-demand model

AWS Pricing Plans

The pricing models we have overviews above form the foundation of four Amazon Web Service pricing plans. Let’s analyze them as well.

Pay as You Go

This pricing plan is powered by an on-demand model, which is clear from its name. AWS Lambda and Amazon Lightsail are examples of this pricing plan. The latter is suitable for containerized apps, while AWS Lambda charges you depending on the amount of the request made.

Pay Less by Using More

The more resources you use by request, the more optimization opportunities you can unlock. For example, you may get a volume discount if you spend more than $500,000 in upfront costs. This pricing model suits advanced cloud storage users since you may scale your solutions faster by moving data between the storages and creating an economy of scale. AWS Snowball and Amazon Glacier are examples of this pricing plan’s packages.

Save When You Reserve

This pricing plan is inspired by Spot and Reserved Instances. Amazon EC2 and Amazon RDS are the tariff plans that allow for reserving storage. Still, you also have to smartly manage your workloads and divide them between your storages to achieve better efficiency.

Free Usage Tier

For those who aren’t sure about the AWS solutions’ applicability and their perspective to meet business needs, Amazon offers to try the services for free for a year. However, you should be smart with this pricing plan as well. Even if you are getting started for free, you still need to pay for specialists who will have to set it up and help you with moving your processes to the cloud.

How to Estimate the Cost of AWS Solutions

Even after an overview of AWS pricing principles, models, and plans, the actual Amazon Web Services price can still be unclear since the business goals and necessities are too different to make an instant and accurate estimate. To help you cope with this task, Amazon has also developed an AWS Pricing Calculator. This is a tool to come up with an instant AWS pricing overview depending on the chosen service; you don’t need an AWS account to use it, plus the calculator comes for free.

To estimate with its help, you should decide on the plan you want to use in advance. Optionally, you can make several estimates comparing different AWS pricing plans. Let’s suggest you want to find out the price for using Amazon Lambda.

The first step to make is to configure the service according to your business needs. You have to specify your location, the number of requests, their duration, and the amount of the allocated memory.  For example, if you need to perform 1 million requests with a 100ms duration of each at 200 MB of memory, the cost to use Amazon Lambda per month with a Free Tier will be $45.69.

That is, the Free Tier is not that free as you may expect, but with AWS Pricing Calculator, you may find it out in advance. Plus, you can make an unlimited amount of estimates, experimenting with different services.

AWS Pricing Model — How to Choose the Right One for Your Business

Let's proceed with the choice of the opportunity that suits your business most. This process will take five steps.

Get started by reviewing your current cloud infrastructure

The first step is to make an independent review of the ways your cloud infrastructure works right now. Is it effective enough to meet your business goals and provide the opportunity to store your data safely?

Define your core tasks / pain points

After you have reviewed the current state of your cloud, proceed with defining the core pain points and the challenges you want to cope with. For example, you may be looking for an opportunity to reduce expenses, improve capacity, or unlock scalability features.

Choose a pricing model that suits your business proceeding from its needs

Depending on the results of the previous steps, decide on the AWS pricing model that may suit your best. Consider a Free Tier if you are a novice AWS user but don’t forget that it is not that free as it seems but still cheaper than other plans. If your product is failure-resistant, you may consider Spot Instance or reserve the cloud resource if you are sure about the value it will deliver. As for an on-demand pricing plan, think twice before getting started with it since flexibility can be costly.

Use AWS Pricing Calculator

Also, don’t miss the opportunity to calculate your expenses in advance, and don’t forget to compare the plans that come with and without a Free Tier.

Make a final decision

You are almost done. The only thing remaining is to make a final decision and get started with AWS. What’s more, we as an AWS consulting company are here to help you with this task.


Getting started with Amazon Web Services can be a challenge. However, cloud data management is one of the competitive approaches modern companies are better to follow. TechMagic may support you along this path by leveraging our practical expertise with Amazon and a well-developed skill to match the opportunities provided by AWS with the ones your business is looking for.

Schedule a free meeting with our experts to receive serverless consulting and find out how we can help!

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