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Why Most Companies Overspend on AWS (And How to Fix It)

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Amazon Web Services (AWS) has become the default choice for modern infrastructure—scalable, fast, and deeply integrated. But as powerful as AWS is, it’s also incredibly easy to overspend. In fact, most companies do.

From startups to enterprise teams, cloud bills often grow faster than usage—and well beyond what’s actually necessary. The result? CFOs are surprised, engineers are confused, and profit margins quietly shrink.

Here’s why most companies overspend on AWS—and more importantly, what you can do about it.


1. “Set and Forget” Infrastructure

Most teams launch their AWS resources and never revisit them. Over time, environments get bloated with:


  • Unused EC2 instances



  • Forgotten EBS volumes



  • Old snapshots



  • Idle load balancers


These unused resources silently generate monthly costs without adding any value.

Fix it:
Run regular audits using tools like:


  • AWS Trusted Advisor



  • AWS Cost Explorer



  • Third-party tools like CloudHealth or CloudCheckr


Set up auto-delete policies, tag governance, and a cleanup schedule—especially for staging and dev environments.


2. Wrong Instance Types (Overprovisioning)

Engineers often choose instance sizes based on guesswork or over-caution. For example, using an m5.4xlarge where a t3.large would suffice.

The problem? You’re paying way more than necessary—sometimes 5–10x the needed capacity.

Fix it:


  • Use AWS Compute Optimizer to rightsize your instances.



  • Benchmark workloads to match CPU, memory, and network needs.



  • Use auto-scaling groups with sensible min/max values.


🧠 Think of provisioning like renting office space—you wouldn’t lease a warehouse if you only need a desk.


3. Not Leveraging Reserved or Spot Pricing

On-demand pricing is convenient but expensive. Many teams never move to Reserved Instances or Spot Instances—even for predictable workloads.

SaaS technology abstract concept vector illustration. Software as a service, cloud computing, application service, customer access, software licensing, subscription, pricing abstract metaphor.

Fix it:


  • Buy Reserved Instances for long-running services.



  • Use Savings Plans for flexibility across instance families and regions.



  • For non-critical jobs (e.g., batch jobs), use Spot Instances with fallback mechanisms.


📉 Companies can save 30–70% just by shifting part of their workloads to reserved or spot options.


4. Storage Sprawl

S3, EBS, Glacier, RDS snapshots… storage is everywhere in AWS, and it adds up quickly—especially when it’s not being monitored.

Common oversights:


  • Stale S3 objects stored in expensive storage classes



  • Unused database backups



  • EBS volumes attached to terminated instances


Fix it:


  • Implement lifecycle policies in S3 to move data to cheaper tiers.



  • Regularly prune old snapshots and unused backups.



  • Use intelligent tiering in S3 for automated cost optimization.



5. No Cost Visibility or Accountability

In many organizations, no one “owns” cloud costs. Engineering uses AWS freely, finance gets the bill, and no one connects the dots.

This lack of visibility leads to:


  • Lack of ownership



  • Unexpected billing spikes



  • Inability to forecast accurately


Fix it:


  • Use AWS cost allocation tags to attribute usage to teams, projects, or customers.



  • Create shared dashboards (e.g., via CloudWatch, Datadog, or custom BI tools).



  • Establish monthly cloud reviews between engineering and finance.


🔁 FinOps is not a one-time project—it’s a cultural shift toward cost-aware engineering.


6. Ignoring Data Transfer Costs

Many teams don’t realize that data transfer (especially cross-region or to the internet) can become a major cost center.

Fix it:


  • Minimize unnecessary cross-AZ or cross-region traffic.



  • Use CloudFront for CDN caching.



  • Review VPC architecture and NAT Gateway usage.



Conclusion

AWS gives you unmatched flexibility—but that same flexibility can turn into uncontrolled spending if not actively managed. Most companies overspend because they treat cloud infrastructure as “set it and forget it.”

But with the right strategy—rightsizing, reserved pricing, storage optimization, visibility—you can significantly reduce your AWS bill without sacrificing performance.

Cloud costs don’t have to be a black box. They can be a strategic advantage.

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Educate all team members including office and reception staff about the important role they play in preventing the spread of infection

Ready to unlock cloud value across your portfolio?

FastFinOps specializes in rapid cloud optimization for PE-backed companies, delivering measurable EBITDA improvement within 90 days.

Additional Resources

- Industry standard for cloud financial management

- Funding opportunities for cloud migration

- PE industry benchmarks and trends

- Latest PE market analysis

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