Flexera's 2025 State of the Cloud report found that organizations waste an average of 32% of cloud spend. For a company spending $100,000/month on AWS, that's $32,000/month in recoverable costs — without changing anything about application performance.
Here are the five cuts that consistently deliver the biggest savings.
Cut 1: Reserved Instances and Savings Plans (20-40% savings)
On-demand instances are the most expensive way to run consistent workloads. Reserved Instances and Compute Savings Plans offer:
| Commitment | Savings vs. On-Demand |
|---|---|
| 1-year, no upfront | 30-40% |
| 1-year, all upfront | 40-50% |
| 3-year, all upfront | 50-65% |
Rule of thumb: Any instance that runs > 720 hours/month (i.e., effectively 24/7) should be covered by Reserved Instances or Savings Plans.
Common mistake: Teams buy Reserved Instances for specific instance types (m5.xlarge) when Compute Savings Plans are more flexible — they apply to any instance type in a region.
Estimated savings for a company spending $80,000/month on EC2 with 70% baseline utilization: $16,000-25,000/month from RI/SP conversion.
Cut 2: Right-Sizing Instances (10-20% savings)
AWS Cost Explorer and Compute Optimizer analyze CPU/memory utilization and flag over-provisioned instances. In practice:
- 40-60% of EC2 instances run at < 20% average CPU utilization
- The default response (provision for peak) results in massive idle capacity
- Moving from m5.2xlarge to m5.xlarge (same workload, lower peak provisioned): saves 50% on that instance
Implementation: Run AWS Compute Optimizer across your fleet. Start with the top 20 instances by monthly cost. Right-size any showing < 20% average CPU over 14 days.
Cut 3: Eliminate Unattached Resources (5-15% savings)
The easiest savings. These resources accumulate silently:
| Resource type | Typical monthly cost | Often-found count |
|---|---|---|
| Unattached EBS volumes | $8-100/volume | 50-200 in large accounts |
| Unallocated Elastic IPs | $3.65/IP | Often dozens |
| Unused load balancers | $16-22/month | Multiple |
| Stale snapshots | $0.05/GB | Often terabytes |
| Orphaned NAT Gateways | $32+/month | Multiple |
A monthly audit script that flags unattached resources and sends a Slack alert to the account owner reduces this waste by 80%.
Cut 4: S3 Storage Tiering (10-30% savings on storage)
Default S3 stores everything in Standard (most expensive). Intelligent-Tiering moves objects automatically based on access patterns:
| Storage class | Cost per GB/month | When to use |
|---|---|---|
| Standard | $0.023 | Frequently accessed |
| Standard-IA | $0.0125 | Infrequent access |
| Glacier Instant | $0.004 | Archive, < 1hr retrieval |
| Glacier Deep Archive | $0.00099 | Long-term, 12hr retrieval |
| Intelligent-Tiering | Automatic | Unknown patterns |
For buckets with > 1TB of data not accessed frequently, moving to Intelligent-Tiering typically saves 40-60% on storage costs within 90 days as objects migrate to lower tiers.
Cut 5: Data Transfer Cost Reduction (variable, often 10-20%)
Data egress from AWS is expensive and often overlooked:
| Transfer type | Cost |
|---|---|
| EC2 to internet | $0.09/GB |
| Cross-region | $0.02/GB |
| Cross-AZ | $0.01/GB |
| To CloudFront | $0.00/GB |
| Via S3 Transfer Acceleration | $0.04/GB additional |
Fix: Put CloudFront in front of every S3 bucket and any public-facing origin. CloudFront egress is 40-80% cheaper than direct S3/EC2 egress, and cached content has zero origin cost.
Cross-AZ traffic: Often invisible because it's in the VPC. A 3-tier app with traffic traversing AZs repeatedly on every request can generate significant cross-AZ charges at scale. Co-locating components in a single AZ where HA isn't critical reduces this to zero.
The Savings Roadmap
| Priority | Cut | Implementation effort | Typical savings |
|---|---|---|---|
| 1 | RI/Savings Plans | Low — purchase in console | 20-40% of compute |
| 2 | Unattached resources | Low — audit script | 5-15% of total |
| 3 | Right-sizing | Medium — testing required | 10-20% of compute |
| 4 | S3 tiering | Low — lifecycle rules | 10-30% of storage |
| 5 | Data transfer | High — architecture change | 10-20% of data costs |
Use the Cloud Cost Calculator to model your potential savings before starting.