10 Tips for Negotiating Your AWS Agreement
Amazon Web Services (AWS) is a dominant force in the cloud computing landscape, commanding 33% of the global cloud infrastructure services market as of the fourth quarter of 2024.
In 2023, AWS reported revenues of $90.76 billion, which shows how significant it is in the industry. For businesses leveraging AWS's scalable infrastructure and diverse cloud services, developing a strategic negotiation approach is a must in order to secure favorable terms and optimize cloud usage, ultimately maximizing cost savings
In this guide, we’ll walk you through 10 key steps to negotiate a better AWS agreement that benefits your business and takes you closer to your goals, without wasting money.
Why is AWS Negotiation Important?
AWS contract negotiation determines how much you pay, the discount levels you receive, and the service agreements you commit to.
Without an optimized negotiation strategy, you risk overpaying for cloud resources and locking into unfavorable commitment terms.
AWS offers various pricing models, including the AWS Enterprise Discount Program (EDP), which requires careful structuring to maximize potential savings.
You must align your contractual commitments with your cloud usage and business objectives to avoid unnecessary additional costs.
Key Reasons AWS Negotiation Matters
Cost optimization
Without effective price negotiations, you could miss out on additional discounts and overpay for unused instances.Flexible commitment terms
AWS contracts can include multi-year commitments, but you need flexibility in contract terms to scale cloud usage as needed.Maximizing discount rates
Securing favorable terms in the AWS Enterprise Discount Program ensures you access the highest discount levels available.Risk mitigation
Unstructured contract negotiations can expose your company to potential risks, such as penalties for failing to meet commitment thresholds.Aligning contracts with business growth
AWS agreements must reflect your growth trajectories, ensuring that cloud spending supports your long-term business continuity.
10 Tips for Negotiating Your AWS Agreement
1. Optimize Your AWS Enterprise Discount Program (EDP) Agreement
The AWS Enterprise Discount Program (EDP) offers organizations substantial discounts on AWS services in exchange for committed annual spending over a specified term, typically starting at $1 million per year. These commitments often span one to five years, with higher spending and longer terms yielding greater discounts.
To maximize benefits from an EDP, it's crucial to accurately forecast your organization's current and future AWS usage. Tools like AWS Cost Explorer can help analyze historical usage patterns, giving you precise predictions and informed commitment levels. This approach not only secures optimal discount rates but also aligns your cloud investment with business objectives for more cost-effectiveness and flexibility.
Effective negotiation of EDP terms involves assembling a cross-functional team, including finance, cloud architects, and legal advisors, to address all aspects of the agreement. Collaborating with AWS account managers can further tailor the EDP to your organization's specific needs and potentially unlock additional benefits like training credits or better support tiers. This strategic approach ensures that your AWS partnership supports both immediate requirements and long-term growth.
2. Align Commitment Terms with Your Actual Usage Patterns
AWS offers multi-year commitments through programs like Reserved Instances and Savings Plans, which allow customers to reduce costs by committing to specific usage over one- or three-year terms. However, misaligned commitments can lead to underuse and increased expenses. For example, committing to more resources than needed can result in paying for unused capacity, while under-committing may lead to higher on-demand rates.
To make sure your contractual commitments align with actual cloud requirements, take advantage of AWS management tools such as AWS Cost Explorer and AWS Cost and Usage Reports. These tools provide detailed insights into your usage trends, helping you identify patterns and forecast future needs. For instance, AWS Cost Explorer allows you to visualize up to 12 months of historical data and predict future costs, enabling more accurate commitment decisions. The screenshot below shows an example.
Additionally, consider implementing a multi-year cost model that accounts for expected growth and seasonal variations. By establishing a plan of your capacity requirements, you can take full advantage of AWS's pricing models and maximize available discounts. Regularly reviewing and adjusting your commitments based on evolving usage patterns ensures that your AWS investments remain cost-effective and aligned with your organization's objectives.
3. Secure AWS Support and Professional Services at No Additional Cost
AWS offers a range of support plans and professional services to help organizations optimize their cloud infrastructure. However, these services often come with additional costs that can impact your overall AWS expenditure. For instance, the AWS Enterprise Support plan, which includes a dedicated Technical Account Manager (TAM) and 24/7 access to senior cloud support engineers, is priced at the greater of $15,000 per month or 10% of monthly AWS usage for the first $150K, with the percentage decreasing for higher usage tiers.
The graphic below shows some examples of support plan pricing tiers:
To manage these expenses effectively, you’ll need to incorporate support and professional services into your negotiation strategy. Engaging in private offers allows you to negotiate customized terms and pricing for professional services, aligning them with your organization's specific requirements.
Making use of programs like AWS Enterprise Support can lead to cost savings; customers on this plan have experienced more than 15% cost savings across select services compared to those on other support tiers with similar AWS spend.
By proactively negotiating these aspects, you can secure essential support and services without incurring unforeseen expenses.
4. Maximize Savings Plans and Reserved Instances Without Overcommitting
AWS provides cost-saving options like Savings Plans and Reserved Instances (RIs), offering discounts of up to 72% compared to On-Demand pricing. However, misaligning these commitments with actual usage can result in underused resources and wasted budgets.
Savings Plans come in two types:
Compute Savings Plans: Offer flexibility across instance families, sizes, regions, operating systems, and even apply to AWS Fargate and Lambda usage
EC2 Instance Savings Plans: Provide higher discounts but are limited to specific instance families within a region
Reserved Instances are categorized as:
Standard RIs: Provide significant savings but are less flexible regarding instance modifications
Convertible RIs: Allow changes to instance attributes, offering more flexibility with slightly lower discounts
See the graphic below for more information:
To optimize these savings mechanisms without overcommitting:
Analyze Usage Patterns: Use AWS tools like Cost Explorer to monitor and understand your organization's compute usage. This analysis helps you forecast future requirements and align commitments accordingly.
Choose Appropriate Commitment Levels: For workloads with predictable usage, EC2 Instance Savings Plans or Standard RIs may be suitable. In contrast, for variable workloads, Compute Savings Plans or Convertible RIs offer the necessary flexibility.
Regularly Review Commitments: Periodically assess your reserved capacity against actual usage. AWS allows modifications or exchanges of certain RIs to better fit evolving needs, helping to maintain cost efficiency.
By strategically aligning your AWS commitments with actual consumption patterns, you can achieve major cost savings while minimizing the risk of underutilized resources.
5. Mitigate Hidden Costs in Data Transfer and Storage Pricing
AWS imposes data transfer fees, particularly for outbound data (egress) moving out of its cloud infrastructure. For instance, transferring data from Amazon EC2 instances to the internet incurs costs starting at $0.09 per GB beyond the first 100 TB each month, with decreasing rates for higher usage.
The graphic below shows how AWS compares to other providers here.
To manage these expenses, especially in a multi-cloud environment or when anticipating high outbound traffic, it's important to optimize data transfer routes. Services like AWS Direct Connect can offer more predictable costs by establishing dedicated network connections between your on-premises environments and AWS, potentially reducing egress fees.
On top of that, implementing strategies such as data compression and caching can minimize the volume of data transferred and lead to cost reductions. Regularly reviewing your data transfer patterns and adjusting your architecture accordingly helps keep you aligned with your performance and budgetary goals.
6. Make Sure Future Growth Is Factored Into Your AWS Agreement
When negotiating your AWS Enterprise Discount Program (EDP), it's a good idea to incorporate your organization's projected growth to secure favorable terms. AWS values long-term commitments and often offers better discounts to customers who can show potential for increased cloud usage over time. For instance, companies committing to higher annual spends can access more substantial discounts.
To use your growth projections effectively, use AWS tools like the AWS Pricing Calculator to estimate future costs based on planned expansions or new projects. This approach allows you to present a data-driven case during negotiations and match your commitment levels to your expected cloud consumption.
You might also consider structuring your EDP to include scalability options, allowing adjustments to your commitments as your organization grows. This flexibility ensures that your AWS agreement stays relevant to your evolving business needs.
7. Negotiate Clearer SLAs for Service Performance and Uptime
AWS's Service Level Agreements (SLAs) specify the expected availability and performance of their services. For example, AWS commits to a Monthly Uptime Percentage of 99.99% for services like Amazon S3. If AWS fails to meet this standard, customers may be eligible for service credits as compensation. An example for Amazon API Gateway is shown below:
However, standard SLAs may not fully address the critical needs of your organization. It's advisable to negotiate stricter SLAs tailored to your specific requirements. This could involve setting higher availability targets or defining more stringent performance metrics. Including financial penalties for non-compliance can further ensure accountability.
Clear and customized SLAs are essential for maintaining business continuity. They provide a structured framework for recourse in the event of service disruptions, thereby minimizing potential risks associated with downtime. By proactively negotiating these terms, you can align AWS's services more closely with your organization's operational needs and expectations.
8. Engage Finance and Procurement Teams Early in the Negotiation Process
Involving your organization's finance and procurement teams early in AWS contract negotiations helps you secure favorable terms and ensure alignment with business objectives. These teams bring expertise in cost management, compliance, and strategic sourcing, which can significantly influence the outcome of your AWS agreements.
Early engagement of these stakeholders allows for a comprehensive understanding of the organization's cloud usage patterns and future requirements. This collaborative approach ensures that financial commitments align with actual consumption, preventing overcommitment and potential overspending. Ineffective contract management can lead to value erosion, with organizations potentially losing between 2-4% of revenue in consumer goods sectors and over 15% in capital-intensive industries like construction and aerospace.
Additionally, procurement professionals can take advantage of their negotiation skills to obtain more favorable terms, such as discounts or flexible payment options.
Moreover, involving finance and procurement teams from the outset helps build cross-functional alignment, which streamlines the negotiation process and reduces the likelihood of contractual disputes.
By integrating their insights with those of technical teams, organizations can develop a holistic negotiation strategy that addresses both operational needs and financial constraints, ultimately strengthening their position at the negotiation table.
9. Negotiate Service-Specific Discounts for High-Volume AWS Services
AWS offers flexible pricing models, such as Savings Plans, that provide significant discounts for high-usage services like Amazon EC2, S3 storage, and RDS. By committing to consistent usage over one or three years, you can save up to 72% compared to On-Demand pricing.
To maximize these savings, analyze your organization's usage patterns to identify services with high and consistent demand. For example, if your applications make heavy use of EC2 instances, consider Compute Savings Plans, which offer flexibility across instance families, sizes, and regions. Alternatively, EC2 Instance Savings Plans provide deeper discounts for specific instance families within a region, which is ideal for predictable workloads. The image below shows more information about these two types of plans.
It's important to align your commitments with actual usage to avoid overcommitting and incurring unnecessary costs. AWS tools like Cost Explorer can monitor and analyze your consumption, so your negotiated discounts reduce expenses without compromising operational flexibility.
10. Push for Flexibility in Contract Terms to Reduce Lock-In Risks
Engaging in long-term contracts with AWS can offer cost benefits, but they may also introduce challenges if your organization's objectives change. To mitigate potential vendor lock-in, negotiate contract terms that provide flexibility. This includes options like shorter commitment periods, scaling allowances, or the ability to reallocate unused credits across different AWS services.
Vendor lock-in refers to the difficulties and costs associated with moving away from a specific service provider. In the context of cloud computing, this can happen when a company uses proprietary services or tools from a particular provider, making migration to another platform challenging. A study highlighted that 71% of companies standardized on one provider's public cloud services, indicating a significant reliance on single vendors.
The image below shows some common signs on vendor lock-in:
To reduce the risk of vendor lock-in, consider adopting strategies such as using open-source solutions, implementing cloud-agnostic architectures, and developing robust exit strategies. These approaches improve interoperability and data portability so your organization can adapt to changing business needs without being constrained by rigid contract terms.
Common Mistakes When Negotiating Your AWS Contract
Negotiating an AWS contract requires deep technical and financial alignment to avoid overpaying or locking into restrictive terms. Many businesses fail to optimize their agreements due to misaligned commitment terms, poor cost forecasting, or lack of flexibility. Below are some of the most common AWS contract negotiation mistakes and how to avoid them.
1. Overcommitting to Long-Term Contracts Without Usage Analysis
AWS often incentivizes multi-year commitments through Enterprise Discount Programs (EDP) or Reserved Instances (RIs). However, many businesses overestimate their future cloud usage, which results in unused instances and wasted budgets.
How to avoid it:
Use AWS Cost Explorer and AWS Cost and Usage Reports to analyze historical usage patterns before committing to a multi-year contract. Consider Savings Plans, which offer more flexibility than Reserved Instances, and allow you to adjust commitment thresholds over time.
2. Failing to Negotiate Custom Discounts for High-Usage Services
AWS provides default discount tiers, but many businesses assume they cannot negotiate beyond standard pricing. Without customized discount levels, high-volume users of EC2, S3, and RDS often leave significant savings on the table.
How to avoid it:
Negotiate service-specific pricing by demonstrating growth trajectories and long-term cloud usage commitments. AWS allows customers to secure additional discounts based on projected workloads—particularly for high-volume compute, storage, and database services.
3. Ignoring Data Transfer and Egress Fees
AWS charges egress fees for moving data out of its cloud, which can significantly inflate cloud spending—especially for businesses using a multi-cloud strategy. Many organizations underestimate these costs during negotiations.
How to avoid it:
Request discounted data transfer pricing if your workloads require high outbound traffic. Use AWS Direct Connect to lower costs and optimize data routes by keeping transfers within AWS availability zones.
4. Not Securing Flexibility for Changing Business Needs
AWS contracts often lock customers into rigid commitment terms, making it difficult to adjust service cost structures as business objectives evolve. This can result in excess spending on services no longer needed.
How to avoid it:
Negotiate contract flexibility, including the ability to reallocate unused credits, modify commitment terms, or adjust discount thresholds based on cloud requirements. This ensures long-term purchase commitments remain aligned with actual demand.
5. Overlooking AWS Support and Professional Services Costs
AWS provides Enterprise Support, TAMs (Technical Account Managers), and migration assistance, but these services often come with hidden costs. Many businesses fail to factor these fees into their negotiation strategy.
How to avoid it:
Request Enterprise Support and technical consulting services to be bundled into your agreement at no additional cost. AWS often includes premium support tiers and training credits for customers committing to higher spending levels.
By avoiding these common pitfalls, businesses can secure favorable AWS contract terms, maximize cost savings, and drive more pricing efficiency as cloud usage scales.
Looking Forward
Negotiating your AWS contract isn’t just about getting the lowest price—it’s about securing flexibility, optimizing cloud spending, and making sure your commitments align with real usage.
A poorly structured agreement can lock you into rigid terms, hidden costs, and wasted resources. AWS expects customers to negotiate, and failing to do so means leaving money on the table.
Your contract will shape your cloud strategy for years. Are you confident it reflects your business’s future needs, growth plans, and cost structure? If not, now is the time to rethink your approach and take control of the negotiation process. Reach out to our experts today to ensure your next move is strategic, cost-effective, and aligned with your long-term goals.
