How does consolidated billing help reduce costs for a company that has multiple AWS accounts?

Consolidated billing, a feature of AWS Organizations, combines usage from multiple AWS accounts into a single bill. This aggregation allows the organization to benefit from volume pricing discounts sooner. As the combined usage across all accounts increases, it crosses pricing tiers that offer lower rates per unit for services like Amazon S3 and data transfer. This sharing of volume discounts is a primary mechanism for cost reduction.

It offers an additional 5% discount on purchases of All Upfront Reserved Instances: This specific discount is not a standard feature of consolidated billing. Consolidated billing helps share RI benefits, but does not add a flat percentage discount. It provides a simplified billing invoice that the company can process more quickly: While the invoice is simplified, this is an operational benefit, not a direct cost reduction mechanism on AWS service charges. It gives AWS resellers the ability to bill their customers for usage: This is a use case for the service but does not explain the cost-saving mechanism for a company managing its own accounts.

1. AWS Documentation. (n.d.). Consolidated billing for AWS Organizations. AWS Billing and Cost Management User Guide. Retrieved from https://docs.aws.amazon.com/awsaccountbilling/latest/aboutv2/consolidated-billing.html. The documentation states, "You can combine the usage from all accounts in the organization to share the volume pricing discounts, Reserved Instance discounts, and Savings Plans."

2. AWS Whitepapers. (2021, December). An Overview of the AWS Cloud Adoption Framework, Updated AWS CAF 3.0. Page 43. The whitepaper discusses how the Cost pillar of the framework is supported by features like consolidated billing to achieve economies of scale.