Amazon Redshift is the world's most widely used data warehouse. But before you decide to use Redshift, you'll need to learn if it works for your budget.

About Amazon Redshift

• The Amazon Redshift data cloud provides a fast, secure, and widely accessible data warehouse solution. It is an ideal platform for performing complex analytics and processing large data sets. In addition to supporting multi-parallel processing (MPP), Redshift is also a type of Online Analytical Processing (OLAP) database.

• Yet, one of Redshift’s main selling points is its cost-effectiveness over alternatives like Snowflake and BigQuery..
• Redshift is a fully managed, petabyte-scale, cloud-based data warehouse that's a part of Amazon Web Services (AWS).
• It's a scalable and cost-effective platform built for high-performance columnar data warehousing in SQL. Redshift accepts structured and semi-structured data formats and virtually any amount of data, from a few gigabytes to several petabytes.

How Amazon Redshift pricing works

One of the reasons why Amazon Redshift prices seem so complex is that there's just so much to choose from.

As one example, pricing for the current generation of Dense Compute (DC2) large begins at $0.25 per hour in the US East (Ohio) region.

Redshift charges on a pay-as-you-go model, so you only pay for what you consume. Yet, Amazon Redshift costs vary based on various factors, such as your AWS Region and the type and number of Redshift nodes you deploy.

Here are more details about each Amazon Redshift billing strategy.

1. Amazon Redshift On-Demand pricing

• On-Demand billing allows you to use Redshift clusters without committing to long-term contracts or paying anything upfront. Instead, you pay hourly for the provisioned capacity of the particular node type and number you have running. Redshift bills partial hours per second you accumulate.
• You can create, pause, delete, and resume these clusters as needed. Redshift suspends On-Demand billing when you pause a cluster, but you still pay for its backup storage during that time.
• A Redshift On-Demand plan is the most flexible data warehouse pricing option. You can seamlessly switch between node types, add or remove nodes to your cluster, and pause and resume it as your workload requires. A few clicks through the Amazon Redshift console or an API call will do the trick.
• Still, On-Demand pricing can be up to 75% costlier than this next Redshift billing strategy.

2. Amazon Redshift Reserved Instances pricing
Redshift’s Reserved Instance costs follow a commitment-based pricing model. You commit to using Amazon Redshift for one or three years in return for up to 75% off of On-Demand pricing.

There are three types of reserved pricing available with Redshift:

• All Upfront - Saves up to 42% (1 year) or 75% (3 years) over On-Demand pricing when you pay 100% in advance.
• Partial Upfront - Saves up to 41% (1 year) or 71% (3 years) over On-Demand pricing depending upon the amount of upfront cost you put down (1% to 99%).
• No Upfront - Saves up to 20% compared to On-Demand pricing, is available only for one-year contracts, and requires no upfront payment.

3. Amazon Redshift Serverless pricing

• Redshift Serverless automatically starts up, shuts down, and scales capacity as your application needs change. Redshift Serverless charges only when it is actively processing workloads. A dynamic workload with unpredictable requirements, such as those that can spike at any time, is ideal for using this option.
• This Redshift pricing strategy bills you per second based on Redshift Processing Unit Hours (RPU-hours). There is a minimum billing requirement of 60 seconds. Additionally, you pay for queries to open file formats in Amazon S3.
• Redshift Serverless does not charge additional fees for auto-scaling, data warehouse startup time, or security features.
• One more thing. Redshift Serverless pricing includes concurrency scaling and Redshift Spectrum.

4. Concurrency scaling in Amazon Redshift

• Concurrency scaling automatically launches additional, short-lived clusters during high usage periods. As soon as they are no longer needed, the feature removes them to save costs.
• Redshift lets you use one hour of Concurrency Scaling for free every 24 hours and charges you by the second once you go over it. Your cluster earns credits for every hour it operates, and you can accumulate a maximum of 30 free hours. As long as you don't terminate the cluster, these credits will not expire.
• When you activate concurrency scaling for a cluster, there's a 60-second minimum charge. The rate is based on Redshift's On-Demand rate.

5. Redshift Spectrum pricing

• With Redshift Spectrum, you can query your data lake directly without importing it to Redshift. It charges based on the number of bytes it scans (rounded off to the next gigabyte). There’s also a 10 MB minimum charge per query.
• Note: Redshift Spectrum costs reduce when you store your data in a compressed, columnar, partitioned data format.

Redshift provisioned data warehouse

• Amazon Redshift divides its computing resources into units called nodes, which can be grouped together in a cluster. There are separate node types for different use cases, and each cluster can only contain one type of node.
• For data sets under one terabyte, use DC2 nodes. This stands for "dense compute" and uses a fast solid-state drive (SSD) for data storage. DC2 nodes have different capacities measured as virtual CPUs (vCPUs).
• Users in a US region can expect to pay around $0.25-0.35/hour for the lowest-power, 2-vCPU dc2.
• For large node, users can expect to pay around $5-6/hour for the highest-power 32-vCPU dc2.8xlarge node.
• For data sets over one terabyte, use RA3 nodes. These use a unique split that stores data for fast access in SSD storage while keeping the rest in Amazon S3. The RA3 node essentially separates compute and storage architectures, similar to the default setup on Snowflake and BigQuery.
• Users in a US region can expect to pay around $1.09-1.20/hour for the lowest-power, 4-vCPU ra3.xlplus node and up to around $13-14.50/hour for the highest-power 48-vCPU ra3.16xlarge node.
• Amazon launched RA3 nodes in 2019 to replace dense storage nodes (DS2), which used hard disk drives (HDD). This DS2 type of node is still available, though outdated, and doesn't offer the same features as the new RA3 node.
• The RA3 node offers elastic resizing which lets you scale your cluster size up and down instead of reallocating the workload across several clusters.
• The pricing model depends on the size of your Amazon Redshift cluster---the number of nodes and type of nodes you're using---and the region you're in.

Redshift Managed Storage

Redshift Managed Storage prices come only with RA3 nodes and are billed at a per-gigabyte rate monthly. Managed Storage does not include backup storage, which is charged separately.While the exact price depends on your region, most US users can expect to pay around $0.025 per gigabyte per month. Keep in mind that for large datasets that only need infrequent queries, it may be more affordable to store data long-term in S3 and use Redshift Spectrum to scan it when necessary.

Redshift Serverless

What if you want to use Redshift but don't want to worry about managing Redshift clusters and compute nodes yourself? Enter Redshift Serverless.

This service handles all capacity behind the scenes, scaling up or down as you need. And instead of charging based on the nodes you need; it bills based on Redshift Processing Units (RPUs).

These are credits for an hour of processing time, billed on a per-second basis with a 60-second minimum. The price depends on your region, but customers in the US can expect to pay from $0.35 to $0.50 per hour. Redshift Serverless also includes Concurrency Scaling and Redshift Spectrum features for free. 

Data transfer

Finally, you'll pay additional fees for transferring data in and out of Amazon Redshift.

The only exception is any data you'll be moving within Amazon Web Services within the same AWS region. So, if you need to connect Redshift to a third-party data source, you'll be charged for inputting that data. But if you're moving data that's already stored in Amazon S3 in the same region, moving into Redshift will be free.

How to optimize costs for your Redshift deployment
While Redshift is known for its affordable pricing, there are still ways to reduce your total cost.

Limit concurrency scaling

• You can set monthly, weekly, and daily caps on Concurrency Scaling. This can help keep costs down and prevent you from using the automatically allocated hours.

Use query monitoring

• Redshift includes a feature to monitor the usage based on each query. You may find some are consuming more processing power than expected and can modify them or reduce their frequency.

Use Redshift Spectrum

• If you're doing infrequent scans on large amounts of data, one of the best ways to save money is to move that data to an S3 bucket and use Spectrum for the few scans you need.

How To Understand And Control Redshift Costs With Cloud Cost Intelligence

You can monitor your data warehouse logs and usage patterns using Amazon CloudWatch. However, AWS Redshift integrates with over 170 AWS services. These include Amazon S3, AWS Glue, Amazon Kinesis Data Firehose, and Amazon Quicksight. When analyzing your CloudWatch data, it's hard to tell how each service is impacting your Redshift bill and why.

• You can now organize your Amazon Redshift costs with CloudZero, normalize them, and then view them by customer, software feature, tenant, team, product, environment, etc. No manual tagging is required.

Amazon Redshift Pricing FAQs

Does Amazon Redshift have a free plan?

• Yes. If you're new to Redshift, you can try the DC2 large node for two months for free.
• You’ll get 750 free hours per month, complete with 160 GB of compressed SSD storage. You can then continuously run one DC2 large node or more for as long as this capacity lasts.
• After your free trial expires or your usage exceeds the 750 hours per month, you can choose to shut down your cluster to avoid charges. Or you can keep it running at Redshift’s On-Demand Rate.

Is Redshift cheaper than Snowflake?

There are several use cases in which Amazon Redshift is more cost-effective than Snowflake. If you want a more precise comparison, check out our Redshift vs Snowflake guide here.

Is Amazon Redshift better than Amazon S3?

Despite both being AWS cloud storage options, they serve different purposes. Most organizations find it more practical to use both than to choose one over the other.

What is RA3 in Amazon Redshift?

Redshift RA3 nodes are optimized for handling large data sets and separate compute and storage functions. They are the default nodes for Redshift Managed Storage (RMS).