Terraform tagging strategies and Cost Estimation Tools

OpenSource tools for terraform cost analysis
February 14, 2023
min read
Yehonatan Rumyantsev
Cloud Specialist
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Harness the power of infrastructure as code to optimize your cloud expenses

Optimizing Costs with Terraform Tagging Strategy

Implementing a tagging strategy is essential for organizations looking to manage their cloud resources and costs efficiently. Here are some best practices to consider when using Terraform tags:

  1. Consistent Naming Convention: Adopting a uniform naming convention for tags simplifies resource identification and cost allocation. Examples include "team:team-name" or "env:environment-name."
  2. Tag All Resources: Ensure all resources are tagged, even temporary or unused ones, to facilitate cost tracking and identify optimization opportunities.
  3. Cost-related Tags: Utilize tags to monitor costs by associating them with specific cost centers, projects, or resource criticality.
  4. Regular Review and Update: Keep tags up-to-date to maintain accurate cost tracking and resource management.
  5. Automate Tag Management: Use automation tools like Terraform or third-party solutions to ensure consistency and efficiency in managing tags across resources.

Cost Estimation Tools for Terraform

Several cost estimation tools are available for Terraform, including open-source options like Infracost and Terracost, and paid solutions such as Scalr and Terraform Cloud. Although our focus is on AWS, these tools also support Google Cloud and Microsoft Azure. Consult their documentation for a complete list of supported resources.

Setting Up Cost Estimation Tools

  1. Infracost: Free and open-source, Infracost can be installed locally or integrated into CI/CD pipelines using GitHub Actions or Jenkins. Env0, terrateam, Spacelift are examples of Terraform automation systems that rely on Infracost for cost estimation.
  2. https://github.com/infracost/infracost
  3. Terracost: Another open-source option, Terracost provides cost estimation for Terraform deployments.
  4. https://github.com/cycloidio/terracost
  5. Scalr & Terraform Cloud: These paid solutions offer not only cost estimation but also remote state and operations backend capabilities for enhanced automation and collaboration.

Price Accuracy Limitations

It's important to note that Terraform cost estimation tools may sometimes produce inaccurate results due to:

  • Custom Pricing: The tools may not account for negotiated custom pricing with cloud providers.
  • Complex Pricing Models: Inaccuracies may arise from factors such as data transfer costs, storage costs, and regional differences.
  • Usage Patterns: Estimates may vary from actual costs due to differing usage patterns, i.e the resources will be stopped during nights.
  • Discounts and Credits: The tools may not consider any discounts, credits, or promotions your organization has with a cloud provider.


Managing cloud costs effectively is crucial for organizations as they migrate and expand their infrastructure. Terraform's tagging strategies and cost estimation tools offer valuable insights to optimize and allocate expenses, ensuring the long-term success of your cloud endeavors. By leveraging these tools and best practices, you'll be well-equipped to make informed decisions and control your cloud costs with confidence.