AWS Webcast - Total Cost of (Non) Ownership

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The Total Cost of (Non) Ownership in

the Cloud

Jinesh Varia

[email protected] @jinman

mailto:[email protected]


Total Cost of Ownership (TCO)


Pay as you go


When Calculating TCO…


#1 Use updated pricing - price cuts, tiered pricing, volume discounts

When calculating TCO…


Massive economies of scale and efficiency improvements allow us to continually

lower prices


“It makes me look so good in front of my CFO. When he [CFO] sees the savings in our AWS monthly bill, he thinks that it is me who is working hard on driving the costs down and increasing efficiency of the company’s infrastructure. I get all the credit for all the hard work you guys are putting in.”

CIO of F500 company

35 price cuts in last 6 years


Pay less when you use more


New Customers

Amazon EC2 and RDS

Amazon ELB

Amazon S3

Amazon EBS

Amazon DynamoDB…

For all customers

Amazon SQS/SNS

Amazon DynamoDB

Amazon SES

Amazon SWF

And more…

AWS Elastic Beanstalk

AWS CloudFormation

AWS OpsWorks

AWS IAM

Auto Scaling

Consolidated Billing

No Charge for Inbound Data Transfer

No Charge for Data Transfer Between

Services within a region

Low Data Transfer Between Regions

AWS Free Usage Tier

Did you know?

Free Services Data Transfer



#2 Take all the fixed costs into consideration (Don’t forget admin and redundancy costs)



Fixed Cost Factors One-time Upfront Monthly

AWS Co-lo On-Site AWS Co-lo On-Site

Server Hardware 0 $$$ $$ $$ 0 0

Network Hardware 0 $$ $$ 0 0 0

Hardware Maintenance 0 $$ $$ 0 0 0

Software OS 0 $$ $$ $ 0 0

Power and Cooling and Data Center Efficiency

0 0 $$ 0 0 $

Data Center/co-lo Space 0 $$ $$ 0 0 0

Personnel (Administration) 0 $$ $$ $ $$ $$$

Storage and Redundancy 0 $$ $$ $ 0 0

Bandwidth $ $$ $ $$ $ $

Resource Management Software 0 0 0 $$ $ 0

Total

Take all the fixed costs into consideration


Hardware Administration Costs Database administration costs


Hardware procurement teams

Data center design and build teams

Hardware operations staff

Networking teams

Security personnel

Administrative staff

Contractors

Power and Cooling Consultants




#3 Mix and match Reserved pricing with On-Demand Pricing (Amortize over 3/5 yrs)



Heavy Utilization RI

Medium Utilization RI

Light Utilization RI

1-year and 3-year terms

On-demand Instances

•Pay as you go

•Starts from $0.02/Hour

Reserved Instances

•One time low upfront fee + Pay as you go

•$23 for 1-year term and $0.01/Hour

Spot Instances

•Requested Bid Price and Pay as you go

•$0.003/Hour as of today at 9 AM

Dedicated Instances

•Standard and Reserved

•Multi-Tenant Single Customer

•$2/Region + $0.066/Hour

Multiple pricing models allow you to optimize costs for both variable and stable workloads

Billing Options


Utilization (Uptime)

Ideal For Savings over On-Demand

10% - 40% (>3.5 < 5.5 months/year)

Disaster Recovery (Lowest Upfront)

56%

40% - 75% (>5.5 < 7 months/year)

Standard Reserved Capacity

66%

>75% (>7 months/year)

Baseline Servers (Lowest Total Cost)

71%

1-year and 3-year terms

Light Utilization RI

Medium Utilization RI

Heavy Utilization RI

Reserved Instances

•One time low upfront fee + Pay as you go

•$23 for 1-year term and $0.01/Hour


Mix and Match Reserved and On-Demand Billing Types

Insta

nces

Days of Month

0

2

4

6

8

10

12

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Heavy Utilization Reserved Instances

Light RI Light RILight RILight RI

On-Demand




#3 Mix and Match Reserved pricing with On-Demand Pricing (Amortize over 3/5 yrs)

#4 Factor usage patterns in your calculation (Spiky, Steady State, Unpredictable)



Steady State Usage Pattern

(Example: Corporate Website)

Understand Usage Patterns of your App

Spiky Predictable Usage Pattern

(Example: Marketing Promotions Website)

Uncertain unpredictable Usage Pattern

(Example: Social game or Mobile Website)


Availability Zone #2

Availability Zone #1

Auto Scaling group : App Tier

Auto Scaling group : Web Tier

Elastic Load

Balancer

www.MyWebSite.com

(dynamic data)

media.MyWebSite.com

(static data)

Amazon Route 53

(DNS)

Amazon EC2

Amazon RDS Amazon

RDS Amazon S3

Amazon

CloudFront

Example: TCO of a 3-Tier Web Application


0

2

4

6

8

0 5 10 15 20 25 30 35

Tra

ffic

Me

as

ure

d in

Se

rve

rs/I

nsta

nce

s

Months

Steady State Usage Pattern

Traffic pattern

EC2 Reserved

Physical servers

(on-premises)


TCO of Steady State Web Application

TCO Web Application - Steady State Usage Pattern

Amortized monthly costs over 3 years

On-Premises

Option AWS Option 1

All Reserved (3-Year Heavy)

AWS Option 2 Mix of On-Demand and

Reserved

AWS Option 3 All On-Demand

Compute/Server Costs

Server Hardware $306.36 $0.00 $0.00 $0.00

Network Hardware $62.04 $0.00 $0.00 $0.00

Hardware Maintenance $47.10 $0.00 $0.00 $0.00

Power and Cooling $172.02 $0.00 $0.00 $0.00

Data Center Space $144.48 $0.00 $0.00 $0.00

Personnel $1,200.00 $0.00 $0.00 $0.00

AWS Instances $0.00 $618.33 $1,079.42 $2,138.40

Total - Per Month $1,932.00 $618.33 $1,079.42 $2,138.40

Total - 3 Years $69,552.00 $22,260.00 $38,859.20 $76,982.40

Savings over On-Premises Option 68.00% 44.13% -10.68%

Recommended option (most cost-effective)

Option 1: All Reserved Recommended Option (Most Cost-effective)

Option 2: Mix of On-Demand and Reserved

Option 3: All On-Demand Commitment-free and Risk-free Option


0

2

4

6

8

10

12

0 5 10 15 20 25 30 35

Tra

ffic

me

as

ure

d in

Se

rve

rs/I

nsta

nce

s

Months


Traffic Pattern

EC2 Reserved

Physical servers

(on-premises)

EC2 On-Demand


0

2

4

6

8

10

12

0 5 10 15 20 25 30 35Tra

ffic

me

as

ure

d in

Se

rve

rs/I

nsta

nce

s

Months


Traffic Pattern

EC2 Reserved

Physical servers

(on-premises)

EC2 On-Demand


When you turn off your cloud resources, you actually stop paying for them


TCO Web Application - Spiky Usage Pattern

Amortized monthly costs over 3 years On-Premises

Option AWS Option 1

All Reserved


Reserved



Server Hardware $510.60 $0.00 $0.00 $0.00




Data Center Space $240.80 $0.00 $0.00 $0.00

Personnel $2,000.00 $0.00 $0.00 $0.00

AWS Instances $0.00 $992.16 $881.42 $1,940.40

Total - Per Month $3,220.00 $992.16 $881.42 $1,940.40

Total - 3 Years $115,920.00 $35,717.60 $31,731.20 $69,854.40

Savings over On-premises Option 69.19% 72.63% 39.74%

TCO of Spiky Predictable Web Application

Option 1: All Reserved

Option 2: Mix of On-Demand and Reserved Recommended Option (Most Cost-effective)

Option 3: All On-Demand Commitment-free and Risk-free Option


0

2

4

6

8

10

12

14

16

18

20

0 5 10 15 20 25 30 35

Tra

ffic

me

as

ure

d in

S

erv

ers

/In

sta

nc

es

Months

Uncertain Unpredictable Usage Pattern

Actual Traffic

Expected Traffic

EC2 Reserved

Physical servers

(on-premises)

EC2 On-Demand


Light and Medium Utilization Reserved Instances

Low upfront one-time fees When you turn off, you save on hourly usage


TCO Web Application - Unpredictable Usage Pattern (Failure case)

Amortized monthly costs over 3 years On-Premises

Option AWS Option 1

All Reserved


Reserved



Server Hardware $816.96 $0.00 $0.00 $0.00




Data Center or Co-located Space $385.28 $0.00 $0.00 $0.00

Personnel $3,200.00 $0.00 $0.00 $0.00

AWS Instances $0.00 $1,552.89 $1,275.46 $1,009.80

Total - Per Month $5,152.00 $1,552.89 $1,275.46 $1,009.80

Total - 3 Years $185,472.00 $55,904.00 $45,916.48 $36,352.80

Savings over On-premises Option 69.86% 75.24% 80.40%

Recommended option (most cost-effective)

Option 1: All Reserved

Option 2: Mix of On-Demand and Reserved

Option 3: All On-Demand Commitment-free and Risk-free Option Recommended Option (Most Cost-effective)

TCO of uncertain unpredictable web application when it fails


Reserved Instance Marketplace

Buy a smaller term instance Buy instance with different OS or type

Buy a Reserved instance in different region

Sell your unused Reserved Instance Sell unwanted or over-bought capacity Further reduce costs by optimizing


My advice to startups as you grow…

Start out Risk-free

and commitment-

free

On-Demand

Instances

POCs, New Apps,

Apps constrained by

capital

Save by purchasing

Reserved for your

Baseline capacity

Reserved +

On-Demand

Apps with committed

usage

Baseline: Use Heavy

Peak: On-Demand

Save more by

converting On-

Demand to Light RIs

More Light

RI

Apps with predictable

usage

Spikes: On-Demand

Continuous savings

by adjusting instance

types

RI

Marketplace

Apps with steady

growth

Spikes: On-Demand

Discard: Marketplace

Consolidate:

Consolidated Billing


0

4

8

12

16

20

24

28

32

36

40

0 5 10 15 20 25 30 35

Tra

ffic

me

as

ure

d in

S

erv

ers

/In

sta

nc

es

Months

Uncertain Unpredictable Usage Pattern (Success Case)

Actual Traffic

Expected Traffic

EC2 Reserved

Physical servers

(on-premises)

EC2 On-Demand

Cost of lost business or disappointed customers






#5 Intangible cost savings – Take a closer look at what you get as part of AWS



Certifications

SOC 1 Type 2 (formerly

SAS-70)

ISO 27001

PCI DSS for EC2, S3,

EBS, VPC, RDS, ELB, IAM

FISMA Moderate

Compliant Controls

HIPAA & ITAR Compliant

Architecture

Physical Security

Datacenters in nondescript

facilities

Physical access strictly

controlled

Must pass two-factor

authentication at least

twice for floor access

Physical access logged

and audited

HW, SW, Network

Systematic change

management

Phased updates

deployment

Safe storage

decommission

Automated monitoring and

self-audit

Advanced network

protection

AWS delivers a premium security spec at non-premium prices


Reduced Time to Market = More Revenue


Opportunity Cost


Go Global in Minutes


When Comparing TCO…


Make sure that

you are

including all

the cost

factors into

consideration

Place

Power

Pipes

People

Patterns

Easy to Remember…


In Your TCO Analysis

3 or 5 Year Amortization

Use 3-Year Heavy RIs

Use Volume RI Discounts

Understand Usage Patterns

Ratios (VM:Physical, Servers:Racks, People:Servers)

Mention Tiered Pricing (Less expensive at every Tier)

Cost Benefits of Automation (Auto scaling,

APIs, TA, Optimization)

DOs

DON’Ts

BONUS


Forget Power/Cooling (compute, storage, shared network)

Forget Administration Costs (procurement,

design, build, operations, network, security personnel)

Forget Rent/Real Estate (building deprecation, taxes, shared services staff)

Forget Virtualization licensing and Software

Maintenance Costs

Forget to mention Cost of “Redundancy”,

Multi-AZ Facility


DOs

DON’Ts

BONUS


Time from ordering to procurement (Releasing early = Increased Revenue)

Cost of “capacity on shelf” (top of step)

Incremental cost of adding an on-premises

server when physical space is maxed out

Real cost of resource shortfalls (bottom of

step)

Cost of disappointed or lost customers when

unable to scale fast enough


DOs

DON’Ts

BONUS


Build Cost-aware architectures Continuous optimization in your architecture

results in recurring savings as early as your next month’s bill


AWS Pricing Philosophy

Pay as you go

• No minimum commitments or long-term contracts required

• Capex -> Opex and Turn off when you don’t need it

Pay less per unit when you use more

• Tiered Pricing and Volume Discounts

Pay even less when you reserve

• Reserved pricing

Pay even less as AWS grows

• Efficiencies, optimizations and economies of scale result in passing the savings back to you in the form of lower pricing

Custom Pricing






#5 Intangible cost savings – Take a closer look at what you get as part of AWS



How customers are saving money with AWS

AWS Economics Center TCO Whitepapers Calculator Tools Videos Case Studies Other Resources


Whitepapers and Resources from Analysts

AMAZON CLOUD

INFRASTRUCTUR

E REPRESENTS A

70% SAVINGS

SAP

applications on

AWS provides

infrastructure

savings of up

71%

AWS is

a Price

Leader


AWS Resources

Whitepapers available at

http://aws.amazon.com/whitepapers

TCO Online Calculator

http://aws.amazon.com/tco-calculator

AWS Simple Calculator

http://aws.amazon.com/calculator

http://aws.amazon.com/whitepapers




http://aws.amazon.com/calculator


Thank you!

Jinesh Varia [email protected] - Twitter:@jinman

AWS Webcast - Total Cost of (Non) Ownership

Technology

Transcript of AWS Webcast - Total Cost of (Non) Ownership