AWS Cloud Kata 2013 | Singapore - Achieving Profitability on AWS

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Getting from scale to profitability, the question is: How to run lean and continue to grow revenue? How to get to profitability? This session will focus on how to run lean. Attend this session to learn more about:
Total Cost of Ownership (TCO) on the AWS Cloud versus on-premise infrastructure
Smart ways to lower your costs by leveraging various AWS pricing models
The six best practices for "cost aware architecting"

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AWS Cloud Kata 2013 | Singapore - Achieving Profitability on AWS

  1. 1. Getting to Profitability Vinoth Gopinathan Co-founder, Semantics3
  2. 2. About Semantics3 We are building the world’s largest database of products & prices > 20 million products and >200 million price points Sophisticated system that scours the web to discover products, categorize, match and merge them with existing products and keep their prices updated.
  3. 3. How Semantics3 runs lean on AWS Set up on AWS • 400 instances on AWS for crawling, database, search, and API • Storage using S3, EBS, and instance-store • Costs are less than $5K due to smart cost optimization Cost Optimization • Commercial – use various AWS pricing models, such as Spot pricing and Reserved Instances • Technology – design with cost in mind: being able to leverage Spot pricing, write code that can run on micro instances, etc. 67% cost reduction
  4. 4. Getting to Profitability Kingsley Wood Business Development Manager Dhruv Parpia Solutions Architect
  5. 5. Time Usage Page Views Revenue Etc. The Infamous Hockey Stick
  6. 6. Time Usage Page Views Revenue Etc. The Infamous Hockey Stick Costs
  7. 7. You want only 3 things
  8. 8. Revenue to go Up Unit Costs to go Down Margin to go Up
  9. 9. Time Usage Page Views Revenue Etc. The Infamous Hockey Stick Costs
  10. 10. How does AWS help here?
  11. 11. Economies of Scale Pricing Models Cost Aware Architecting
  12. 12. Every Day… AWS adds the equivalent server capacity to power Amazon when it was a global, $5.2B enterprise in 2003 2003 $5.2B retail business 7,800 employees A whole lot of servers… Reduced Prices More Customers More AWS Usage More Infrastructure Economies of Scale Lower Cost
  13. 13. What does this look like in the real world?
  14. 14. An example Enterprise software provider in APAC Focused on SaaS for storage, security, collaboration, etc. Backed by leading VC’s in the region Strong growth – winning customers globally Focused on profitability & reducing unit costs Worked closely with the AWS team to optimize its architecture
  15. 15. Margin Growth -10% price drop in S3 -20% RI purchase -22% Migration Cassandra to Dynamo -18% Price drop in S3 of 25% 54% reduction in unit costs “Based on a True Story”
  16. 16. 01 02 03 04 Idea MVP ProfitabilityScale
  17. 17. Getting to Profitability 03 04 ProfitabilityScale Pricing Models Cost Aware Architecting Total Cost of Ownership
  18. 18. On-Demand Pay for compute capacity by the hour with no long-term commitments For spiky workloads, or to define needs Cost Optimization using different purchase models Reserved Make a low, one-time payment and receive a significant discount on the hourly charge For committed utilization Spot Bid for unused capacity, charged at a Spot Price which fluctuates based on supply and demand For time-insensitive or transient workloads Free Tier Get Started on AWS with free usage & no commitment For POCs and getting started
  19. 19. aws.amazon.com/free
  20. 20. Reserved Instance Pricing Make a low, one-time payment and receive a significant discount on the hourly charge For committed utilization •Light Utilization RI •Medium Utilization RI •High Utilization RI •1-year •3-year 2 Terms3 Versions
  21. 21. Reserved Instance Pricing Utilization RI option Savings over On-Demand <10% On-Demand 10% - 40% Light Utilization RI Up to 56% 40% - 75% Medium Utilization RI Up to 66% >75% Heavy Utilization RI Up to 71%
  22. 22. S3 Storage Volume
  23. 23. EC2 Instance Hours
  24. 24. February 2013 48.7 million users globally Raised $200M (Total = $338M) $2.5B valuation
  25. 25. • Most traffic happens in the afternoons and evenings, so they reduce the number of instances at night by 40%. • At peak traffic $52 an hour is spent on EC2 and at night, during off peak, the spend is as little as $15 an hour. Saving per hour = 71%
  26. 26. Save more money by using Spot Instances Up to 85% savings over On Demand pricing Spot market for under- utilized capacity Requested Bid Price and Pay as you go Spot Price < On-Demand Price
  27. 27. Use Case Types of Applications Batch Processing Generic background processing (scale out computing) Hadoop Hadoop/MapReduce processing type jobs (e.g. Search, Big Data, etc.) Scientific Computing Scientific trials/simulations/analysis in chemistry, physics, and biology Video and Image Processing/Rendering Transform videos into specific formats Testing Provide testing of software, web sites, etc Web/Data Crawling Analyzing data and processing it Financial Hedgefund analytics, energy trading, etc HPC Utilize HPC servers to do embarrassingly parallel jobs Cheap Compute Backend servers for Facebook games Use Cases for Spot Pricing
  28. 28. Optimizing Video Transcoding Workloads for a FREEMIUM model Free Offering Optimize for reducing cost Acceptable Delay Limits Implementation – Leverage spot pricing – Maximum Bid Price – < On-demand Rate – Use on-demand Instances, if delay Get strongly reduced price for your workload Premium Offering Optimized for Faster response No Delays Implementation – Invest in Reserved Instances – Use on-demand for Elasticity Get Instant Capacity for higher price
  29. 29. Getting to Profitability 03 04 ProfitabilityScale Pricing Models Cost Aware Architecting Total Cost of Ownership
  30. 30. Cost optimization through ‘Cost Aware Architecting’ …by leveraging:Reduce Cost of… Compute 1. S3 & CloudFront for Caching & Offloading Storage 3. Storing derivative objects in S3 ‘Reduced Redundancy’ Database 4. Read Replicas and/or ElastiCache Test & Dev 5. Rapid proto-typing & Lean Dev/Test 2. Auto-Scaling done Right
  31. 31. 1. S3 & CloudFront for Caching & Offloading • Reduce your compute demand and costs • Improve end-user experience • Increase reliability and durability Cost Aware Architecting to Reduce costs of EC2
  32. 32. 1. S3 & CloudFront for Caching & Offloading Cost Aware Architecting to Reduce costs of EC2
  33. 33. 1. S3 & CloudFront for Caching & Offloading Cost Aware Architecting to Reduce costs of EC2
  34. 34. 1. S3 & CloudFront for Caching & Offloading Cost Aware Architecting to Reduce costs of EC2
  35. 35. 1. S3 & CloudFront for Caching & Offloading Cost Aware Architecting to Reduce costs of EC2
  36. 36. 2. Auto-Scaling done Right with Real Time reaction response • Elastic Load Balancing and (event-driven) Auto Scaling • Notification of pending news flash (with audible alarm) • On-demand ramp up of capacity (6 mins.) • Subscriber alert push delivered • Mass response traffic handled (followed by ramp down) Cost Aware Architecting to Reduce costs of EC2
  37. 37. Buuuk for Singapore Press Holding (SPH)
  38. 38. 2. Auto-Scaling done Right with Real Time reaction response Cost Aware Architecting to Reduce costs of EC2 Straits TimesBuuuk
  39. 39. 2. Auto-Scaling done Right with Real Time reaction response Cost Aware Architecting to Reduce costs of EC2
  40. 40. 2. Auto-Scaling done Right with Real Time reaction response Cost Aware Architecting to Reduce costs of EC2
  41. 41. 2. Auto-Scaling done Right with Real Time reaction response Cost Aware Architecting to Reduce costs of EC2
  42. 42. 2. Auto-Scaling done Right with Real Time reaction response Cost Aware Architecting to Reduce costs of EC2
  43. 43. 3. Storing derivative objects in S3 ‘Reduced Redundancy’ • Original vs. derived assets : 33% savings • Single reference and consistency • Control, accurate logs and tracking Cost Aware Architecting to Reduce costs of S3 Reduced Redundancy Storage ‘RRS’
  44. 44. 4. Read Replicas and/or ElastiCache (‘Database Smarts’) • Scale out and share work • Optimal performance, minimize load • Enhance reliability, ensure data safety • Cost reduction Cost Aware Architecting to Reduce costs of DB
  45. 45. 5. Rapid proto-typing & Lean Dev/Test • Inexpensive idea validation • Seamless switch over and versioning • Rapid dev / test agility Cost Aware Architecting to Reduce costs of Test/Dev
  46. 46. Getting to Profitability 03 04 ProfitabilityScale Pricing Models Cost Aware Architecting Total Cost of Ownership
  47. 47. When calculating TCO… #1 Start by understanding your use cases & usage patterns
  48. 48. Traditional HW / Hosting On and Off Fast Growth Predictable peaksVariable peaks WASTE CUSTOMER DISSATISFACTION
  49. 49. AWS = Elastic Capacity Fast GrowthOn and Off Predictable peaksVariable peaks
  50. 50. When calculating TCO… #1 Start by understanding your use cases & usage patterns #2 Apples to Apples – Take all the fixed costs into consideration
  51. 51. When calculating TCO… #1 Start by understanding your use cases & usage patterns #2 Apples to Apples – Take all the fixed costs into consideration #3 Leverage ‘Cost Aware Architecting’ to reduce resources
  52. 52. 0 10 20 30 40 50 60 Hosting Traditional Hosting vs AWS # of (virtual) servers Offload to S3 Caching with CF Auto- Scaling Etc.Hosting
  53. 53. When calculating TCO… #1 Start by understanding your use cases & usage patterns #2 Apples to Apples – Take all the fixed costs into consideration #3 Leverage ‘Cost Aware Architecting’ to reduce resources #4 Include pricing models (RI, Spot) and economies of scale
  54. 54. Margin Growth -10% price drop in S3 -20% RI purchase -22% Migration Cassandra to Dynamo -18% Price drop in S3 of 25% 54% reduction in unit costs “Based on a True Story”
  55. 55. When calculating TCO… #1 Start by understanding your use cases & usage patterns #2 Apples to Apples – Take all the fixed costs into consideration #3 Leverage ‘Cost Aware Architecting’ to reduce resources #4 Include pricing models (RI, Spot) and economies of scale #5 Take a look at what’s included: Intangible Cost Savings !
  56. 56. New Customers Amazon EC2 Amazon RDS Amazon ELB Amazon S3 Amazon EBS For All Customers Amazon SQS/SNS Amazon DynamoDB Amazon SES Amazon SWF And more… AWS Elastic Beanstalk AWS CloudFormation AWS IAM Auto Scaling Consolidated Billing No Charge for Inbound Data Transfer Data Transfer between Instances within an Availability Zone Free Usage Tier Did you know? Free Services Data Transfer
  57. 57. Trusted Advisor
  58. 58. A premium security spec at non-premium prices • Security groups for EC2 and VPC Network ACL • Multi-Factor Authentication • CloudHSM • RDS Oracle transparent encryption • VPC • Direct connect • Dedicated instances • Identity & Access Management • S3 Encryption
  59. 59. DEMO Getting to Profitability Off-loading of static content to CloudFront to reduce required server capacity
  60. 60. So what does this mean in terms of costs? Month Medium EC2 instances 1 $ 121 CloudFront Data Transfer Out 1Tb $ 168 CloudFront Requests $1.89 TOTAL $ 291 Month Medium EC2 instances 4 $ 485 AWS Data Transfer Out 1Tb $ 194 TOTAL $ 679 Standard Architecture Optimized Architecture 57% lower cost – 6 x faster
  61. 61. Thank you! aws.amazon.com/start-ups aws.amazon.com/free
  62. 62. Thank You

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