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Building the business case for AWS

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Building the business case for AWS

  1. 1. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. Mario Thomas, Global Advisory Organisational transformation through the adoption of AWS Building a Business Case for AWS 6 June 2018
  2. 2. The following applies to this document and all other documents, information, data, and responses (written or verbal) provided by Amazon Web Services, Inc. or any of its affiliates (collectively, "AWS") in connection with responding to this request and other related requests (collectively, this "Response"): This Response is expressly (a) informational only and provided solely for discussion purposes, (b) non-binding and not an offer to contract that can be accepted by any party, (c) provided "as is" with no representations or warranties whatsoever, and (d) based on AWS's current knowledge and may change at any time due to a variety of factors such as changes to your requirements or changes to AWS's service offerings. All obligations must be set forth in a separate, definitive written agreement between the parties. Neither party will have any liability for any failure or refusal to enter into a definitive agreement. All use of AWS's service offerings will be governed by the AWS Customer Agreement available at http://aws.amazon.com/agreement/ (or other definitive written agreement between the parties governing the use of AWS's service offerings) (as applicable, the "Agreement"). If the parties have an applicable Nondisclosure Agreement ("NDA"), then the NDA will apply to all Confidential Information (as defined in the NDA) disclosed in connection with this Response. AWS's pricing is publicly available and subject to change in accordance with the Agreement. Pricing information (if any) provided in this Response is only an estimate and is expressly not a binding quote. Fees and charges will be based on actual usage of AWS services, which may vary from the estimates provided. Nothing in this Response will modify or supplement the terms of the Agreement or the NDA. No part of this Response may be disclosed without AWS's prior written consent. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. Disclaimers
  3. 3. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. • Why establishing a business case is important • Types of business case • When to build a business case • TCO and the business case • Business case tooling and process • Discovery and the data we collect • Analysis of and normalising data • The outputs Building the business case
  4. 4. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. Why establishing the business case is important
  5. 5. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. An effective business case and the process to create it can help you to remove friction to adoption of the cloud as well as identify the key stages and costs of adoption and migration to AWS. By understanding your existing application workloads or plans for new ones we can work with you to develop the foundations of a sound business case.
  6. 6. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. New WorkloadsExisting Workloads Customers with existing workloads typically want to know what the cost of moving those workloads to AWS will be as well the ongoing cost of keeping them there. Customers with new workloads which have not yet been deployed to a production environment, typically want to know the cost of keeping those workloads in AWS.
  7. 7. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. In preparing the business case, we often find more opportunities to help customers drive efficiencies in the broader business as well as reduce costs. This creates the environment required to accelerate innovation, increase productivity and reduce risk.
  8. 8. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. What a business case tells us
  9. 9. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. • What the cost of getting into AWS will be • What the cost of operating in AWS will be • What the costs of exiting current infrastructure could be • What benefits the business will gain from being in AWS • What the cost of doing nothing is • What building infrastructure for new workloads costs Building a business case tells us
  10. 10. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. What type of business case do customers need
  11. 11. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. Directional Detailed ?
  12. 12. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. Iterate the business case; don’t go for perfection with the first pass
  13. 13. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. Directional 1-2 days Low-fidelity data, directional Limited customer scope Presentation Simple Excel output Detailed 4-10 weeks High-fidelity data, detailed Broad customer scope Presentation Multiple outputs
  14. 14. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. How do we build a business case?
  15. 15. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. Manual Automated
  16. 16. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. • Migration cost estimator • Simple TCO Calculator • Assumptions • Resource efficiency model • Six R’s analysis • Financial analysis • Business value analysis Manual business case tooling
  17. 17. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. Automated business case tooling Business Case Discovery & Planning Dependency Mapping Workload & Data Migration ValidationInventory
  18. 18. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. Business case process Discovery Analysis Outputs
  19. 19. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. When do we build a business case?
  20. 20. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. When to build a business case At each stage of adoption: • Project • Foundation • Migration • Reinvention Customers may opt to develop any and all types of business case to establish gating criteria to the next stage. Here Here Here And here
  21. 21. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. Why not just build a TCO analysis?
  22. 22. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. TCO and the business case Business Value $ 1 2 3 4 50 TCO Migration Bubble Cost Optimising Current / Do Nothing (with growth) AWS Environment Payback Period Time Cost
  23. 23. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. Business Value $ 1 2 3 4 50 TCO Migration Bubble Cost Optimising Current / Do Nothing (with growth) AWS Environment Payback Period Time Cost TCO and the business case
  24. 24. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. Business Value $ 1 2 3 4 50 TCO Migration Bubble Cost Optimising Current / Do Nothing (with growth) AWS Environment Payback Period Time Cost TCO and the business case
  25. 25. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. Business Value $ 1 2 3 4 50 TCO Migration Bubble Cost Optimising Current / Do Nothing (with growth) AWS Environment Payback Period Time Cost TCO and the business case
  26. 26. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. Business Value $ 1 2 3 4 50 TCO Migration Bubble Cost Optimising Current / Do Nothing (with growth) AWS Environment Payback Period Time Cost TCO and the business case
  27. 27. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. Business Value $ 1 2 3 4 50 TCO Migration Bubble Cost Optimising Current / Do Nothing (with growth) AWS Environment Payback Period Time Cost TCO and the business case
  28. 28. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. Business Value $ 1 2 3 4 50 TCO Migration Bubble Cost Optimising Current / Do Nothing (with growth) AWS Environment Payback Period Time Cost TCO and the business case
  29. 29. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. TCO and the business case Features of a great AWS cloud adoption business case TCO BCA Like-for-like comparison of AWS vs. on-premise/co-location for same workloads ✓ ✓ A high-level business-focussed analysis of application migration patterns (six R’s) ✗ ✓ A cost for migration to AWS ✗ ✓ A cost of operation (TCO) once landed in AWS ✓ ✓ Alternative TCO’s for higher-level services (e.g. RDS instead of Oracle on EC2) ✗ ✓ Consideration given to current licencing and licencing in AWS some ✓ Resource utilisation cost analysis ✗ ✓ Third party cost analysis ✗ ✓ Identification of value benefits ✗ ✓ Financial cost analysis including balance sheet and budget items ✗ ✓ Apply cost optimisation principles to the TCO’s in the business case maybe ✓
  30. 30. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. TCO and the business case Features of a great AWS cloud adoption business case TCO BCA Show the cost and cashflow of leaving on-premise or co-location and moving to AWS ✗ ✓ Show the cost of doing nothing (i.e. not migrating to cloud) ✗ ✓ Calculates NPV, ROI, MIRR and the payback period ✗ ✓ Provides financial models to the customer so they can amend assumptions ✗ ✓ Provides a presentation which can be used for stakeholders ✗ ✓ Time to execute 3-8h varies* * Can be as little as 2 hours and as long as 10 weeks, subject to having the data from the customer.
  31. 31. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. What information do we need to build the business case?
  32. 32. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. Business objectives • It is important that we find out about you • Knowing your business objectives is key to presenting the business case aligned to them • We like to understand what challenges will come up in building the business case so we can work around them or through them with you • Understanding what is driving your cloud adoption plan is key to a well articulated business case • Ensure there is an executive sponsor
  33. 33. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. Discovery People Costs Third Party Costs Infrastructure Costs Application Costs Migration Costs
  34. 34. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. Infrastructure costs
  35. 35. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. Infrastructure costs Used IT Capacity Idle Capacity 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% On-Premises IT Compute capacity A typical on-premises compute environments are massively underutilized A 2017 Study by IDC stated that typical data centers are 45% utilized. This is measured in terms of the amount of idle compute hours and unused storage capacity for provisioned components. IDC: Quantifying Datacenter Inefficiency http://www.integra1.net/uploads/files/IDC%20Making%20the%20Case%20for%20Composable%20Infrastructure.pdf
  36. 36. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. Infrastructure costs Used IT Capacity Idle Capacity 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% On-Premises IT Compute capacity Part of this can be explained by buying for “peak load” requirements with inflexible infrastructure IDC: Quantifying Datacenter Inefficiency http://www.integra1.net/uploads/files/IDC%20Making%20the%20Case%20for%20Composable%20Infrastructure.pdf CyclicalPart-timeFluctuating
  37. 37. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. Infrastructure savings can be significant in the business case, because of this over-capacity
  38. 38. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. • Data centre costs • Facilities costs • Lease term remaining • Lease termination penalties • Cost of reduced footprint • Connectivity • Leased lines to the data centre Infrastructure costs
  39. 39. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. • Servers • Number of physical servers • Number of virtual servers • Virtual servers mapped to their physical counterparts • Specification (CPUs, cores, RAM) • Performance characteristics (CPU/RAM/IO min/max/avg.) • Storage (SAN, NAS, direct-attached) • Network connectivity (peak throughput) • Dependencies on other servers • Upcoming refreshes • Existing end of life plans Infrastructure costs
  40. 40. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. • Date purchased / instantiated, time remaining on capex • Cost of purchase / instantiation, cost remaining on capex, lease penalties • Depreciation / amortisation approach • Data centre management costs (non-third party) maintenance and support • Utilisation of the servers • Applications and systems installed on the server • Power supply, cooling, backup, Disaster Recovery • Security, Compliance and certification cost • End of life costs • Decommissioning costs • ‘Other costs’ Infrastructure costs
  41. 41. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved.
  42. 42. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. So how do we collect this data?
  43. 43. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved.
  44. 44. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved.
  45. 45. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved.
  46. 46. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. Application costs
  47. 47. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. • Number of application workloads • Map workloads to the underlying servers • Establish workload dependencies (both server and other workloads) • Understand upcoming application changes • Consider application migration patterns • Application maintenance costs • Innovation / ongoing development / bug fixes • Managed service organisation Application costs
  48. 48. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. • Licensing landscape • Existing licences • Transferability of licences • Upcoming licence renewals • Move to Amazon Linux • Application requirements: • SLAs • Disaster Recovery • High Availability • Security and access • Regulation and compliance • Perform a “Six R’s” analysis of each workload Application costs
  49. 49. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. Application costs R Name Description Examples 1 Retain Workloads are kept in-situ and are not changed in any way. Unresolvable dependencies, custom Linux kernels, non-x86, AS400, etc. 2 Retire Workloads are retired from use. Existing decommission scope. 3 Re-host Workloads moved to the cloud, lift-and-shift. Minimal re-engineering, IP, DNS, file path changes, Win 2008, RHEL, etc. 4 Re-platform Workloads moved to the cloud with some changes to support use of cloud concepts, e.g. elasticity, failover, etc. Broader changes, use of higher-level AWS servers, e.g. RDS 5 Re-factor Workloads require significant re-engineering in order to run on the cloud. Significant re-engineering, e.g. to Linux, server-based to serverless, etc. 6 Re- purchase Workloads are candidates for migration to SaaS-based solutions. On-premise CRM to SaaS CRM, Exchange to WorkMail, etc. 10% 5% 40% 30% 10% 5% 70%
  50. 50. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. How do we decide which ‘R’ an application belongs in?
  51. 51. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. Business Domain Technical Domain
  52. 52. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved.
  53. 53. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. Migration costs
  54. 54. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. • Planning and designing migration • Development effort • Testing effort • Acceptance effort • Deployment effort • Landing zone configuration • Licensing • Data migration • Cut over • Roll back plan Migration costs
  55. 55. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. • Duplicate environment • Training and certification • Migration velocity • Identify which apps can move most easily • Create prioritised move groups • Organise in sprints and sprint teams for fast results • Be able to forecast the entire project timescale • Create a high-level multi-year/month project plan • The migration should be fast paced and demonstrate a commitment to migrating the workloads because of its velocity Migration costs
  56. 56. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. Migration Costs Application Prioritisation Drivers Organisational Drivers (Cost, Risk, Time) Application Drivers Transaction Load Resource Utilisation Scalability and Performance Infrastructure Size of Servers Number of Servers File Systems Database Storage Volumes Environment Test, dev, UAT, staging, acceptance, prod Security and Compliance Business Criticality Frequency of use Supported business process and impact Size of user base End of life; end of life support Application Complexity Technology stack Application architecture External interfaces Inter-dependencies
  57. 57. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. How do we calculate the migration cost?
  58. 58. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved.
  59. 59. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. People costs
  60. 60. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. • Direct people costs (employees): • Recruitment, retention, replacement and retirement costs • Activity costs including understanding time and motion • Training and development costs • Physical space, equipment, and services • Direct people costs (contractors): • Recruitment, retention, replacement and retirement costs • Cost per hour/day/week/month • Physical space, equipment, and services People costs
  61. 61. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. Task On-Premise On AWS Install server, rack, TOR, networking… ✓ Manage physical access ✓ Test power and network fail over ✓ Deal with disk failures ✓ Manage RAID arrays ✓ Hardware procurement and budgeting ✓ Patch management and End of Life issues ✓ Configure services ✓ ✓
  62. 62. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. How do we capture people costs?
  63. 63. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved.
  64. 64. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved.
  65. 65. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. Third party costs
  66. 66. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. • Contract related costs • Fixed costs (maintenance, etc.) • Variable costs (innovation, change requests, etc.) • Variation penalties / early termination penalties • Lock-in deals • Tools lifecycle status • Software licences (e.g. orchestration tools / multi-cloud) • Activity costs including understanding time and motion Third party costs
  67. 67. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. How do we analyse and process the data for the business case?
  68. 68. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. • Data is given to us in a variety of formats, the most popular are: • Excel • CSV • vCenter exports • PDF • ADS exports • Often cut and pasted from multiple sources • There are usually errors, missing data and questionable data • Understanding what you are getting is key to being able to challenge the data • Get to know the data, you are going to need to document it Data formats
  69. 69. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. • Once received, data must be analysed • Begin by establishing meaning, do this by discussing the data with the customer • Generate questions and assumptions about the data • Then move on to validation • Look for range errors (e.g. inexplicably large amounts of RAM vs. cores) • Look for invalid data (e.g. versions of Windows that don’t exist) • Look for high utilisation, peak CPU and peak RAM values • Filter the data • Some data can be excluded because it doesn’t apply (non-x86, not R3, R4 or R5) • Customers sometimes include everything, check you’re not counting infrastructure Analysing and normalising data
  70. 70. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. Normalising data
  71. 71. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. • Once data is analysed and filtered, it’s time to normalise it • Our tooling typically uses Excel or CSV inputs • We need to produce ‘clean’ CSV inputs • We need to ‘cut and paste’ just values to ensure completely clean data Analysing and normalising data
  72. 72. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. How do we collate and present the numbers?
  73. 73. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved.
  74. 74. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved.
  75. 75. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved.
  76. 76. © 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. Thank you! Mario Thomas, Global Advisory mario@amazon.com @mariothomas

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