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Whether you’re a cash-strapped startup or an enterprise trying to optimizing spend, it pays to run cost-efficient architectures on AWS. Come learn about cost planning, monitoring, and optimization strategies, featuring real AWS customer use cases.


  1. 1. ©2015, Amazon Web Services, Inc. or its affiliates. All rights reserved AWS Cloudonomics: Realizing the Economic Case for the AWS Cloud Ryan Roberts ( Global Lead, AWS Business Practices February 8, 2017
  2. 2. What to expect…. We will discuss the AWS approach for building the business case for the cloud and share tips from some of our most innovative customers who are able to successfully architect for cost optimization in order to realize the economics of the AWS Cloud.
  3. 3. What is TCO? Definition: Comparative total cost of ownership analysis (acquisition and operating costs) for running an infrastructure environment end-to-end on-premises vs. on AWS. Used for: 1) Comparing the costs of running an entire infrastructure environment or specific workload on-premises or in a co-location facility vs. on AWS 2) Budgeting and building the business case for moving to AWS
  4. 4. Cloud Economics In A Single Chart Achieving More With Less Lost sales Infrastructure cost $ Tim e Large capital expenditure Opportunity cost Predicted demand Traditional hardware Actual demand Automated virtualization Key:
  5. 5. AWS Pricing Philosophy More AWS Usage More Infrastructure Economies of Scale Lower Infrastructure Costs Reduced Prices More Customers Ecosystem Global Footprint New Features New Services Infrastructure Innovation We pass the savings along to our customers in the form of low prices and continuous reductions 59
  6. 6. How do customers lower their TCO with AWS? 1 “Average of 400 servers replaced per customer” Replace up-front capital expense with low variable cost 2 59 Price Reductions Economies of scale allow AWS to continually lower costs 3 Pricing model choice to support variable & stable workloads 4 Save more money as you grow bigger On-Demand Reserved Spot Tiered Pricing Volume Discounts
  7. 7. So how do we do it? ≠
  8. 8. TCO = acquisition costs + operations costs Hardware—server, rack chassis PDUs, Tor switches (+maintenance) Software—OS, virtualization licenses (+maintenance) Facilities cost Hardware—storage disks, SAN/FC switches Storage admin costs Network hardware—LAN switches, load balancer bandwidth costs Network admin costs Server admin virtualization admin4 The diagram doesn’t include every cost item. For example, software costs can include database, management, and middle-tier software costs. Facilities cost can include costs associated with upgrades, maintenance, building security, taxes, and so on. IT labor costs can include security admin and application admin costs. Space Power Cooling Facilities cost Space Power Cooling Facilities cost Space Power Cooling Server costs Storage costs Network costs IT labor costs 1 2 3 illustrative
  9. 9. Questions to explore your existing footprint… Operations Utilization Capacity Planning Optimization • How do you plan for capacity? • How many servers have you added in the past year? Anticipating next year? • Can you switch your hardware on and off and only pay for what is used? • What is your average server utilization? • How much do you overprovision for peak load? • Will you run out of data center space some time in the future? • What was your last year power utility bill for the Data Center(s)? • Have you budgeted for both average and peak power requirements? • Are you on AWS today? • Is your architecture cost-optimized (Auto Scaling, RIs, Spot, Instances turn on/off)? 1 2 3 4
  10. 10. And, make sure to…  Power/Cooling (compute, storage, shared network)  Data Center Administration (procurement, design, build, operate, network, security personnel)  Rent/Real Estate (building deprecation, taxes)  Software (OS, virtualization licensing & maintenance)  RAW vs. USABLE storage capacity  Storage Redundancy (RAID penalty, OS penalty)  Storage Backup costs (tape, backup software)  Bandwidth, Network Gear & Redundancy (routers, VPN, WAN, etc.) Consider Understand  Procurement Time, Resource sitting on self  Cost of Lost Customers  RTO, RPO
  11. 11. Analysts have shown AWS reduces cost over the long term Source: IDC, Quantifying the Business Value of Amazon Web Services (May, 2015)
  12. 12. Resources to get you started AWS TCO Calculator Case studies and research
  13. 13. Lowering TCO Through cost optimization On- Premises Lift & Shift Instance Right- Sizing Improved Elasticity Measure, Monitor, Improve Optimized EC2 Storage Optimization Serverless Architecture Managed Services True AWS Optimized Traditional TCO Comparisons
  14. 14. So you’re feeling pretty good.
  15. 15. But maybe you’re spending more than you planned… …Or maybe you’d just like to spend less
  16. 16. Cost optimization is… going from… to… pay for what you use pay for what you need
  17. 17. Key inputs to cost optimization on AWS Cost Optimized on AWS Appropriate Pricing Plans (e.g. RI, Spot) Periodic Review / Instance Resizing Shutdown Non-Prod Instances and EBS volumes Gate Process / Architecture Review Governance Showbacks / Transparency Behavior Change / Incentive Alignment Limit Resource Provisioning Implement Automation Key: Direct Input Indirect Input
  18. 18. Where do you start?
  19. 19. The four pillars of cost optimization Right-sizing Reserved Instances Increase elasticity Measure, monitor, and improve
  20. 20. Right-sizing Right-sizing • Selecting the cheapest instance available while meeting performance requirements • Looking at CPU, RAM, storage, and network utilization to identify potential instances that can be downsized • Leveraging Amazon CloudWatch metrics and setting up custom RAM metrics Rule of thumb: Right size, then reserve. (But if you’re in a pinch, reserve first.)
  21. 21. Reserved Instances Commitment level 1 year 3 year AWS services offering RIs Amazon EC2 Amazon RDS Amazon DynamoDB Amazon Redshift Amazon ElastiCache * Dependent on specific AWS service, size/type, and region
  22. 22. Reserved Instances Step 1: RI Coverage • Cover always-on resources. Step 2: RI Utilization • Leverage RI flexibility to increase utilization. • Merge and split RIs as needed. Rule of thumb: Target 70–80% always-on coverage and 95% RI utilization rate.
  23. 23. Increase elasticity Turn off nonproduction instances • Look for dev/test, nonproduction instances that are running always-on and turn them off. Autoscale production • Use Auto Scaling to scale up and down based on demand and usage (for example, spikes). Rule of thumb: Shoot for 20–30% of Amazon EC2 instances running on demand to be able to handle elasticity needs.
  24. 24. Using right-sizing and elasticity to lower cost More smaller instances vs. fewer larger instances 29 m4.large @ $0.12 /hr $2,505.60 / mo* 59 t2.medium @ $0.052/hr $2,208.96 / mo* *Assumes Linux instances in US-East at 720 hours per month
  25. 25. Features • Spot fleets to maintain service availability availability • Spot block durations (1-6 hours) for workloads that must run continuously Commitment level • None Spot Instances
  26. 26. Keep it simple 50% of OD 75% of OD 25% of OD You pay the market price at an 87% discount …and Diversify
  27. 27. Use Cases Disrupt by scaling with cost-effective compute Stateless Web Services, Containerized Applications Cost-sensitive business models
  28. 28. Strike a Balance Finding balance between pricing options Reserved Instances On Demand Spot
  29. 29. Consumption Model by Industry Web Scale/Big Data Enterprise SaaS Company
  30. 30. Consumption Model by Industry Onboarding Enterprise Gaming Company
  31. 31. Or by Workload… Data Science Dev Test Internal IT New app development
  32. 32. Pay less per unit when you use more Volume discounts on overall bill when usage hits certain thresholds $0.030 $0.0295 $0.029 $0.0285 $0.028 $0.0275 <1 TB <50 TB 50-500 TB 500-1000 TB 1000-5000 TB >5000 TB Storage (S3) Tiered Pricing Pricing as of June 2016
  33. 33. Cost optimization governance (Remember the fourth pillar?)
  34. 34. Uncovering the cost optimization opportunities 1. Auto-tag resources. 2. Identify always-on nonprod. 3. Identify instances to downsize. 4. Recommend RIs to purchase. 5. Dashboard our status. 6. Report on savings.
  35. 35. AWS options
  36. 36. Reserved Instances and right-sizing options
  37. 37. Metrics & Targets ✔ ✔ ✔ ✔ ✘ ✘ ✘ ✘ A company’s overall AWS Cost should be evaluated or framed in context of what outcome it delivers. 𝑈𝑛𝑖𝑡 𝐶𝑜𝑠𝑡 = 𝑇𝑜𝑡𝑎𝑙 𝐶𝑜𝑠𝑡 𝐼𝑛𝑑𝑖𝑣𝑖𝑑𝑢𝑎𝑙 𝑜𝑟 𝐵𝑢𝑠𝑖𝑛𝑒𝑠𝑠 𝑀𝑒𝑡𝑟𝑖𝑐 Examples • Unit cost per revenue generated • Unit cost per product or business unit • Unit cost per internal user • Unit cost per customer or subscriber
  38. 38. Cycle of cost optimization ✔ ✔ ✔ ✔✘ ✘ ✘ ✘ $ $ $ $ $
  39. 39. Questions Finance May Bbe Asking 1. How much of our workloads are “steady state”? 2. How are we currently handling our elasticity needs? 3. Have we had a Well Architected review with AWS? 4. How much of our usage is covered by Reserved Instances? 5. What’s keeping us from reserving capacity? 6. Have we looked at “serverless computing”? 7. How can I be more involved in our process?
  40. 40. Help You Optimize: Credit Programs 1. Startup Migration 2. re:Think 3. Partner POCs
  41. 41. After Optimization: Private Pricing 1. Commit to Service (e.g. CDN, Storage) • Usage based • Unit price 2. Commit to AWS - EDP • Flat discount for range of AWS services • Increasing discount based on level of AWS spend commitment • 12 to 36 month commitment terms
  42. 42. Our teams can help with… • Architecture reviews • Solutions Architects • Reserved instance analysis • AWS Account Managers • TCO comparative analysis • AWS Cloud Economics Team • EDP & growth plans • AWS Business Practices Team
  43. 43. Cloudonomics
  44. 44. Putting it all together: case study
  45. 45. Challenge: Minimizing unit costs during a period of massive growth. A consistent measure of CPU processing power Elastic compute unit (ECU)
  46. 46. The growth challenge August 2014 August 2015 584 ECU 1,192 ECU 2x YoY Compute Growth 33% decrease in monthly EC2 costs!
  47. 47. Solving the growth challenge
  48. 48. Step 1: Right-size and update instances m1 on demand $0.07 per ECU c4 on demand $0.02 per ECU
  49. 49. The impact of right-sizing 70% reduction in unit cost
  50. 50. Step 2: Reserve
  51. 51. The impact of reservations 30% reduction In unit cost
  52. 52. Putting it together 85% reduction in unit cost!
  53. 53. Example: reasonable optimization dashboard