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(ISM315) How to Quantify TCO & Increase Business Value Gains Using AWS


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"Do you need to develop a business case for moving to cloud or communicate business value of your investment in AWS? This session introduces you to methods and tools to help you calculate total cost of ownership (TCO) and evaluate your business value gains from AWS.

In this session, you learn how to measure TCO and business value, and communicate a business case to organizations such as finance and procurement. You compare the costs of running your own IT infrastructure on-premises vs. on AWS and quantify intangible benefits. You also learn about resources available from AWS to help you engage in business value conversations with your organization’s leaders and what contact is available to you for further evaluation. "

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(ISM315) How to Quantify TCO & Increase Business Value Gains Using AWS

  1. 1. © 2015, Amazon Web Services, Inc. or its Affiliates. All rights reserved. Tom Johnston, Sr. Manager, Cloud Economics October 2015 ISM315 Strategies to Quantify TCO and Increase Business Value Gains using AWS
  2. 2. “We adopted AWS because it costs less…”
  3. 3. “But we’re staying because of what else it does”
  4. 4. Move quickly
  5. 5. Scale based on market needs
  6. 6. Differentiated innovation
  7. 7. Leverage what you already have
  8. 8. Today’s agenda Framing business value AWS & lower costs Business value in action
  9. 9. How to frame the value of moving to AWS? Start with your goals “We need to focus on moving our core business forward — not building and maintaining infrastructure…” “Reducing our overall cost is a high priority.” “We are looking to improve performance and expand globally in a flexible way.” Macro goals to move
  10. 10. How would…
  11. 11. saving money…
  12. 12. moving quickly…
  13. 13. scaling based on market needs…
  14. 14. innovating…
  15. 15. and leveraging what you already have…
  16. 16. …help you achieve these goals?
  17. 17. Analysts have shown AWS creates value Source: IDC, Quantifying the Business Value of Amazon Web Services (May, 2015)
  18. 18. Let’s dive deep in costs
  19. 19. Comparing TCO is not easy ≠
  20. 20. Lower costs than on-premises On-premises traditional data center On-premises virtualized data center CAPEX OPEX OPEX AWS CAPEX OPEX* Cost savings from running internal IT more efficiently AWS scale • Multiple new data centers built each year • Volume purchasing, highly automated, supply chain optimization Utilization fundamentally higher in AWS cloud • Aggregating non-correlated workloads, scale, Spot market Amazon-specific hardware designs • OEM acquisition of custom servers and net gear • Direct purchasing of disk, memory, and CPU • AWS-controlled hypervisor and net protocol layers Diagram is not to scale *For AWS, OPEX costs includes Reserved instances one-time low, up-front payment, if Reserved instances are used. Cost savings from moving to a public cloud provider
  21. 21. Typical cost drivers for on-premises deployments, including overhead costs Network costs Storage costs Server costs Hardware – server, rack chassis PDUs, ToR switches (+maintenance) Software - OS, virtualization licenses (+maintenance) Overhead cost Space Power Cooling Hardware – storage disks, SAN/FC switches Overhead cost Storage admin costs Network hardware – LAN switches, load balancer bandwidth costs Network admin costs Overhead cost IT labor costs Server admin Virtualization admin Space Power Cooling Space Power Cooling illustrative Diagram doesn’t include every cost item. E.g. software costs can include database, management, middle tier software costs. Facilities cost can include costs associated with upgrades, maintenance, building security, taxes etc. IT labor costs can include security admin and application admin costs. 1 2 3 4
  22. 22. Traditional capacity planning Limitations of traditional data centers: Inflexible physical assets Costs are never in sync Migration and expansion costs are high Cost of unexpected inefficiencies
  23. 23. TCO calculator demo
  24. 24. Even after initial deployment, AWS continues to drive down costs
  25. 25. Upgrades are your responsibility Upgrades happen automatically On-premises infrastructure VPC support With AWS, service upgrades occur automatically
  26. 26. Managed services eliminate many operational tasks Do-it-yourself MySQL replication Potentially ~100+ manual steps Set up primary and standby instances Set up identical volumes Create synchronous replication Create and manage DNS entries Detect instance failure conditions Detect network failure conditions Detect storage failure conditions Decide when to fail over…. Re-establish primary secondary connections. Amazon RDS Multi-AZ HA with a mouse click
  27. 27. Introducing Amazon EC2 Dedicated Hosts It’s a physical server with EC2 instance capacity dedicated for your use
  28. 28. Enabling Bring Your Own License (BYOL) • Provides necessary visibility into physical resources • Physical core and socket counts per host • Instance utilization per host • Instance positions per host • Granular placement controls enables you to reuse the same physical host Host ID = h-123abc Sockets = 2 Physical Cores = 20
  29. 29. One customer saved 42% by using their own licenses
  30. 30. Track costs & predict future spend
  31. 31. Cost Explorer demo: Focus on budgeting and forecasting
  32. 32. • By moving to AWS, Jobvite increased availability and uptime to more than 99.98% • Jobvite expected to reduce OpEx by 15-20% per year, but actually reduced it by 35%”
  33. 33. Move quickly
  34. 34. Hit your deadlines
  35. 35. More time to focus on what differentiates your business
  36. 36. Faster turns
  37. 37. Fewer long and large projects
  38. 38. Long & large projects • More likely to exceed budget
  39. 39. • More likely to exceed budget • More likely to run late Long & large projects
  40. 40. • More likely to exceed budget • More likely to run late • More likely to fail to deliver full value Long & large projects
  41. 41. • Each additional year in a project boosts the likelihood of missing targets by 15% Long & large projects
  42. 42. • $66 billion in cost overruns in 5,400 projects How much can you save? Long & large projects
  43. 43. Benefits of fail fast
  44. 44. AWS & speed
  45. 45. Immediate provisioning
  46. 46. Try it
  47. 47. If it doesn’t work, iterate
  48. 48. When it does work, use AWS CloudFormation to deploy at scale
  49. 49. QuickStart, DriveTimes, Partners
  50. 50. Move fast – even with complex business apps • Wego moved its entire SAP system — including database and applications — to the AWS cloud over a 3-month timeline • “On AWS, we can deploy a new application 75 percent — or three weeks — faster than we did in our previous environment” – Son Phung, Chief Technology Officer (CTO)
  51. 51. Speed & agility enhance other benefits
  52. 52. Scale based on market needs
  53. 53. Known variability
  54. 54. Don’t pay for capacity you don’t need
  55. 55. Uncertain demand
  56. 56. Elastic and pay-per-use infrastructure Unable to serve customers Infrastructure cost $ Time Large capital expenditure Opportunity cost Predicted demand Traditional hardware Actual demand Automated virtualization
  57. 57. Use AWS to grow the business • Scale to handle 500,000 new users in 2 months • 20% faster launch time for new products
  58. 58. Expand globally • Initial move to the cloud: 1 month • Reduced OpEx by 60% • Increased uptime to nearly 100% • Faster analytics (40%) • Deployed to Japan in only one week
  59. 59. What sets you apart?
  60. 60. Focus your efforts there
  61. 61. Focus on the business, not undifferentiated heavy lifting • Chose not to spend time running their IT infrastructure internally • Reduced the time to run compute-intensive clinical trial simulations from 60 hours to 1.2 hours on AWS
  62. 62. Improve time to market • Execute projects more than 80% faster
  63. 63. Leverage what you already have
  64. 64. • 175 countries, 270 companies • Leverages AWS cloud to run 120 applications • Plans to triple applications on AWS and launch 25,000 Amazon WorkSpaces cloud- based desktops • Savings + makes employees and consultants quickly productive
  65. 65. Integrating AWS with Your Existing On-premises Infrastructure Corporate data centers Active Directory Network Config. Encryption Back-up. apps Management Your On Premises Apps On premises apps Users, Access Rules, AWS Direct Connect, AWS Identity and Access Management (IAM) Your Private Network (Amazon VPC) Encryption (Amazon S3, Amazon RDS, AWS CloudHSM) Back-ups (AWS Storage Gateway) Tracking & Inventorying (Amazon CloudWatch, AWS OpsWorks, Service Catalog) Cloud Apps AWS Direct Connect
  66. 66. Putting it all together
  67. 67. The value of using AWS accelerates over time Source: IDC Business Value of AWS Accelerates over time According to IDC, this relationship between length of time using AWS and return is due to customers leveraging the more optimized environment to generate more applications along a learning curve. $1 Investment in AWS $8.40 in benefits At 60 months of using AWS ~8X $3.50 in benefits $1 Investment in AWS At 36 months of using AWS ~3X
  68. 68. Next steps
  69. 69. Cloud center of excellence
  70. 70. How the 11 AWS regions,
  71. 71. 30 Availability Zones,
  72. 72. 50+ services,
  73. 73. …and hundreds of innovations can help you
  74. 74. Lower costs
  75. 75. Move quickly
  76. 76. Scale based on market needs
  77. 77. Innovate around your unique value
  78. 78. Leverage what you already have
  79. 79. Tens of thousands of APN Partners
  80. 80. 2,300 software listings in over 30 categories
  81. 81. Conclusion: Delaware North $3.5 million in savings over 5 years Now takes 1 day to provision a new business (vs. 2-3 weeks) Improved compliance, disaster recovery, solutions delivery
  82. 82. Business value for you: AWS can help you • Lower costs • Move quickly • Scale based on market needs • Innovate around your unique value • Leverage what you already have
  83. 83. Web links for more information AWS Economics Center: • • Includes link to TCO calculator Case studies & references: •
  84. 84. More sessions Cost Optimization at Scale: ISM 402 – Thursday 11:00 Framework for IT and Business Transformation: ISM 205 – Thursday 2:45 Breaking Down the Economics & TCO of Migration to AWS: ISM 314 – Friday 9:00 This Session (Repeat): ISM 315 – Friday 10:15
  85. 85. Remember to complete your evaluations!
  86. 86. Thank you!