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AWS Webcast - Total Cost of (Non) Ownership

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Explore the financial considerations of owning and operating a traditional data center versus utilizing cloud infrastructure. The session will consider many cost factors which can be overlooked when comparing models, such as provisioning, procurement, training, support contracts and software licensing. Learn how to further reduce your current costs on AWS and improve your spend predictability. Join this webinar to learn more.

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AWS Webcast - Total Cost of (Non) Ownership

  1. 1. © 2011 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified or distributed in whole or in part without the express consent of Amazon.com, Inc. The Total Cost of (Non) Ownership in the Cloud Jinesh Varia jvaria@amazon.com @jinman
  2. 2. © 2011 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified or distributed in whole or in part without the express consent of Amazon.com, Inc. Total Cost of Ownership (TCO)
  3. 3. © 2011 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified or distributed in whole or in part without the express consent of Amazon.com, Inc. Pay as you go
  4. 4. © 2011 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified or distributed in whole or in part without the express consent of Amazon.com, Inc. When Calculating TCO…
  5. 5. © 2011 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified or distributed in whole or in part without the express consent of Amazon.com, Inc. #1 Use updated pricing - price cuts, tiered pricing, volume discounts When calculating TCO…
  6. 6. © 2011 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified or distributed in whole or in part without the express consent of Amazon.com, Inc. Massive economies of scale and efficiency improvements allow us to continually lower prices
  7. 7. © 2011 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified or distributed in whole or in part without the express consent of Amazon.com, Inc. “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
  8. 8. © 2011 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified or distributed in whole or in part without the express consent of Amazon.com, Inc. Pay less when you use more
  9. 9. © 2011 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified or distributed in whole or in part without the express consent of Amazon.com, Inc. 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
  10. 10. © 2011 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified or distributed in whole or in part without the express consent of Amazon.com, Inc. #1 Use updated pricing - price cuts, tiered pricing, volume discounts #2 Take all the fixed costs into consideration (Don’t forget admin and redundancy costs) When calculating TCO…
  11. 11. © 2011 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified or distributed in whole or in part without the express consent of Amazon.com, Inc. 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
  12. 12. © 2011 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified or distributed in whole or in part without the express consent of Amazon.com, Inc. Hardware Administration Costs Database administration costs
  13. 13. © 2011 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified or distributed in whole or in part without the express consent of Amazon.com, Inc. Hardware procurement teams Data center design and build teams Hardware operations staff Networking teams Security personnel Administrative staff Contractors Power and Cooling Consultants
  14. 14. © 2011 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified or distributed in whole or in part without the express consent of Amazon.com, Inc. #1 Use updated pricing - price cuts, tiered pricing, volume discounts #2 Take all the fixed costs into consideration (Don’t forget admin and redundancy costs) #3 Mix and match Reserved pricing with On-Demand Pricing (Amortize over 3/5 yrs) When calculating TCO…
  15. 15. © 2011 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified or distributed in whole or in part without the express consent of Amazon.com, Inc. 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
  16. 16. © 2011 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified or distributed in whole or in part without the express consent of Amazon.com, Inc. 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
  17. 17. © 2011 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified or distributed in whole or in part without the express consent of Amazon.com, Inc. Mix and Match Reserved and On-Demand Billing Types Instances 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
  18. 18. © 2011 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified or distributed in whole or in part without the express consent of Amazon.com, Inc. #1 Use updated pricing - price cuts, tiered pricing, volume discounts #2 Take all the fixed costs into consideration (Don’t forget admin and redundancy costs) #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) When calculating TCO…
  19. 19. © 2011 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified or distributed in whole or in part without the express consent of Amazon.com, Inc. 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)
  20. 20. © 2011 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified or distributed in whole or in part without the express consent of Amazon.com, Inc.
  21. 21. © 2011 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified or distributed in whole or in part without the express consent of Amazon.com, Inc. 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
  22. 22. © 2011 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified or distributed in whole or in part without the express consent of Amazon.com, Inc. 0 2 4 6 8 0 5 10 15 20 25 30 35 TrafficMeasuredinServers/Instances Months Steady State Usage Pattern Traffic pattern EC2 Reserved Physical servers (on-premises)
  23. 23. © 2011 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified or distributed in whole or in part without the express consent of Amazon.com, Inc. 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% 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
  24. 24. © 2011 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified or distributed in whole or in part without the express consent of Amazon.com, Inc. 0 2 4 6 8 10 12 0 5 10 15 20 25 30 35 TrafficmeasuredinServers/Instances Months Spiky Predictable Usage Pattern Traffic Pattern EC2 Reserved Physical servers (on-premises) EC2 On-Demand
  25. 25. © 2011 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified or distributed in whole or in part without the express consent of Amazon.com, Inc. 0 2 4 6 8 10 12 0 5 10 15 20 25 30 35 TrafficmeasuredinServers/Instances Months Spiky Predictable Usage Pattern Traffic Pattern EC2 Reserved Physical servers (on-premises) EC2 On-Demand
  26. 26. © 2011 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified or distributed in whole or in part without the express consent of Amazon.com, Inc. When you turn off your cloud resources, you actually stop paying for them
  27. 27. © 2011 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified or distributed in whole or in part without the express consent of Amazon.com, Inc. TCO Web Application - Spiky Usage Pattern Amortized monthly costs over 3 years On-Premises Option AWS Option 1 All Reserved AWS Option 2 Mix of On-Demand and Reserved AWS Option 3 All On-Demand Compute/Server Costs Server Hardware $510.60 $0.00 $0.00 $0.00 Network Hardware $103.40 $0.00 $0.00 $0.00 Hardware Maintenance $78.50 $0.00 $0.00 $0.00 Power and Cooling $286.70 $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
  28. 28. © 2011 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified or distributed in whole or in part without the express consent of Amazon.com, Inc. 0 2 4 6 8 10 12 14 16 18 20 0 5 10 15 20 25 30 35 Trafficmeasuredin Servers/Instances Months Uncertain Unpredictable Usage Pattern Actual Traffic Expected Traffic EC2 Reserved Physical servers (on-premises) EC2 On-Demand
  29. 29. © 2011 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified or distributed in whole or in part without the express consent of Amazon.com, Inc. Light and Medium Utilization Reserved Instances Low upfront one-time fees When you turn off, you save on hourly usage
  30. 30. © 2011 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified or distributed in whole or in part without the express consent of Amazon.com, Inc. TCO Web Application - Unpredictable Usage Pattern (Failure case) Amortized monthly costs over 3 years On-Premises Option AWS Option 1 All Reserved AWS Option 2 Mix of On-Demand and Reserved AWS Option 3 All On-Demand Compute/Server Costs Server Hardware $816.96 $0.00 $0.00 $0.00 Network Hardware $165.44 $0.00 $0.00 $0.00 Hardware Maintenance $125.60 $0.00 $0.00 $0.00 Power and Cooling $458.72 $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% 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
  31. 31. © 2011 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified or distributed in whole or in part without the express consent of Amazon.com, Inc. 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
  32. 32. © 2011 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified or distributed in whole or in part without the express consent of Amazon.com, Inc. 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
  33. 33. © 2011 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified or distributed in whole or in part without the express consent of Amazon.com, Inc. 0 4 8 12 16 20 24 28 32 36 40 0 5 10 15 20 25 30 35 Trafficmeasuredin Servers/Instances 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
  34. 34. © 2011 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified or distributed in whole or in part without the express consent of Amazon.com, Inc.
  35. 35. © 2011 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified or distributed in whole or in part without the express consent of Amazon.com, Inc. #1 Use updated pricing - price cuts, tiered pricing, volume discounts #2 Take all the fixed costs into consideration (Don’t forget admin and redundancy costs) #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) #5 Intangible cost savings – Take a closer look at what you get as part of AWS When calculating TCO…
  36. 36. © 2011 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified or distributed in whole or in part without the express consent of Amazon.com, Inc. 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
  37. 37. © 2011 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified or distributed in whole or in part without the express consent of Amazon.com, Inc. Reduced Time to Market = More Revenue
  38. 38. © 2011 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified or distributed in whole or in part without the express consent of Amazon.com, Inc. Opportunity Cost
  39. 39. © 2011 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified or distributed in whole or in part without the express consent of Amazon.com, Inc. Go Global in Minutes
  40. 40. © 2011 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified or distributed in whole or in part without the express consent of Amazon.com, Inc.
  41. 41. © 2011 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified or distributed in whole or in part without the express consent of Amazon.com, Inc.
  42. 42. © 2011 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified or distributed in whole or in part without the express consent of Amazon.com, Inc. When Comparing TCO…
  43. 43. © 2011 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified or distributed in whole or in part without the express consent of Amazon.com, Inc. Make sure that you are including all the cost factors into consideration Place Power Pipes People Patterns Easy to Remember…
  44. 44. © 2011 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified or distributed in whole or in part without the express consent of Amazon.com, Inc. 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
  45. 45. © 2011 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified or distributed in whole or in part without the express consent of Amazon.com, Inc. 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 In Your TCO Analysis DOs DON’Ts BONUS
  46. 46. © 2011 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified or distributed in whole or in part without the express consent of Amazon.com, Inc. 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 In Your TCO Analysis DOs DON’Ts BONUS
  47. 47. © 2011 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified or distributed in whole or in part without the express consent of Amazon.com, Inc. Build Cost-aware architectures Continuous optimization in your architecture results in recurring savings as early as your next month’s bill
  48. 48. © 2011 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified or distributed in whole or in part without the express consent of Amazon.com, Inc. 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
  49. 49. © 2011 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified or distributed in whole or in part without the express consent of Amazon.com, Inc. #1 Use updated pricing - price cuts, tiered pricing, volume discounts #2 Take all the fixed costs into consideration (Don’t forget admin and redundancy costs) #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) #5 Intangible cost savings – Take a closer look at what you get as part of AWS When calculating TCO…
  50. 50. © 2011 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified or distributed in whole or in part without the express consent of Amazon.com, Inc. How customers are saving money with AWS AWS Economics Center TCO Whitepapers Calculator Tools Videos Case Studies Other Resources
  51. 51. © 2011 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified or distributed in whole or in part without the express consent of Amazon.com, Inc. 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
  52. 52. © 2011 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified or distributed in whole or in part without the express consent of Amazon.com, Inc. 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
  53. 53. © 2011 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified or distributed in whole or in part without the express consent of Amazon.com, Inc. Thank you! Jinesh Varia jvaria@amazon.com - Twitter:@jinman

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