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The Total Cost of Ownership (TCO) of Web Applications in the AWS Cloud - Jinesh Varia

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Weighing the financial considerations of owning and operating a data center facility versus employing a cloud infrastructure requires detailed and careful analysis. In practice, it is not as simple as just measuring potential hardware expense alongside utility pricing for compute and storage resources. The Total Cost of Ownership (TCO) is often the financial metric used to estimate and compare direct and indirect costs of a product or a service. Given the large differences between the two models, it is challenging to perform accurate apples-to-apples cost comparisons between on-premises data centers and cloud infrastructure that is offered as a service. In this presentation, we explain the economic benefits of deploying a web application in the Amazon Web Services (AWS) cloud over deploying an equivalent web application hosted in an on-premises data center and highlight the 5 things to not forget while calculating TCO.

Whitepaper: http://bit.ly/aws-tco-webapps

Published in: Technology, Business

The Total Cost of Ownership (TCO) of Web Applications in the AWS Cloud - Jinesh Varia

  1. 1. The Total Cost of (Non) Ownership ofCompute and Database In The Cloud Jinesh Varia jvaria@amazon.com Technology Evangelist
  2. 2. The AWS Cloud For Enterprises Tools to access services Cross Service features High-level building blocks Low-level building blocks
  3. 3. Pay as you go
  4. 4. When Comparing TCO…
  5. 5. When calculating TCO… #1 Start with a use case or an application – Buying racks vs. deploying an application - and know its current utilization
  6. 6. Start with Use case or pick the low-hanging fruit List all your IT assets Dash board Identify upward and downward dependencies Start classifying your IT assets into different categories: • Applications with Top Secret, Secret, or Public data sets • Applications with low, medium and high compliance requirements • Applications that are internal-only, partner-only or customer-facing • Applications with low, medium and high coupling • Applications with strict, relaxed licensing
  7. 7. Start with Use case or pick the low-hanging fruit Dash board
  8. 8. Stack Rank your IT Assets Search for under-utilized IT assets Applications that has immediate business need to scale Applications that are running out of capacity Easiest to move today That Builds support within your organization and creates awareness and excitement
  9. 9. Web Application Usage Patterns Steady State Spiky Predictable Uncertain unpredictable Usage Pattern Usage Pattern Usage Pattern(Example: Corporate Website) (Example: Marketing (Example: Social game or Promotions Website) Mobile Website)
  10. 10. When calculating TCO… #1 Start with a use case or an application - Migrating racks vs. migrating application - and know its current utilization #2 Take all the fixed costs into consideration (Don’t forget administration and redundancy costs)
  11. 11. Take all the Fixed Costs in to considerationFixed Cost Factors One-time Upfront Monthly AWS Co-lo On-Site AWS Co-lo On-SiteServer Hardware 0 $$$ $$ $$ 0 0Network Hardware 0 $$ $$ 0 0 0Hardware Maintenance 0 $$ $$ 0 0 0Software OS 0 $$ $$ $ 0 0Power and Cooling and Data 0 0 $$ 0 0 $Center EfficiencyData Center/co-lo Space 0 $$ $$ 0 0 0Personnel (Administration) 0 $$ $$ $ $$ $$$Storage and Redundancy 0 $$ $$ $ 0 0Bandwidth $ $$ $ $$ $ $Resource Management 0 0 0 $$ $ 0SoftwareTotal
  12. 12. Hardware Administration Costs Database administration costs
  13. 13. Costs Overlooked in Data Center Planning Source: http://notesfromtheconsultantsjungle.com/2011/10/25/neglected-cost-components-in-data-center-planning/
  14. 14. When calculating TCO… #1 Start with a use case or an application - Migrating racks vs. migrating application - and know its current utilization #2 Take all the fixed costs into consideration (Don’t forget administration and redundancy costs) #3 Use Updated Pricing (compute, storage and bandwidth) Price cuts, Tiered Pricing and Volume Discounts
  15. 15. Massive economies of scale andefficiency improvements allow us to continually lower prices
  16. 16. ate Mr. Autom nt lo pm e Deve AutomationManagement Logistics Moni to ring Deployment
  17. 17. 19 price cuts in last 5 years“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 mewho is working hard on driving the costs down and increasingefficiency of the company’s infrastructure. I get all the credit forall the hard work you guys are putting in.” CIO of F500 company Massive economies of scale and efficiency improvements allow us to continually lower prices.
  18. 18. Pay less when you use more
  19. 19. Did you know?AWS Free Usage Tier Free Services Data Transfer New Customers Amazon EC2 (Linux & Windows) Amazon ELB AWS Elastic Beanstalk No Charge for Inbound Amazon S3 AWS CloudFormation Data Transfer Amazon EBS AWS IAM Auto Scaling No Charge for Data For all customers Consolidated Billing Transfer Between Services within a region Amazon SQS/SNS Amazon DynamoDB Amazon SES Amazon SWF And more…
  20. 20. When calculating TCO… #1 Start with a use case or an application - Migrating racks vs. migrating application - and know its current utilization #2 Take all the fixed costs into consideration (Don’t forget administration and redundancy costs) #3 Use Updated Pricing (compute, storage and bandwidth) Price cuts, Tiered Pricing and Volume Discounts #4 Leverage Reserved Pricing instead of On-Demand Pricing (Amortize Monthly over 3-5 years)
  21. 21. Multiple pricing models allow you to optimize costs for both variable and stable workloadsOn-Demand, Reserved (Light, Medium and Heavy for 1-Year, 3-Year) and Spot
  22. 22. Save more when you reserve
  23. 23. m2.xlarge running Linux in US-East Region over 3 Year periodUtilization Sweet Spot Feature Savings over On-Demand<10% On-Demand No Upfront Commitment10% - 40% Light Utilization RI Ideal for Disaster Recovery Up to 56% (3-Year)40% - 75% Medium Utilization RI Standard Reserved Capacity Up to 66% (3-Year)>75% Heavy Utilization RI Lowest Total Cost Up to 71% (3-Year) Ideal for Baseline Servers
  24. 24. www.MyWebSite.com (dynamic data) Example: TCO of a Amazon Route 53 media.MyWebSite.com (DNS)3-tier Web Application Elastic Load (static data) Balancer Amazon Auto Scaling group : Web Tier CloudFront Amazon EC2 Auto Scaling group : App Tier Amazon RDS Amazon S3 Amazon Availability Zone #1 RDS Availability Zone #2
  25. 25. TCO of Steady State Web Application TCO Web Application - Steady State Usage Pattern On-Premises AWS Option 1 AWS Option 2 AWS Option 3 Option All Reserved Mix of On-Demand All On-Demand Amortized monthly costs over 3 years (3-Year Heavy) and ReservedOption 1: All ReservedRecommended Option (Most Cost- Compute/Server Costseffective)Server Hardware $306.36 $0.00 $0.00 $0.00 Network Hardware $62.04 $0.00 $0.00 $0.00Option 2:Hardware Maintenance Mix of On-Demand and Reserved $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 $0.00Option 3:Personnel All On-Demand $1,200.00 $0.00 $0.00 $0.00Commitment-free and Risk-free Option 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%
  26. 26. When you turn off your cloud resources, you actually stop paying for them
  27. 27. TCO of Spiky Predictable Web Application TCO Web Application - Spiky Usage Pattern On-Premises AWS Option 1 AWS Option 2 AWS Option 3 Amortized monthly costs over 3 years Option All Reserved Mix of On-Demand All On-Demand and Reserved Compute/Server CostsOption 1: All Reserved Server Hardware $510.60 $0.00 $0.00 $0.00 Network Hardware $103.40 $0.00 $0.00 $0.00Option 2: Mix of On-Demand and Reserved Hardware Maintenance $78.50 $0.00 $0.00 $0.00Recommended Option (Most Cost-effective) Power and Cooling $286.70 $0.00 $0.00 $0.00 Data Center Space $240.80 $0.00 $0.00 $0.00Option 3: Personnel All On-Demand $2,000.00 $0.00 $0.00 $0.00Commitment-free and Risk-free Option $0.00 AWS Instances $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%
  28. 28. Light and Medium Utilization Reserved Instances Low upfront one-time fees When you turn off, you save on hourly usage
  29. 29. TCO of uncertain unpredictable web application when it fails TCO Web Application - Unpredictable Usage Pattern (Failure case) On-Premises AWS Option 1 AWS Option 2 AWS Option 3 Amortized monthly costs over 3 years Option All Reserved Mix of On-Demand All On-Demand and Reserved Compute/Server CostsOption 1: All Reserved Server Hardware $816.96 $0.00 $0.00 $0.00 Network Hardware $165.44 $0.00 $0.00 $0.00Option 2: Mix of On-Demand and Reserved Hardware Maintenance $125.60 $0.00 $0.00 $0.00 Power and Cooling $458.72 $0.00 $0.00 $0.00Option 3: Data Center or Co-located Space All On-Demand $385.28 $0.00 $0.00 $0.00Commitment-free and Risk-free Option$3,200.00 Personnel $0.00 $0.00 $0.00Recommended Option (Most Cost- AWS Instances $0.00 $1,552.89 $1,275.46 $1,009.80effective) 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%
  30. 30. Experiment Often & Fail Quickly $1 00  $2 K  $5 00 $7 5  $3 3  $3 K $2 34  $5 00  $6 92 Cost of failure falls dramatically People are free to try out new ideas More risk taking, more innovation $1 K  $9 6  $1 2
  31. 31. Buy a smaller term instance Sell your unused Reserved Instance Buy instance with different OS or type Sell unwanted or over-bought capacityBuy a Reserved instance in different region Further reduce costs by optimizing Reserved Instance Marketplace
  32. 32. Cost of lost business or disappointed customers
  33. 33. TCO of Web Application with uncertain unpredictable usage pattern Option 1: Option 2: Option 3:Option 1: On-Demand + On-Demand On-Demand + On-PremisesRecommended Option over 3 years Amortized monthly costs (Most Cost-effective) Option Reserved (Heavy + + All Reserved Baseline ReservedBaseline: 3-Year Heavy Light) (Light 1-year) (Light)Median: 1-Year Light Compute/Server CostsPeak: On-Demand Server Hardware $793.59 $0.00 $0.00 $0.00 Network Hardware $119.04 $0.00 $0.00 $0.00Option 2:Hardware Maintenance $273.79 $0.00 $0.00 $0.00Lowest upfront Cooling Power and Commitment Option $309.58 $0.00 $0.00 $0.00Baseline andCenter or Co-located Space Light Data Median: 1-Year $274.09 $0.00 $0.00 $0.00Peak: On-Demand Hardware Administration $1,866.66 $0.00 $0.00 $0.00 Instances $0.00 $2,102.31 $2,537.36 $2,708.69Option 3: Total - Per Month $3,636.73 $2,102.31 $2,537.36 $2,708.69Balance of upfront costs and savings Total - 3 Years $130,922.40 $75,683.20 $91,344.80 $97,512.80 Savings over On-Premises 42.19% 30.23% 25.52% Cost of Lost Business 23.72% 0.00% 0.00% 0.00%
  34. 34. Cost of lost business or disappointed customers
  35. 35. When calculating TCO… #1 Start with a use case or an application - Migrating racks vs. migrating application - and know its current utilization #2 Take all the fixed costs into consideration (Don’t forget administration and redundancy costs) #3 Use Updated Pricing (compute, storage and bandwidth) Price cuts, Tiered Pricing and Volume Discounts #4 Leverage Reserved Pricing instead of On-Demand Pricing (Amortize Monthly over 3-5 years) #5 Intangible Cost Savings – Take a closer look at what you get as part of AWS
  36. 36. AWS delivers a premium security spec at non-premium pricesCertifications Physical Security HW, SW, NetworkSOC 1 Type 2 Datacenters in Systematic change(formerly SAS-70) nondescript facilities managementISO 27001 Physical access Phased updates strictly controlled deploymentPCI DSS for EC2, S3,EBS, VPC, RDS, Must pass two-factor Safe storageELB, IAM authentication at least decommission twice for floor accessFISMA Moderate Automated monitoringCompliant Controls Physical access and self-audit logged and auditedHIPAA & ITAR Advanced networkCompliant protectionArchitecture
  37. 37. Reduced Time to Market = More Revenue
  38. 38. Opportunity Cost
  39. 39. Continuous optimization in your architecture results in recurring savingsas early as your next month’s bill
  40. 40. When Comparing TCO…
  41. 41. When calculating TCO… #1 Start with a use case or an application - Migrating racks vs. migrating application - and know its current utilization #2 Take all the fixed costs into consideration (Don’t forget administration and redundancy costs) #3 Use Updated Pricing (compute, storage and bandwidth) Price cuts, Tiered Pricing and Volume Discounts #4 Leverage Reserved Pricing instead of On-Demand Pricing (Amortize Monthly over 3-5 years) #5 Intangible Cost Savings – Take a closer look at what you get as part of AWS
  42. 42. How customers are saving money with AWSAWS Economics CenterTCO WhitepapersCalculator ToolsCase StudiesOther Resources
  43. 43. AWS Pricing PhilosophyPay as you go• No minimum commitments or long-term contracts required• Capex -> Opex• Turn off when you don’t need itPay less per unit when you use more• Tiered Pricing and Volume DiscountsPay even less when you reserve• Reserved pricingPay even less as AWS grows• Efficiencies, optimizations and economies of scale result in passing the savings back to you in the form of lower pricingCustom Pricing
  44. 44. When calculating TCO… #1 Start with a use case or an application - Migrating racks vs. migrating application - and know its current utilization #2 Take all the fixed costs into consideration (Don’t forget administration and redundancy costs) #3 Use Updated Pricing (compute, storage and bandwidth) Price cuts, Tiered Pricing and Volume Discounts #4 Leverage Reserved Pricing instead of On-Demand Pricing (Amortize Monthly over 3-5 years) #5 Intangible Costs – Take a closer look at what you get as part of AWS
  45. 45. Thank you! Jinesh Variajvaria@amazon.com Twitter:@jinman
  46. 46. The AWS Cloud Tools to access services Cross Service features High-level building blocks Low-level building blocks
  47. 47. Elasticity + Auto ScalingInfrastructureCost $ Large Large You just lost You just lost Capital Capital customers customers Expenditure Expenditure Predicted Demand Traditional Hardware Actual Demand Cloud Automated Elasticity time

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