The Total Cost of (Non) Ownership In The Cloud
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#1 Analyze your applications and usage patterns to understand your needs. Consider steady state, spiky, and unpredictable usage. #2 Consider all relevant costs, including hardware, maintenance, personnel, space, power, and bandwidth when comparing options. Some costs are hidden. #3 Leverage AWS's flexible pricing models like reserved instances, spot instances, and free tier services to optimize for your workload patterns and lower your total cost of ownership over time compared to on-premises infrastructure. Savings increase with higher utilization and longer commitments.
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The Total Cost of (Non) Ownership In The Cloud
- 1. The Total Cost of (Non) Ownership In The Cloud Kingsley Wood kwood@amazon.com Business Development Manager
- 2. The AWS Cloud Components For Enterprises Tools to access services Cross Service features High-level building blocks Low-level building blocks
- 3. Pay as you go
- 5. When calculating TCO… #1 Start by understanding your use cases, and the applications that support them
- 6. Analyze, Understand and Classify IT assets List all your IT assets Dash board Identify upward and downward dependencies Web CRM Auth Start classifying your IT assets into different categories: • Applications with Top Secret, Secret, LDAP Service or Public data sets DB • Applications with low, medium and Search high compliance requirements OLAP Engine • Applications that are internal-only, partner-only or customer-facing • Applications with low, medium and high coupling ERP Report logs • Applications with strict, relaxed licensing
- 7. Stack Rank your IT Assets, looking for: Under-utilized IT assets Applications that have an immediate business need to scale Applications that are running out of capacity Applications that are easy to move today First successes will build support within your organization and create awareness and excitement, so choose carefully!
- 8. Application Usage Patterns Steady State Spiky Predictable Uncertain Unpredictable Example: Example: Example: Corporate Data Logging Marketing Web Apps Promotions Website
- 9. Pick the low-hanging fruit so you can learn Dash board Web CRM CRM Auth Servic LDAP e DB DB Search OLAP Engine ERP Report logs
- 10. When calculating TCO… #1 Start by understanding your use cases, and the applications that support them #2 Take all the fixed costs into consideration (Don’t forget all the hidden costs!)
- 12. Take all the costs in to consideration Fixed Cost Factors One-time Upfront Monthly AWS Co-lo On-Site AWS Co-lo On-Site Server Hardware 0 $$$ $$ $$ 0 0 Network Hardware 0 $$ $$ 0 0 0 Hardware Maintenance 0 $$ $$ 0 0 0 Software OS 0 $$ $$ $ 0 0 Power and Cooling and Data 0 0 $$ 0 0 $ Center Efficiency Data Center/co-lo Space 0 $$ $$ 0 0 0 Personnel (Administration) 0 $$ $$ $ $$ $$$ Storage and Redundancy 0 $$ $$ $ 0 0 Bandwidth $ $$ $ $$ $ $ Resource Management 0 0 0 $$ $ 0 Software Total
- 13. Hardware Administration Costs Database Administration Costs
- 14. When calculating TCO… #1 Start by understanding your use cases, and the applications that support them #2 Take all the fixed costs into consideration (Don’t forget all the hidden costs!) #3 Use Updated Pricing (compute, storage and net) Price cuts, Tiered Pricing and Volume Discounts
- 15. Massive economies of scale and efficiency improvements allow us to continually lower prices
- 17. 20 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 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 Massive economies of scale and efficiency improvements allow us to continually lower prices.
- 18. Pay less when you use more
- 19. Incremental Adoption Savings 60 50 40 Data in TB 30 20 10 0 0 12 24 36 Months Actual Storage
- 20. Incremental Adoption Savings 60 50 40 Data in TB 30 20 10 0 0 12 24 36 Months Actual Storage Provisioned
- 21. Incremental Adoption Savings 60 50 40 Data in TB 30 20 10 0 0 12 24 36 Months Actual Storage Provisioned
- 22. Did you know? Free Usage Tier Free Services Data Transfer New Customers AWS Elastic Beanstalk No Charge for AWS CloudFormation Amazon EC2 AWS IAM Inbound Data Transfer Amazon RDS Auto Scaling Amazon ELB Consolidated Billing Data Transfer between Amazon S3 Instances within an Amazon EBS Availability Zone For All Customers Amazon SQS/SNS Amazon DynamoDB Amazon SES Amazon SWF And more…
- 23. When calculating TCO… #1 Start by understanding your use cases, and the applications that support them #2 Take all the fixed costs into consideration (Don’t forget all the hidden costs!) #3 Use Updated Pricing (compute, storage and net) Price cuts, Tiered Pricing and Volume Discounts #4 Leverage Reserved Pricing vs. On-Demand Pricing (Amortize Monthly over 1-3 years)
- 24. Multiple pricing models allow you to optimize costs for both variable and stable workloads On-Demand, Reserved (Light, Medium and Heavy for 1-Year, 3-Year) and Spot
- 25. Save more when you reserve On-demand Reserved Instances Instances • Pay as you go • One time low upfront fee + Pay as you go • Starts from • $23 for 1 year $0.02/Hour term and $0.01/Hour 1 and 3 year terms Heavy Medium Light Utilization RI Utilization RI Utilization RI
- 26. $14,000 $12,000 m2.xlarge running Linux in US-East Region $10,000 over 3 year period $8,000 Cost Heavy Utilization $6,000 Medium Utilization Light Utilization $4,000 On-Demand $2,000 $- 0% 20% 40% 60% 80% 100% Utilization Utilization Sweet Spot Feature Savings over On-Demand <10% On-Demand No Upfront Commitment 10% - 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
- 27. Steady State Usage Pattern 8 Traffic in Instances 6 Traffic pattern 4 Reserved Physical 2 0 0 6 12 18 24 30 36 Months
- 28. 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 Reserved Option 1: All Reserved Compute/Server Costs Recommended Option (Most Cost-effective) Server Hardware $306.36 $0.00 $0.00 $0.00 Network Hardware $62.04 $0.00 $0.00 $0.00 Option 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 $0.00 Option 3:Personnel All On-Demand $1,200.00 $0.00 $0.00 $0.00 Commitment-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 68.0% 44.1% -10.7%
- 29. Spiky Predictable Usage Pattern 12 10 Traffic in Instances 8 6 Traffic Pattern Reserved 4 On-Demand Physical 2 0 0 6 12 18 24 30 36 Months
- 30. When you turn off your cloud resources, you actually stop paying for
- 31. 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 Costs Option 1: All Reserved Server Hardware $510.60 $0.00 $0.00 $0.00 Network Hardware $103.40 $0.00 $0.00 $0.00 Option 2: Hardware Maintenance Mix of On-Demand and Reserved $78.50 $0.00 $0.00 $0.00 Recommended Option (Most Cost-effective) Power and Cooling $286.70 $0.00 $0.00 $0.00 Data Center Space $240.80 $0.00 $0.00 $0.00 Option 3: Personnel All On-Demand $2,000.00 $0.00 $0.00 $0.00 Commitment-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 69.2% 72.6% 39.7%
- 32. Uncertain Unpredictable Usage Pattern 20 16 Traffic in Instances 12 Actual Traffic 8 Expected Traffic Reserved On-Demand 4 Physical 0 0 6 12 18 24 30 36 Months
- 33. Light and Medium Utilization Reserved Instances Low upfront one-time fees When you turn off, you save on hourly usage
- 34. 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 Costs Option 1: All Reserved Server Hardware $816.96 $0.00 $0.00 $0.00 Network Hardware $165.44 $0.00 $0.00 $0.00 Option 2: Hardware Maintenance Mix of On-Demand and Reserved $125.60 $0.00 $0.00 $0.00 Power and Cooling $458.72 $0.00 $0.00 $0.00 Option 3: Data Center or Co-located Space All On-Demand $385.28 $0.00 $0.00 $0.00 Commitment-free and Risk-free Option$3,200.00 Personnel $0.00 $0.00 $0.00 Recommended Option (Most Cost-effective) 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 69.9% 75.2% 80.4%
- 35. « Want to increase innovation? Lower the cost of failure » Joi Ito
- 36. Cost of lost business or disappointed customers Uncertain Unpredictable Usage Pattern (Success Case) 40 36 32 Traffic in Instances 28 24 20 Actual Traffic Expected Traffic 16 Reserved 12 On-Demand 8 Physical 4 0 0 6 12 18 24 30 36 Months
- 37. Save more money by using Spot Instances On-demand Reserved Spot Instances Instances Instances • Pay as you go • One time low upfront • Requested Bid Price fee + Pay as you go and Pay as you go • $23 (1 year) • Varying…$0.005/Hour • Starts from $0.01/Hour at 9am today $0.02/Hour 1 and 3 year terms Heavy Medium Light Utilization RI Utilization RI Utilization RI
- 38. Save more money by using Spot Instances Reserved Hourly Price > Spot Price < On-Demand Price
- 39. Spot Use cases Use Case Types of Applications Batch Processing Generic background processing (scale out computing) Hadoop Hadoop/MapReduce processing type jobs (e.g. Search, Big Data, etc.) Scientific Computing Scientific trials/simulations/analysis in chemistry, physics, and biology Video and Image Transform videos into specific formats Processing/Rendering Testing Provide testing of software, web sites, etc Web/Data Crawling Analyzing data and processing it Financial Hedgefund analytics, energy trading, etc HPC Utilize HPC servers to do embarrassingly parallel jobs Cheap Compute Backend servers for Facebook games
- 40. Typical Spot Bidding Strategies Bid Distribution 20% 18% Percentage of the Distribution 16% 14% 12% 10% 8% 6% 4% 2% 0% Bid Price as Percentage of the On-Demand Price
- 41. Optimizing Video Transcoding Workloads Free Offering Premium Offering • Optimize for reducing cost Optimized for Faster response times • Acceptable Delay Limits No Delays Implementation Implementation • Set Persistent Requests Invest in RIs • Use on-demand Instances, if Use on-demand for Elasticity delay Maximum Bid Price Maximum Bid Price < On-demand Rate >= On-demand Rate Get your set reduced price for Get Instant Capacity for higher price your workload
- 42. When calculating TCO… #1 Start by understanding your use cases, and the applications that support them #2 Take all the fixed costs into consideration (Don’t forget all the hidden costs!) #3 Use Updated Pricing (compute, storage and net) Price cuts, Tiered Pricing and Volume Discounts #4 Leverage Reserved Pricing vs. On-Demand Pricing (Amortize Monthly over 1-3 years) #5 Intangible Cost Savings – Take a closer look at what you get as part of AWS
- 43. AWS delivers a premium security spec at non-premium prices Certifications Physical Security HW, SW, Network SOC 1 Type 2 Datacenters in Systematic change (formerly SAS-70) nondescript facilities management ISO 27001 Physical access Phased updates strictly controlled deployment PCI DSS for EC2, S3, EBS, VPC, Must pass two-factor Safe storage RDS, ELB, IAM authentication at decommission least twice for floor FISMA Moderate Automated access Compliant Controls monitoring and self- Physical access audit HIPAA & ITAR logged and audited Compliant Advanced network Architecture protection
- 44. Reduced Time to Market = More Revenue
- 46. Continuous optimization in your architecture results in recurring savings as early as your next month’s bill
- 49. AWS Pricing Philosophy Pay as you go • No minimum commitments or long-term contracts required • Capex -> Opex • 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
- 50. How customers are saving money with AWS AWS Economics Center IDC Report: The aws.amazon.com/economics Business Value of TCO Whitepapers AWS Accelerates Calculator Tools Over Time Case Studies
- 51. Thank you!
Editor's Notes
- We have really come a long way. Today, Amazon Web Services is not just one service but a suite of services that enterprises can leverage to deploy highly mission-critical applications with confidence. There is no limit to what you can do with AWS, whether it’s building a static website, deploying a web application, running data-and compute-intensive workloads, or storing data and building dependable backup solutions. The AWS cloud computing platform provides the flexibility to build your application, your way, regardless of your use case or industry.While the number and types of services offered by AWS has increased dramatically, our philosophy on pricing has not changed: at the end of each month, you pay only for what you use, and you can start or stop using a product at any time. No long-term contracts are required
- Our strategy of pricing each service independently gives you tremendous flexibility to choose the services you need for each project and to pay only for what you usePay as you goPay less per unit when you use morePay even less when you reserve Pay even less as AWS grows
- The first step in the migration of existing applications comes to classifying your IT assets. Some customers have looked at their IT departments from 50K view and have created dependency tree of their logical constructs. Listing all your IT assets and identifying the upward and downward dependencies. Andy felt that this was the most important step anyone can do. Within every organization there are variety of applications of different sizes and shapes and with different set of characteristics. Thinking that if one application cannot move, does not mean all applications cannot move. Breaking down the big job, into small tasks and tackling each task individually will get the big job done. So he classified the IT Asset portfolio into different categories – Top secret, secret, public datasets, Application with high low medium compliance requirements, Applications different security and licensing requirements.
- Stack ranking your assets and prioritizing the applications based on simple criteria you defined earlier. Andy noticed very quickly that there were several applications which are “No Brainer to Move” and can be moved today and will result in immediate benefits of the cloud. At the same time, He also did not just select some applications that were just easy to move but also that were complex and can be used as a internal success story within the companyYou will notice that some applications are just plain drop dead cool if they moved to the cloud like your content, tutorial websites, pre-sales demo environments.
- It is very important to know your costs. Most organizations get TCO calculations but they don’t know what the TCO of the indivual App is because central IT had cut a big fat check earlier in the past. In order to do real TCO analysis of App-level, you have to know that there are costs of Power, cooling, real estate system administration costs in case of on-premise data center and co-lo which is not in that of the cloud. I am even taking into account the value of “Headache” and cost of this undifferentiated heavy lifting. When you use AWS, all these costs are already baked in to your costs. You really don’t have to worry about all these costs. The other very important item that customers miss is Reserved Instances when doing long-term TCO calculations. Reserved instances can save you upto 50% for a 3-year term. Its our commitment to you and not your commitment to us. Andy took this into two things into consideration : know what he is currently paying for the app and understanding the reserved instance pricing
- Personnel costs include the cost of the sizable IT infrastructure teams that are needed to handle the “heavy lifting” – managing heterogeneous hardware and the related supply chain, staying up-to-date on data center design, negotiating contracts, dealing with legacy software, operating data centers, moving facilities, scaling and managing physical growth, etc. These are all the things that an enterprise needs to do well if it wants to achieve low infrastructure costs in the areas discussed above. For example: Hardware procurement teams are needed, who have to spend a lot of time evaluating hardware, negotiating, holding hardware vendor meetings, managing delivery and installation, etc. It’s expensive to have a staff with sufficient knowledge to do this well.Data center design and build teams are needed to create and maintain reliable and cost-effective facilities.Operations staff is needed 24/7/365 in each facility to manage MySQL Databases. This staff is responsible for installing, patching, upgrades, migration, backups, snapshots and recovery of databases, ensuring availability, trouble shooting and performance enhancements.Networking teams are needed for running a highly available network. Expertise is needed to design, debug, scale, and operate the network and deal with the external relationships necessary to have cost-effective internet transit.Security personnel are needed at all phases of the design, build, and operations process.
- To this….
- Option 1: This is the most cost-effective option. You save 68% over the on-premises option. By purchasing 3-Year Heavy Utilization Reserved Instances, you get the maximum savings and lowest rates for your Amazon EC2 instances and Amazon RDS DB instances. Option 2: This option offers 44.13% savings over the on-premises option. By purchasing 3-Year Heavy Utilization Reserved Instances only for your baseline traffic, you pay less upfront ($6,200) than AWS option 1 ($9,300) and on-premises option ($14,952). This is the lowest total upfront commitment option among all AWS options.Option 3: With AWS, you also have an option to choose zero upfront commitment and leverage On-Demand Instances for your steady state workloads. Some AWS customers prefer this option over other options because it allows them to start small without any upfront commitment whatsoever, and therefore provides maximum flexibility while reducing risk to close to zero. For only a 10% cost premium over on-premises infrastructure – which requires 100% up-front purchase and very little flexibility -- , they have an environment that can be started-up or completely shut down to zero at a moment’s notice.
- Only happens in the cloud
- Option 1: This option offers 69% savings over the on-premises option. By purchasing 3-Year Heavy Utilization Reserved Instances (to match the capacity in the on-premises option), you get the lowest hourly rate for your Amazon EC2 and Amazon RDS DB instances. Option 2: This is the most cost-effective option and also the most flexible option. By purchasing 3-Year Heavy Utilization Reserved Instances to handle your baseline traffic and leveraging On-Demand Instances for your peaks, you not only get maximum savings but also enhanced flexibility. The significant savings is due to efficient use of your resources. You use them only when you need to without having to provision for peak capacity. You also have lower total upfront cost ($6,200) than AWS option 1 ($15,500) and on-premises option ($24,920).Option 3: In this option, there is no upfront commitment and you still get significant savings (40%) over the on-premises option. By leveraging On-Demand Instances, you only pay for what you use. This option is best if you want maximum flexibility and zero up-front cost (e.g. many early-stage start-ups fit this profile). Your savings are not as high as in the AWS options with Reserved Instances, but you still get significant savings and flexibility with this option
- We have to be wrong a lot in order to right a lotCloud really helps you to reduce the cost of failure.
- Vimeo is about to come out with a case study. They have 2 offerings: free and premium. The free case they want to minimize cost. They have the ability to have some delay in the service while they transcode the data. So, they set a maximum of $x on the amount they would pay for an hour, and use Spot for the task. If they haven’t gotten capacity in a long time, they choose to start in On-Demand. The premium case they want the media encoding to happen immediately. So, they purchase Reserved Instances to optimize their expected level of demand (note breakeven is around 30% utilization, so buying more RIs may make sense). Then, they use On-Demand for elasticity. If they can’t get the On-Demand when they need it, they try in Spot (e.g. you can get capacity not available anywhere else). In all, they have optimized for their SLA for the premium offering, and minimized cost in their free offering. Both are legitimate scenarios, and AWS is the only provider to support the pricing models to allow them to do it.
- Examining AWS, you’ll see that the same security isolations are employed as would be found in a traditional datacenter. These include physical datacentre security, separation of the network, isolation of the server hardware, and isolation of storage. AWS customers have control over their data: they own the data, not us; they can encrypt their data at rest and in motion, just as they would in their own datacenter. Amazon Web Services provides the same, familiar approaches to security that companies have been using for decades. Importantly, it does this while also allowing the flexibility and low cost of cloud computing. There is nothing inherently at odds about providing on-demand infrastructure while also providing the security isolation companies have become accustomed to in their existing, privately-owned environments.AWS is a secure, durable technology platform with industry-recognized certifications and audits: PCI DSS Level 1, ISO 27001, FISMA Moderate, HIPAA, SAS 70 Type II. Our services and data centers have multiple layers of operational and physical security designed to protect the integrity and safety of your data. Visit our Security Center to learn more http://aws.amazon.com/security/.Certifications and Accreditations: AWS has successfully completed a SAS70 Type II Audit, and will continue to obtain the appropriate security certifications and accreditations to demonstrate the security of our infrastructure and services. PCI DSS: We finalized our 2011 PCI compliance audit, publishing our extensive Report on Controls (ROC) with an expanded scope. Our new November 30, 2011 PCI Attestation of Compliance, a document from our auditor stating we are compliant with all 12 PCI security standard domains, is available now for customers considering or working on moving PCI systems to AWS. The new Attestation of Compliance document includes some key changes this year: This year we’ve added RDS, ELB, and IAM as in-scope services. The addition of these services is fantastic news for PCI customers since they can now leverage RDS to store cardholder and transaction data, use ELB to manage card transaction traffic, and rely on IAM features as validated control mechanisms that satisfy PCI security standard requirements. Consistent with last year, EC2, S3, EBS, and VPC continue to be in scope. Physical Security: Amazon has many years of experience in designing, constructing, and operating large scale data centers. AWS infrastructure is housed in Amazon-controlled data centers throughout the world. Only those within Amazon who have a legitimate business need to have such information know the actual location of these data centers, and the data centers themselves are secured with a variety of physical barriers to prevent unauthorized access.Secure Services: Each of the services within the AWS cloud is architected to be secure and contains a number of capabilities that restrict unauthorized access or usage without sacrificing the flexibility that customers demand. Data Privacy: AWS enables users to encrypt their personal or business data within the AWS cloud and publishes backup and redundancy procedures for services so that customers can gain greater understanding of how their data flows throughout AWS.“In essence, the security system of AWS’s platform has been added to our existing security systems. We now have a security posture consistent with that of a multi-billion dollar company.” - Jim Warren, CIO, Recovery Accountability and Transparency Board (RATB)
- Cloud is highly cost-effective because you can turn off and stop paying for it when you don’t need it or your users are not accessing. Build websites that sleep at night
- Reduced TCO remains one of the core reasons why customers choose the AWS cloud. However, there are a number of other benefits when you choose AWS, such as reduced time to market and increased business agility, which cannot be overlooked.
- While the number and types of services offered by AWS has increased dramatically, our philosophy on pricing has not changed: at the end of each month, you pay only for what you use, and you can start or stop using a product at any time. No long-term contracts are requiredPay as you go. No required minimum commitments, no longterm contracts. This flexibility minimizes the need for detailed resource planning. Pay per use. Pay only for what you use. With AWS, there’s no need to pay up-front for excess capacity or get penalized for under-planning. For compute resources, you pay on an hourlybasis from the time you launch a resource until the time you terminate it. For data storage and transfer, you pay on a per gigabyte basis. We charge based on the underlying infrastructure and services you consume. Pay less by using more. For storage and data transfer, pricing is tiered. The more you use, the less you pay per gigabyte. Pay even less when you reserve. For certain products, you can invest in reserved capacity. In that case, you pay a one-time low upfront fee, and your on-demand rate is reduced by 28% to 58%. Custom pricing. What if none of our pricing models work for your project? Custom pricing is available for high volume projects with unique requirements. For assistance, contact us to speak with a sales representative.