This introductory level business focused session will help you to understand how to calculate, track and optimise the costs of using AWS to deliver your applications and run other IT workloads.

1. © 2014 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.
Optimizing Total Cost of Ownership
for AWS
David de Santiago, Amazon Web Services

2. Agenda
• Cost Philosophy
• Considerations for TCO analysis comparison
• Cost Optimization Techniques

3. Lower costs with AWS
1
“Average of 400 servers
replaced per customer”
Replace up-front
capital expense with
low variable cost
2
42 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
Tiered Pricing
Volume Discounts
Custom Pricing
On-Demand
Reserved
Spot
Dedicated
Source: IDC Whitepaper, sponsored by
Amazon, “The Business Value of Amazon
Web Services Accelerates Over Time.”
December 2013

4. 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 & net gear
• Direct purchasing of disk, memory, & CPU
• AWS controlled hypervisor & net protocol
layers
Diagram is not to scale
*For AWS, OPEX costs includes Reserved Instances one-time low, upfront payment, if Reserved Instances are used.
Cost savings from moving
to a public cloud provider

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
42

6. We’ve announced price reductions 42* times since our
inception in 2006. Recent price drops included…
Amazon EBS
standard volume
prices are lowered
up to 50% for both
storage and I/O
requests.
January 21, 2014
50% Amazon is reducing
prices for Amazon
ElasticCache cache
nodes by an
average of 34%.
March 26, 2014
34% Amazon S3: We are
reducing prices for
Standard and Reduced
Redundancy Storage,
by an average of 51%.
March 26, 2014
51%
*as of April 2, 2014

7. By running on AWS,
Dole can launch a new
SharePoint website in
minutes
Amazon Virtual Private
Cloud met security
needs
Host business
intelligence and
mobile applications
globally
$350,000
savings in
operating
expenses

8. Analysts have shown AWS reduces costs
In early 2012, AWS commissioned IDC to interview 11 organizations that deployed applications on AWS. Since this study was conducted in early
2012, AWS has introduced price reductions nearly 20 times across Amazon EC2 and Amazon S3. IDC estimated what the impact of AWS's fee
restructuring would be on the organizations that participated in the 2012 study and determined that the overall fees would drop by 21% lowering the
five year TCO from $909,000 to $846,000. Source: IDC Business Value of AWS Accelerates over time
IT
PRODUCTIVITY
INCREASE:
52%
5 YEAR TCO
SAVINGS:
72%

9. New Markets
Procurement
Security: Entire infrastructure
Productivity: Down-Time
Agility: Innovation
Cost Visibility-Traceability
Cost Benefit Analysis
Go Global in minutes
New Capacity in Minutes
Time-To-Market
Employee productivity
Cost of Failure
Cost Allocation to Teams –
Products - LOB

10. AWS TCO benefits increase over time…
$3.50 in benefits
$1 Investment in AWS $1 Investment in AWS
$8.40 in benefits
At 36 Months of using AWS… At 60 Months of using AWS…
~3X ~8X
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.

11. Flipboard Example: Handling objection AWS gets expensive as you grow big…

12. Comparing TCO is not easy
(But We’re here to help)
≠

13. 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
1
2
3
4
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.

14. AWS services pricing includes overhead costs
Hardware
Vendor
Offering
✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔
✔
Server
Network
Hardware
Software
OS +
VMs
DC/Co-lo
Floor
Space
Powering
Cooling
Software
Defined
Networking
Data Center
Personnel
Storage
Redundancy
Resource
Mgmt. /SW
Automation
× × × ××× ×

15. In Your TCO Analysis
Power/Cooling (compute, storage, shared network)
Data Center Administration (procurement, design, build, operate, network,
security personnel)
Rent/Real Estate (co-lo charges, building deprecation, taxes)
Software Licensing/Maintenance (OS, Virtualization, DCIM, Automation..)
RAW vs. USABLE storage capacity (Usable = ~50% Raw)
Storage Redundancy (RAID penalty, OS penalty)
Storage Backup costs (Tape, backup software)
Bandwidth, Network Gear & Redundancy (Routers, VPN, WAN..)
DON’T
FORGET
THINK
BENEFITS
Additional investment into new initiatives
Reduced Procurement Time, Resource sitting on shelf
Cost of lost customers
Lower down time, increased productivity

16. • From over 40 data centers down to 6
• Planning to migrate 3000 apps by Jan
2015
• Saving $100M over 3 Years
VS
1. Evaluate infrastructure
costs & architecture
2. Make business case 3. Enable decision to move to the
cloud
Customer Spotlight: Dow Jones Intl.

17. Cost Optimization on AWS

18. 1. Choose the right instance types
Start
Choose an instance
that best meets your
basic requirements
Start with memory & then
choose closest virtual
cores
Look for peak IOPS
storage requirements
Tune
Change instance size up
or down based upon
monitoring
Use CloudWatch &
Trusted Advisor to assess
Roll-Out
Run multiple instances
in multiple Availability
Zones

19. TCO Example : Choosing EC2 instances
On Demand Prices shown (N.Virginia region), only latest generation instances (M3,C3) shown
where applicable, GPU and Micro instances not shown above

20. 2. Use Auto Scaling
Auto-scaling
Automatic re-sizing of compute clusters
based upon demand
Actual
EC2
Right Amount
Satisfy peaks and flat periods
No wasted capacity

21. Utilization and Auto Scaling: Granularity
more small instances vs. less large instances
29 m1.large @ $0.240/hr.
= $6.96
59 m1.small @ $0.06/hr.
= $3.54

22. 3. Turn off un-used instances
• Dev./test instances
• Simple instance start/stop
• Tear down/build up altogether
• Instances are disposable

23. 0
2
4
6
8
10
12
14
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
On Demand
Medium Utilization RI
Heavy utilization RI
/Spot Instances
4. Use Reserved Instances
Reserved Instances enable you to maximize savings by paying a low, one-time fee for a
capacity reservation of 1-3 years in exchange for a significant discount on the hourly rate.
Amazon EC2
up to 65% savings
Amazon RDS
up to 76% savings
Amazon DynamoDB
up to 76% savings
Amazon Redshift
up to 73% savings
Amazon ElastiCache
up to 70% savings
AWS services offering reservations

24. Customer Spotlight: Pinterest
AWS
Set-up
• 8 billion objects and 400 terabytes of data (May 2012), 10x growth from August 2011; EC2 instances
have grown by 3x in the same time period
• 150 EC2 instances ( web tier), 90 instances (in-memory caching), 70 master databases
• Reserved instances used for standard traffic; On-demand and spot instances used to handle daily elastic
load. Most services targeted to run at about 50% on-demand and 50% spot
Source: Pinterest AWS Case study, Pinterest Architecture update, 410TB of data, 10X Growth, 12 employees
Source: Return on Agility, Werner Vogels
“Imagine we were running our data center, and we had to go through a process of capacity
planning and ordering and racking hardware. It wouldn't have been possible to scale fast
enough,"– Ryan Park, Pinterest Operations Engineer
Costs have gone from $54 per hour to $20
per hour
Only 2 weeks of engineering effort was
required to achieve this cost savings

25. 5. Use Spot Instances
• Pricing
• Up to 92% discount
• Elastic
• Capacity not otherwise
available
• Tradeoff
• Potential for interruption
Picking the right Bid Price - Tolerance for interruptions, % likelihood of
termination

26. 1.21 PFLOPS
264 years of compute in < 18 hours
16,788 instances in 8 regions
Customer Spotlight: Cycle Computing
On-Premises Spot
$68 Million
$33K

27. 6. Leverage Storage Classes
AWS Cloud
Amazon
Glacier
Gateway Appliance/
AWS Storage Gateway
Amazon
S3
Block File
On-premises Data Center
Archive Backup Disaster
Recovery
Amazon
EBS
Amazon S3 Reduced Redundancy
• 99.99% durability vs.
99.999999999%
• Up to 20% savings
• Great for everything that is easy to
reproduce
Amazon Glacier
• Same durability as S3
• 3 to 5 hours restore time
• Up to 89% savings
• Great for archiving, long-term
backups and old data

28. 7. Offload your architecture
The more you can offload, the less infrastructure you need to maintain, scale, and pay for
• Offload popular traffic to Amazon CloudFront and S3
• Introduce Caching
ResponseTime
ServerLoad
ResponseTime
Server
Load
ResponseTime
Server
Load
No CDN CDN for
Static
Content
CDN for
Static &
Dynamic
Content
90% of calls

29. 8. Use Application Services
Elastic
Load
Balancing
Amazon
Relational
Database
Service (RDS)
Amazon Simple
Queue Service
(SQS)
Amazon Simple
Email Service
(SES)
Amazon
Elastic
MapReduce
Amazon
ElastiCache
Amazon Simple
Notification
Service (SNS)

30. Web Servers
Availability Zone
$0.025 per Elastic Load Balancer-
hour (or partial hour)
$0.008 per GB of data processed
by an Elastic Load Balancer
100 GB Data processed, 1 ELB
$18 (.025*24*30) + $.008*100
$18.80
Web Servers
Availability Zone
EC2 instance
+ software LB
Elastic Load
Balancer
DNS
DNS
VS
Leverage Application Services
$0.060 per hour, m1.small
Separate for Software Load
Balancer
$.060*24*30 = $43.2 (m1.small)
+ Software LB Cost
On Demand Prices shown (N.Virginia region)

31. 9. Use Consolidated Billing
• Receive a single bill for all charges incurred across all linked accounts
• Share RI discounts
• Combine tiering benefits
• View & manage linked accounts
• Add additional accounts
• Projected spent (billing Alarms….. Build story)
• Attribute cost back to projects… (allocate costs to specific project and measure/assess productivity of teams… build story)
• Netflix tagging.

32. 10. Leverage AWS tools
AWS Trusted Advisor
AWS EC2 Usage Reports

33. Summary
TCO
• Know the on-premises hidden costs
• Make reasonable assumptions and leverage industry benchmarks
Cost Optimization
• Create cost-aware architectures and leverage best practices
• Re-evaluate and revisit your architecture often
• Leverage Application Services, CloudWatch
• Stay up to date – RI modifications, Trusted Advisor

34. AWS Partner Trail
Win a Kindle Fire
• 10 in total
• Get a code from our
sponsors

35. Please rate
this session
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Summits App
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36. #AWSSummit
@AWScloud @AWS_UKI

37. © 2014 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.
Optimizing Total Cost of Ownership
for AWS
David de Santiago, Amazon Web Services
Thank you!