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 session, we explain the economic benefits of deploying applications in AWS over deploying equivalent applications hosted in an on-premises environment.

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
Jean-Pierre LeGoaller
Principal Solutions Architect
Amazon Web Services

2. Agenda
• Total Cost of Ownership
• Cost Optimization on AWS

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. 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%

7. 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.

8. Comparing TCO is not easy
(But We’re Going to Try)
≠

9. 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.

10. 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
× × × ××× ×

11. TCO Example : 100 VMs On-Premises vs. AWS
# of VMs Avg.
vCPU
Avg.
vRAM
Optimize by? Usage
25 1 2 RAM 5%
35 4 14 RAM 80%
30 8 32 RAM 60%
5 8 68 RAM 40%
5 16 128 Disk I/O 8%
# of
Instances
Instance vCPU RAM Instance Type
25 m1.small 1 1.7 On Demand
35 m3.xlarge 4 15 3 Yr. Heavy RI
30 m3.2xlarge 8 30 3 Yr. Med. RI
5 m2.4xlarge 8 68.4 3 Yr. Light RI
5 i2.4xlarge 16 122 3 Yr. Light RI
Avg.
vCPU
Avg.
vRAM
Optimize by?
1 2 CPU
4 14 CPU
8 32 CPU
8 68 CPU
16 128 Disk I/O
Instance vCPU RAM
m1.small 1 1.7
c3.xlarge 4 7
c3.2xlarge 8 15
c3.2xlarge 8 15
i2.4xlarge 16 122

12. 1, 1.7, 0.044
1, 3.75, 0.07
2, 3.75, 0.105
2, 7.5, 0.14
2, 15, 0.41
4, 7, 0.21
4, 15, 0.28
4, 30.5, 0.82
8, 15, 0.42
8, 30, 0.56
8, 61, 1.64
4, 30.5, 0.853
8, 61, 1.705
16, 122, 1.4
16, 30, 0.84
32, 60, 1.68
32, 244, 3.5
16, 122, 3.41
16, 117, 4.6
0
50
100
150
200
250
300
0 5 10 15 20 25 30
On Demand Prices shown (N.Virginia region), only latest generation instances (M3,C3) shown where
applicable, GPU and Micro instances not shown above
Memory-Optimized Instances (R3)
Compute-Optimized Instances (C3)
General Purpose Instances (M3)
Storage-Optimized Instances (I2)
vCPU
RAM
TCO Example : Choosing EC2 instances

13. TCO Example : 100 VMs On-Premises vs. AWS

14. NEW: AWS TCO Calculator

21. • 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.

22. 7/2011 - ~50GB/day
4/2013 - ~5TB/day
10/2013 - ~20TB/day
03/2014 - ~40TB/day
Customer Spotlight:

23. AdRoll S3 Usage by the numbers
• 1.5+ PB of compressed data stored
• 5-10TB of compressed new data each day
• ~5B monthly requests
No engineers spend time on storage

24. AdRoll EC2 Infrastructure
• ~500 c3.4xlarge in 4 regions
• Close to 100% uptime since launch
• <100ms max latency
• 500K+ requests/second globally on DynamoDB
• Operated by 2 engineers
AdRoll estimate that they would need about
20 engineers to design and maintain
a similar infrastructure on-site.

25. AdRoll TCO
AdRoll estimate that they would need about
20 engineers to design and maintain
a similar infrastructure on-site.
Their entire AWS cost is less than the cost of such a
team

26. 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
Focus on your business

27. Cost Optimization on AWS

28. 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

29. 2. Use Auto Scaling
Describes what Auto Scaling will
create when adding Instances
Only one active launch configuration
at a time
Launch
Configuration
as-create-launch-config
--image-id ami-54cf5c3d
--instance-type m1.small
--key mykey
--group webservers
--launch-config 101-launch-config
Auto Scaling managed grouping of EC2
instances
Automatically scale the number of
instances by policy – Min, Max, Desired
Auto Scaling
Group
as-create-auto-scaling-group 101-as-group
--availability-zones us-east-1a us-east-1b
--launch-configuration 101-launch-config
--load-balancers myELB
--max-size 5
--min-size 1
Parameters for performing an Auto
Scaling action
Scale Up/Down and by how much
Auto Scaling
Policy
as-put-scaling-policy 101ScaleUpPolicy
--auto-scaling-group 101-as-group
--adjustment=1
--type ChangeInCapacity
--cooldown 300

30. 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

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

32. 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
Light Utilization RI
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

33. 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

34. 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

35. 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

36. 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 67% savings
• Great for archiving, long-term
backups and old data

37. 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

38. 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)

39. 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)

40. 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

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

42. Recap
Choose the right Instance type
Use Auto Scaling
Turn off un-used Instances
Use Reserved Instances
Use Spot Instances
Leverage Storage Classes
Offload your architecture
Use Application Services
Use Consolidated Billing
Leverage AWS Tools – Trusted Advisor, EC2 Usage Reports
Others…

43. Summary
TCO
• Make reasonable assumptions and leverage industry benchmarks
• Know the on-premises hidden costs
• Use our new TCO Calculator
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

44. © 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
Thanks!
Jean-Pierre LeGoaller
Principal Solutions Architect
Amazon Web Services