This document discusses approaches for building an economic case for moving workloads to the AWS cloud to optimize costs. It introduces total cost of ownership analysis to compare on-premises and cloud costs. The four pillars of cost optimization on AWS are outlined as right-sizing instances, using reserved instances, increasing infrastructure elasticity, and continuously measuring and improving. Case studies demonstrate how companies have optimized costs through reserving instances and right-sizing workloads. Governance approaches like cost optimization dashboards and centers are recommended to create transparency and drive optimization.

1. © 2016, Amazon Web Services, Inc. or its Affiliates. All rights reserved.
Shahbaz Alam
AWS Professional Services
August 2016
Cost Optimization at Scale:
Building and Realizing the
Economic Case for the AWS Cloud

2. What to expect….
We will introduce our approach for building
the business case for moving to the cloud
and share tips from some of our most
innovative customers who are able to
successfully architect for cost optimization
in order to realize the economics of the
AWS Cloud.

3. In the beginning . . .
…there was TCO

4. What is TCO?
Definition: Comparative total cost of ownership analysis (acquisition
and operating costs) for running an infrastructure environment end-to-end
on-premises vs. on AWS.
Used for:
1) Comparing the costs of running an entire infrastructure environment or
specific workload on-premises or in a co-location facility vs. on AWS
2) Budgeting and building the business case for moving to AWS

5. So how do we do it?
≠

6. TCO = acquisition costs + operations costs
Hardware—server, rack
chassis PDUs, Tor switches
(+maintenance)
Software—OS,
virtualization licenses
(+maintenance)
Facilities cost
Hardware—storage disks,
SAN/FC switches
Storage admin costs
Network hardware—LAN
switches, load balancer
bandwidth costs
Network admin costs
Server admin virtualization admin4
The diagram doesn’t include every cost item. For example, software costs can include database,
management, and middle-tier software costs. Facilities cost can include costs associated with upgrades,
maintenance, building security, taxes, and so on. IT labor costs can include security admin and application
admin costs.
Space Power Cooling
Facilities cost
Space Power Cooling
Facilities cost
Space Power Cooling
Server costs
Storage costs
Network costs
IT labor costs
1
2
3
illustrative

7. Resources to get you started
AWS TCO Calculator
https://awstcocalculator.com
Case studies and research
http://aws.amazon.com/economics/

8. Lowering TCO through cost optimization
On-
Premises
Lift & Shift Instance Right-
Sizing
Improved
Elasticity
Measure,
Monitor,
Improve
Optimized EC2 Storage
Optimization
Serverless
Architecture
Managed
Services
True AWS
Optimized
Traditional TCO Comparisons

9. So you’re feeling pretty good.

10. Until your CFO shows up with the bill.

11. Cost optimization is…
going from…
to…
pay for what you use
pay for what you need

12. Where do you start?

13. The four pillars of cost optimization
Right-sizing Reserved
Instances
Increase
elasticity
Measure,
monitor, and
improve

14. Right-sizing
Right-sizing
• Selecting the cheapest instance available
while meeting performance requirements
• Looking at CPU, RAM, storage, and network
utilization to identify potential instances that
can be downsized
• Leveraging Amazon CloudWatch metrics and
setting up custom RAM metrics
Rule of thumb: Right size, then reserve.
(But if you’re in a pinch, reserve first.)

15. Reserved Instances
Commitment level
1 year
3 year
AWS services offering RIs
Amazon EC2
Amazon RDS
Amazon DynamoDB
Amazon Redshift
Amazon ElastiCache
* Dependent on specific AWS service, size/type, and region

16. Reserved Instances
Step 1: RI Coverage
• Cover always-on resources.
Step 2: RI Utilization
• Leverage RI flexibility to increase utilization.
• Merge and split RIs as needed.
Rule of thumb: Target 70–80% always-on
coverage and 95% RI utilization rate.

17. Increase elasticity
Turn off nonproduction instances
• Look for dev/test, nonproduction instances that
are running always-on and turn them off.
Autoscale production
• Use Auto Scaling to scale up and down based
on demand and usage (for example, spikes).
Rule of thumb: Shoot for 20–30% of Amazon EC2
instances running on demand to be able to
handle elasticity needs.

18. Using right-sizing and elasticity to lower cost
More smaller instances vs. fewer larger instances
29 m4.large @ $0.12 /hr
$2,505.60 / mo*
59 t2.medium @ $0.052/hr
$2,208.96 / mo*
*Assumes Linux instances in the US-East (N. Virginia) Region at 720 hours per month

19. Putting it all together: case study

20. Challenge:
Minimizing unit costs
during a period of massive
growth.
A consistent measure of
CPU processing power
Elastic compute unit
(ECU)

21. The growth challenge
August 2014
August 2015
584 ECU
1,192 ECU
2x
YoY Compute Growth
33%
decrease in monthly
EC2 costs!

22. Solving the growth challenge

23. Step 1: Right-size and update instances
m1 on demand
$0.07 per ECU
c4 on demand
$0.02 per ECU

24. The impact of right-sizing
70% reduction
in unit cost

25. Step 2: Reserve

26. The impact of reservations
30% reduction
In unit cost

27. Putting it together
85% reduction
in unit cost!

28. Sounds pretty easy, right?
Not really.
In reality, it is very complex.
• Scale
• Behavioral change
• Visibility
• Ownership

29. Cost optimization governance
(Remember the fourth pillar?)

30. Uncovering the cost optimization opportunities
1. Auto-tag resources.
2. Identify always-on nonprod.
3. Identify instances to downsize.
4. Recommend RIs to purchase.
5. Dashboard our status.
6. Report on savings.

31. AWS options

32. Reserved Instances and right-sizing options

33. Example: reasonable optimization dashboard

34. Creating a culture of cost transparency
Targets and metrics Cloud Competency
Center
AWS Enterprise
Support

35. Case Studies

36. Active Policy Management & Automation
Improve
Reservation
Management
Model, manage & modify
reservations & customize
recommendations based
on budget.
Optimize
Performance
Rightsizing
Leverage integrated data
sources, define policies &
improve resource utilization
by workload
Implement
Governance &
Automation
Define policies to manage
cost, usage, performance &
security to optimize &
empower LOBs through
centralized governance
Simplify Management
Establish guidelines, automate tasks & provide recommendations

37. Managing the Cloud for Improved Efficiency

38. Recorded Future used CloudHealth to gain visibility across all with functional
business group. They generated reports that aligned infrastructure costs with
usage and performance. The analysis helped understand additional opportunities
for cost savings and provided recommendations for Reserved Instance
modifications and updated purchasing plans.
Case Study: Billing Optimization
More than 150
employee hours &
$75,000
Benefits realized from RI
modifications alone!

39. NewsCorp implemented CloudHealth Automated Tasks via policies for notification,
termination and start/stop of non-compliant infrastructure deployment, budget
overages, weekend usage lights-out rules, and reservation modifications.
Case Study: Automated Tasks
More than 21%
The amount saved in the
last year!

40. Putting it all together

41. Where to start
Set up a Cloud
Competency Center
Bring in the right
tools
Use metrics to
reinforce behavior
Use partners to
accelerate!

42. Cycle of cost optimization
✔
✔
✔
✔✘
✘
✘
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$
$
$
$
$

43. Thank You!