"Do you need to develop a business case for moving to cloud or communicate business value of your investment in AWS? This session introduces you to methods and tools to help you calculate total cost of ownership (TCO) and evaluate your business value gains from AWS. In this session, you learn how to measure TCO and business value, and communicate a business case to organizations such as finance and procurement. You compare the costs of running your own IT infrastructure on-premises vs. on AWS and quantify intangible benefits. You also learn about resources available from AWS to help you engage in business value conversations with your organization’s leaders and what contact is available to you for further evaluation. "

1. © 2015, Amazon Web Services, Inc. or its Affiliates. All rights reserved.
Tom Johnston, Sr. Manager, Cloud Economics
October 2015
ISM315
Strategies to Quantify TCO and
Increase Business Value Gains
using AWS

2. “We adopted AWS
because it costs less…”

3. “But we’re staying
because of what else it
does”

4. Move quickly

5. Scale
based on market needs

6. Differentiated innovation

7. Leverage
what you already have

8. Today’s agenda
Framing
business value
AWS &
lower costs
Business value
in action

9. How to frame the value of moving to AWS?
Start with your goals
“We need to focus on moving our core
business forward — not building and
maintaining infrastructure…”
“Reducing our overall cost is a high priority.”
“We are looking to improve performance and
expand globally in a flexible way.”
Macro goals
to move

10. How would…

11. saving money…

12. moving quickly…

13. scaling
based on market needs…

14. innovating…

15. and leveraging
what you already have…

16. …help you achieve
these goals?

17. Analysts have shown AWS creates value
Source: IDC, Quantifying the Business Value of Amazon Web Services (May, 2015)

18. Let’s dive deep in costs

19. Comparing TCO is not easy
≠

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

21. 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
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.
1
2
3
4

22. Traditional capacity planning
Limitations of traditional data centers:
Inflexible physical assets Costs are never in sync
Migration and expansion
costs are high
Cost of unexpected
inefficiencies

23. TCO calculator demo

24. Even after initial deployment, AWS
continues to drive down costs

25. Upgrades are your responsibility Upgrades happen automatically
On-premises infrastructure
VPC support
With AWS, service upgrades occur automatically

26. Managed services eliminate many operational tasks
Do-it-yourself MySQL replication
Potentially ~100+ manual steps
Set up primary and standby instances
Set up identical volumes
Create synchronous replication
Create and manage DNS entries
Detect instance failure conditions
Detect network failure conditions
Detect storage failure conditions
Decide when to fail over….
Re-establish primary secondary connections.
Amazon RDS Multi-AZ
HA with a mouse click

27. Introducing Amazon EC2
Dedicated Hosts
It’s a physical server with
EC2 instance capacity
dedicated for your use

28. Enabling Bring Your Own License (BYOL)
• Provides necessary visibility into
physical resources
• Physical core and socket counts per host
• Instance utilization per host
• Instance positions per host
• Granular placement controls enables
you to reuse the same physical host
Host ID = h-123abc
Sockets = 2
Physical Cores = 20

29. One customer
saved 42% by
using their own
licenses

30. Track costs &
predict future spend

31. Cost Explorer demo:
Focus on budgeting
and forecasting

32. • By moving to AWS, Jobvite increased availability
and uptime to more than 99.98%
• Jobvite expected to reduce OpEx by 15-20%
per year, but actually reduced it by 35%”

34. Move quickly

35. Hit your deadlines

36. More time to focus
on what differentiates
your business

37. Faster turns

38. Fewer
long and large projects

39. Long & large projects
• More likely to exceed budget

40. • More likely to exceed budget
• More likely to run late
Long & large projects

41. • More likely to exceed budget
• More likely to run late
• More likely to fail to deliver full
value
Long & large projects

42. • Each additional year in a project
boosts the likelihood of missing
targets by 15%
Long & large projects

43. • $66 billion in cost overruns in
5,400 projects
How much can you save?
Long & large projects

44. Benefits of fail fast

45. AWS & speed

46. Immediate provisioning

47. Try it

48. If it doesn’t work, iterate

49. When it does work, use
AWS CloudFormation
to deploy at scale

50. QuickStart, DriveTimes,
Partners

51. Move fast – even with complex business apps
• Wego moved its entire SAP system — including
database and applications — to the AWS cloud
over a 3-month timeline
• “On AWS, we can deploy a new application 75
percent — or three weeks — faster than we did
in our previous environment” – Son Phung,
Chief Technology Officer (CTO)

52. Speed & agility
enhance other benefits

53. Scale
based on market needs

54. Known variability

55. Don’t pay for capacity
you don’t need

56. Uncertain demand

57. Elastic and pay-per-use infrastructure
Unable to
serve
customers
Infrastructure
cost $
Time
Large
capital
expenditure
Opportunity
cost
Predicted
demand
Traditional
hardware
Actual
demand
Automated
virtualization

58. Use AWS to grow the business
• Scale to handle 500,000 new users in 2 months
• 20% faster launch time for new products

59. Expand globally
• Initial move to the cloud: 1
month
• Reduced OpEx by 60%
• Increased uptime to nearly
100%
• Faster analytics (40%)
• Deployed to Japan in only one
week

60. What sets you apart?

61. Focus your efforts there

62. Focus on the business,
not undifferentiated heavy lifting
• Chose not to spend time running their IT
infrastructure internally
• Reduced the time to run compute-intensive
clinical trial simulations from 60 hours to 1.2
hours on AWS

63. Improve time to market
• Execute projects more than 80% faster

64. Leverage
what you already have

65. • 175 countries, 270 companies
• Leverages AWS cloud to run 120 applications
• Plans to triple applications on AWS and
launch 25,000 Amazon WorkSpaces cloud-
based desktops
• Savings + makes employees and consultants
quickly productive

66. Integrating AWS with Your Existing On-premises
Infrastructure
Corporate
data centers
Active Directory
Network Config.
Encryption
Back-up. apps
Management
Your On Premises Apps
On premises apps
Users, Access Rules,
AWS Direct Connect, AWS
Identity and Access
Management (IAM)
Your Private Network
(Amazon VPC)
Encryption (Amazon S3,
Amazon RDS, AWS
CloudHSM)
Back-ups (AWS Storage
Gateway)
Tracking & Inventorying
(Amazon CloudWatch, AWS
OpsWorks, Service Catalog)
Cloud Apps
AWS Direct Connect

67. Putting it all together

68. The value of using AWS accelerates over time
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.
$1 Investment in AWS
$8.40 in benefits
At 60 months of using AWS
~8X
$3.50 in benefits
$1 Investment in AWS
At 36 months of using AWS
~3X

69. Next steps

70. Cloud
center of excellence

71. How the 11 AWS regions,

72. 30 Availability Zones,

73. 50+ services,

74. …and hundreds of
innovations can help you

75. Lower costs

76. Move quickly

77. Scale
based on market needs

78. Innovate around
your unique value

79. Leverage
what you already have

80. Tens of thousands of
APN Partners

81. 2,300 software listings
in over 30 categories

84. Conclusion: Delaware North
$3.5 million in savings over 5 years
Now takes 1 day to provision a new business (vs. 2-3 weeks)
Improved compliance, disaster recovery, solutions delivery

85. Business value for you: AWS can help you
• Lower costs
• Move quickly
• Scale based on market needs
• Innovate around your unique value
• Leverage what you already have

86. Web links for more information
AWS Economics Center:
• aws.amazon.com/economics
• Includes link to TCO calculator
Case studies & references:
• aws.amazon.com/solutions/case-studies

87. More sessions
Cost Optimization at Scale: ISM 402 – Thursday 11:00
Framework for IT and Business Transformation: ISM 205 –
Thursday 2:45
Breaking Down the Economics & TCO of Migration to AWS:
ISM 314 – Friday 9:00
This Session (Repeat): ISM 315 – Friday 10:15

88. Remember to complete
your evaluations!

89. Thank you!