2016 Utah Cloud Summit: TCO & Cost Optimization

Building [And Realizing] The Economic Case for AWS

Keith JarrettBusiness Development Manager

Cloud Economics

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.

In the Beginning . . .

There was TCO

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. AWS.

Used for:

1) Comparing the costs of running an entire infrastructure environment or specific workload on premises or in a co-location facility versus on AWS

2) Budgeting and building the business case for moving to AWS

So how do we do it?

≠

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 costsNetwork Admin costs

Server Admin Virtualization Admin4

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.

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

Resources to get you startedAWS TCO Calculatorhttps://awstcocalculator.com

Case Studies & Researchhttp://aws.amazon.com/economics/

So you’re feeling pretty good.

Until your CFO shows up with the bill.

Cost Optimization is…Going from… To…

Pay for what you Use Pay for what you Need

Where do you start?

The Four Pillars of Cost Optimization

Right Sizing Reserved Instances

Increase Elasticity

Measure, Monitor, & Improve

Right Sizing

Right Sizing• Selecting the cheapest instance available while

meeting performance requirements• Looks at CPU, RAM, storage, and network

utilization to identify potential instances that can be downsized

Rule of thumb: Right size, then reserve.(But if you’re in a pinch, reserve first).

Reserved Instances

Step 1: RI Coverage• Cover always on resources

Step 2: RI Utilization• Leverage RI flexibility to increase utilization

Rule of thumb: Target 70-80% always on coverage and 95% RI Utilization rate.

Increase Elasticity

Turn off non-production instances• Look for dev/test, non-prod instances that are

running always-on and turn off

Autoscale Production• Use Autoscaling to scale up and down based

on demand and usage (e.g. spikes)

Rule of thumb: Shoot for 20-30% of EC2 instances running on demand to be able to handle elasticity needs.

Putting it all together: Case Study

Challenge: Minimizing Unit Costs under period of massive growth.

A consistent measure of CPU processing power

Elastic Compute Unit (ECU)

The Growth Challenge

August 2014

August 2015

1,601 ECU

13,957 ECU772% YoY Compute Growth!

33% DECREASE in

monthly EC2 costs!

Solving the Growth Challenge

Step 1: Right Size & Update Instancesm1 on demand$0.07 per ECU

c4 on demand$0.02 per ECU

The Impact of Right Sizing

70% Reductionin Unit Cost

Step 2: Reserve

The Impact of Reservations

30% Reductionin Unit Cost

Putting it together

85% Reductionin Unit Cost!

Sounds pretty easy, right?

Not really.

In reality, it is very complex. • Scale• Behavioral Change• Visibility• Ownership

Cost Optimization Governance (Remember the 4th Pillar?)

Uncovering the Cost Optimization Opportunities

1. Auto-tag resources2. Identify ‘always on’ Non Prod3. Identify instances to down-size4. Recommend RIs to purchase5. Dashboard our status6. Report on savings

AWS Options

Trusted Advisor

Cost Explorer

Reserved Instances and Right Sizing Options

(Build Your Own)

Example: Reasonably Optimization Dashboard

Laying the Groundwork for Success

Taking Action: Where to Start• Tag instances to allocate costs by tag

and/or account• Enable Detailed Billing Reports with

resource tags (DBR-rt)• Set up CloudWatch metrics such as RAM

utilization for memory intensive workloads • Set up metrics to measure elasticity, RI

coverage, RI utilization, and right-sizing.

Thank You!

Keith JarrettBusiness Development Manager

Cloud Economics

Appendix

And…A Dashboard Ripe with Opportunity

Right Sizing https://github.com/evancraw/AWSOptimizationTemplates

Analysts have shown AWS reduces cost over the long term

Source: IDC, Quantifying the Business Value of Amazon Web Services (May, 2015)

How do customers lower their TCO with AWS?

1

Replace up-front capital expense with

low variable cost

2

51 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

On-DemandReserved

Spot

Tiered PricingVolume

Discounts