Explore the financial considerations of owning and operating a traditional data center versus utilizing cloud infrastructure. The session will consider many cost factors which can be overlooked when comparing models, such as provisioning, procurement, training, support contracts and software licensing. Learn how to further reduce your current costs on AWS and improve your spend predictability. Join this webinar to learn more.

1. © 2011 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.
The Total Cost of (Non) Ownership in
the Cloud
Jinesh Varia
jvaria@amazon.com @jinman

2. © 2011 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.
Total Cost of Ownership (TCO)

3. © 2011 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.
Pay as you go

4. © 2011 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.
When Calculating TCO…

5. © 2011 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.
#1 Use updated pricing - price cuts, tiered pricing, volume discounts
When calculating TCO…

6. © 2011 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.
Massive economies of scale and efficiency
improvements allow us to continually
lower prices

7. © 2011 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.
“It makes me look so good in front of my CFO. When he [CFO]
sees the savings in our AWS monthly bill, he thinks that it is me
who is working hard on driving the costs down and increasing
efficiency of the company’s infrastructure. I get all the credit for
all the hard work you guys are putting in.”
CIO of F500 company
35 price cuts in last 6 years

8. © 2011 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.
Pay less when you use more

9. © 2011 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.
New Customers
Amazon EC2 and RDS
Amazon ELB
Amazon S3
Amazon EBS
Amazon DynamoDB…
For all customers
Amazon SQS/SNS
Amazon DynamoDB
Amazon SES
Amazon SWF
And more…
AWS Elastic Beanstalk
AWS CloudFormation
AWS OpsWorks
AWS IAM
Auto Scaling
Consolidated Billing
No Charge for Inbound Data Transfer
No Charge for Data Transfer Between
Services within a region
Low Data Transfer Between Regions
AWS Free Usage Tier
Did you know?
Free Services Data Transfer

10. © 2011 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.
#1 Use updated pricing - price cuts, tiered pricing, volume discounts
#2 Take all the fixed costs into consideration (Don’t forget admin and redundancy costs)
When calculating TCO…

11. © 2011 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.
Fixed Cost Factors One-time Upfront Monthly
AWS Co-lo On-Site AWS Co-lo On-Site
Server Hardware 0 $$$ $$ $$ 0 0
Network Hardware 0 $$ $$ 0 0 0
Hardware Maintenance 0 $$ $$ 0 0 0
Software OS 0 $$ $$ $ 0 0
Power and Cooling and Data Center
Efficiency
0 0 $$ 0 0 $
Data Center/co-lo Space 0 $$ $$ 0 0 0
Personnel (Administration) 0 $$ $$ $ $$ $$$
Storage and Redundancy 0 $$ $$ $ 0 0
Bandwidth $ $$ $ $$ $ $
Resource Management Software 0 0 0 $$ $ 0
Total
Take all the fixed costs into consideration

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Hardware Administration Costs
Database administration costs

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Hardware procurement teams
Data center design and build teams
Hardware operations staff
Networking teams
Security personnel
Administrative staff
Contractors
Power and Cooling Consultants

14. © 2011 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.
#1 Use updated pricing - price cuts, tiered pricing, volume discounts
#2 Take all the fixed costs into consideration (Don’t forget admin and redundancy costs)
#3 Mix and match Reserved pricing with On-Demand Pricing (Amortize over 3/5 yrs)
When calculating TCO…

15. © 2011 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.
Heavy
Utilization RI
Medium
Utilization RI
Light
Utilization RI
1-year and 3-
year terms
On-demand
Instances
•Pay as you go
•Starts from
$0.02/Hour
Reserved
Instances
•One time low upfront
fee + Pay as you go
•$23 for 1-year term
and $0.01/Hour
Spot
Instances
•Requested Bid Price
and Pay as you go
•$0.003/Hour as of
today at 9 AM
Dedicated Instances
•Standard and
Reserved
•Multi-Tenant Single
Customer
•$2/Region +
$0.066/Hour
Multiple pricing models allow you to optimize costs for both
variable and stable workloads
Billing Options

16. © 2011 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.
Utilization
(Uptime)
Ideal For Savings
over On-
Demand
10% - 40%
(>3.5 < 5.5
months/year)
Disaster
Recovery
(Lowest Upfront)
56%
40% - 75%
(>5.5 < 7
months/year)
Standard
Reserved
Capacity
66%
>75%
(>7 months/year)
Baseline Servers
(Lowest Total
Cost)
71%
1-year and
3-year terms
Light
Utilization RI
Medium
Utilization RI
Heavy
Utilization RI
Reserved
Instances
•One time low upfront
fee + Pay as you go
•$23 for 1-year term
and $0.01/Hour

17. © 2011 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.
Mix and Match Reserved and On-Demand Billing Types
Instances
Days of Month
0
2
4
6
8
10
12
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
Heavy Utilization Reserved Instances
Light RI Light RILight RILight RI
On-Demand

18. © 2011 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.
#1 Use updated pricing - price cuts, tiered pricing, volume discounts
#2 Take all the fixed costs into consideration (Don’t forget admin and redundancy costs)
#3 Mix and Match Reserved pricing with On-Demand Pricing (Amortize over 3/5 yrs)
#4 Factor usage patterns in your calculation (Spiky, Steady State, Unpredictable)
When calculating TCO…

19. © 2011 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.
Steady State
Usage Pattern
(Example: Corporate Website)
Understand Usage Patterns of your App
Spiky Predictable
Usage Pattern
(Example: Marketing
Promotions Website)
Uncertain unpredictable
Usage Pattern
(Example: Social game or
Mobile Website)

20. © 2011 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.

21. © 2011 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.
Availability Zone #2
Availability Zone #1
Auto Scaling group : App Tier
Auto Scaling group : Web Tier
Elastic Load
Balancer
www.MyWebSite.com
(dynamic data)
media.MyWebSite.com
(static data)
Amazon Route 53
(DNS)
Amazon EC2
Amazon RDS Amazon
RDS
Amazon S3
Amazon
CloudFront
Example: TCO of a
3-Tier Web Application

22. © 2011 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.
0
2
4
6
8
0 5 10 15 20 25 30 35
TrafficMeasuredinServers/Instances
Months
Steady State Usage Pattern
Traffic pattern
EC2 Reserved
Physical servers
(on-premises)

23. © 2011 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.
TCO of Steady State Web Application
TCO Web Application - Steady State Usage Pattern
Amortized monthly costs over 3 years
On-Premises
Option
AWS Option 1
All Reserved
(3-Year Heavy)
AWS Option 2
Mix of On-Demand and
Reserved
AWS Option 3
All On-Demand
Compute/Server Costs
Server Hardware $306.36 $0.00 $0.00 $0.00
Network Hardware $62.04 $0.00 $0.00 $0.00
Hardware Maintenance $47.10 $0.00 $0.00 $0.00
Power and Cooling $172.02 $0.00 $0.00 $0.00
Data Center Space $144.48 $0.00 $0.00 $0.00
Personnel $1,200.00 $0.00 $0.00 $0.00
AWS Instances $0.00 $618.33 $1,079.42 $2,138.40
Total - Per Month $1,932.00 $618.33 $1,079.42 $2,138.40
Total - 3 Years $69,552.00 $22,260.00 $38,859.20 $76,982.40
Savings over On-Premises Option 68.00% 44.13% -10.68%
Option 1: All Reserved
Recommended Option (Most Cost-effective)
Option 2: Mix of On-Demand and Reserved
Option 3: All On-Demand
Commitment-free and Risk-free Option

24. © 2011 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.
0
2
4
6
8
10
12
0 5 10 15 20 25 30 35
TrafficmeasuredinServers/Instances
Months
Spiky Predictable Usage Pattern
Traffic Pattern
EC2 Reserved
Physical servers
(on-premises)
EC2 On-Demand

25. © 2011 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.
0
2
4
6
8
10
12
0 5 10 15 20 25 30 35
TrafficmeasuredinServers/Instances
Months
Spiky Predictable Usage Pattern
Traffic Pattern
EC2 Reserved
Physical servers
(on-premises)
EC2 On-Demand

26. © 2011 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.
When you turn off your cloud resources, you
actually stop paying for them

27. © 2011 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.
TCO Web Application - Spiky Usage Pattern
Amortized monthly costs over 3 years
On-Premises
Option
AWS Option 1
All Reserved
AWS Option 2
Mix of On-Demand and
Reserved
AWS Option 3
All On-Demand
Compute/Server Costs
Server Hardware $510.60 $0.00 $0.00 $0.00
Network Hardware $103.40 $0.00 $0.00 $0.00
Hardware Maintenance $78.50 $0.00 $0.00 $0.00
Power and Cooling $286.70 $0.00 $0.00 $0.00
Data Center Space $240.80 $0.00 $0.00 $0.00
Personnel $2,000.00 $0.00 $0.00 $0.00
AWS Instances $0.00 $992.16 $881.42 $1,940.40
Total - Per Month $3,220.00 $992.16 $881.42 $1,940.40
Total - 3 Years $115,920.00 $35,717.60 $31,731.20 $69,854.40
Savings over On-premises Option 69.19% 72.63% 39.74%
TCO of Spiky Predictable Web Application
Option 1: All Reserved
Option 2: Mix of On-Demand and Reserved
Recommended Option (Most Cost-effective)
Option 3: All On-Demand
Commitment-free and Risk-free Option

28. © 2011 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.
0
2
4
6
8
10
12
14
16
18
20
0 5 10 15 20 25 30 35
Trafficmeasuredin
Servers/Instances
Months
Uncertain Unpredictable Usage Pattern
Actual Traffic
Expected Traffic
EC2 Reserved
Physical servers
(on-premises)
EC2 On-Demand

29. © 2011 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.
Light and Medium Utilization
Reserved Instances
Low upfront one-time fees
When you turn off, you save on hourly usage

30. © 2011 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.
TCO Web Application - Unpredictable Usage Pattern (Failure case)
Amortized monthly costs over 3 years
On-Premises
Option
AWS Option 1
All Reserved
AWS Option 2
Mix of On-Demand and
Reserved
AWS Option 3
All On-Demand
Compute/Server Costs
Server Hardware $816.96 $0.00 $0.00 $0.00
Network Hardware $165.44 $0.00 $0.00 $0.00
Hardware Maintenance $125.60 $0.00 $0.00 $0.00
Power and Cooling $458.72 $0.00 $0.00 $0.00
Data Center or Co-located Space $385.28 $0.00 $0.00 $0.00
Personnel $3,200.00 $0.00 $0.00 $0.00
AWS Instances $0.00 $1,552.89 $1,275.46 $1,009.80
Total - Per Month $5,152.00 $1,552.89 $1,275.46 $1,009.80
Total - 3 Years $185,472.00 $55,904.00 $45,916.48 $36,352.80
Savings over On-premises Option 69.86% 75.24% 80.40%
Option 1: All Reserved
Option 2: Mix of On-Demand and Reserved
Option 3: All On-Demand
Commitment-free and Risk-free Option
Recommended Option (Most Cost-effective)
TCO of uncertain unpredictable web application when it fails

31. © 2011 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.
Reserved Instance Marketplace
Buy a smaller term instance
Buy instance with different OS or type
Buy a Reserved instance in different region
Sell your unused Reserved Instance
Sell unwanted or over-bought capacity
Further reduce costs by optimizing

32. © 2011 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.
My advice to startups as you grow…
Start out Risk-free
and commitment-
free
On-Demand
Instances
POCs, New Apps,
Apps constrained by
capital
Save by purchasing
Reserved for your
Baseline capacity
Reserved +
On-Demand
Apps with committed
usage
Baseline: Use Heavy
Peak: On-Demand
Save more by
converting On-
Demand to Light RIs
More Light
RI
Apps with predictable
usage
Spikes: On-Demand
Continuous savings
by adjusting instance
types
RI
Marketplace
Apps with steady
growth
Spikes: On-Demand
Discard: Marketplace
Consolidate:
Consolidated Billing

33. © 2011 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.
0
4
8
12
16
20
24
28
32
36
40
0 5 10 15 20 25 30 35
Trafficmeasuredin
Servers/Instances
Months
Uncertain Unpredictable Usage Pattern (Success Case)
Actual Traffic
Expected Traffic
EC2 Reserved
Physical servers
(on-premises)
EC2 On-Demand
Cost of lost business or disappointed customers

34. © 2011 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.

35. © 2011 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.
#1 Use updated pricing - price cuts, tiered pricing, volume discounts
#2 Take all the fixed costs into consideration (Don’t forget admin and redundancy costs)
#3 Mix and Match Reserved pricing with On-Demand Pricing (Amortize over 3/5 yrs)
#4 Factor usage patterns in your calculation (Spiky, Steady State, Unpredictable)
#5 Intangible cost savings – Take a closer look at what you get as part of AWS
When calculating TCO…

36. © 2011 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.
Certifications
SOC 1 Type 2 (formerly
SAS-70)
ISO 27001
PCI DSS for EC2, S3,
EBS, VPC, RDS, ELB, IAM
FISMA Moderate
Compliant Controls
HIPAA & ITAR Compliant
Architecture
Physical Security
Datacenters in nondescript
facilities
Physical access strictly
controlled
Must pass two-factor
authentication at least
twice for floor access
Physical access logged
and audited
HW, SW, Network
Systematic change
management
Phased updates
deployment
Safe storage
decommission
Automated monitoring and
self-audit
Advanced network
protection
AWS delivers a premium security spec at non-premium prices

37. © 2011 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.
Reduced Time to Market = More Revenue

38. © 2011 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.
Opportunity Cost

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Go Global in Minutes

40. © 2011 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.

41. © 2011 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.

42. © 2011 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.
When Comparing TCO…

43. © 2011 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.
Make sure that
you are
including all
the cost
factors into
consideration
Place
Power
Pipes
People
Patterns
Easy to Remember…

44. © 2011 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.
In Your TCO Analysis
3 or 5 Year Amortization
Use 3-Year Heavy RIs
Use Volume RI Discounts
Understand Usage Patterns
Ratios (VM:Physical, Servers:Racks, People:Servers)
Mention Tiered Pricing
(Less expensive at every Tier)
Cost Benefits of Automation (Auto scaling,
APIs, TA, Optimization)
DOs
DON’Ts
BONUS

45. © 2011 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.
Forget Power/Cooling
(compute, storage, shared network)
Forget Administration Costs (procurement,
design, build, operations, network, security personnel)
Forget Rent/Real Estate
(building deprecation, taxes, shared services staff)
Forget Virtualization licensing and Software
Maintenance Costs
Forget to mention Cost of “Redundancy”,
Multi-AZ Facility
In Your TCO Analysis
DOs
DON’Ts
BONUS

46. © 2011 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.
Time from ordering to procurement
(Releasing early = Increased Revenue)
Cost of “capacity on shelf” (top of step)
Incremental cost of adding an on-premises
server when physical space is maxed out
Real cost of resource shortfalls (bottom of
step)
Cost of disappointed or lost customers when
unable to scale fast enough
In Your TCO Analysis
DOs
DON’Ts
BONUS

47. © 2011 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.
Build Cost-aware architectures
Continuous optimization in your architecture
results in recurring savings
as early as your next month’s bill

48. © 2011 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.
AWS Pricing Philosophy
Pay as you go
• No minimum commitments or long-term contracts required
• Capex -> Opex and Turn off when you don’t need it
Pay less per unit when you use more
• Tiered Pricing and Volume Discounts
Pay even less when you reserve
• Reserved pricing
Pay even less as AWS grows
• Efficiencies, optimizations and economies of scale result in passing the savings back to
you in the form of lower pricing
Custom Pricing

49. © 2011 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.
#1 Use updated pricing - price cuts, tiered pricing, volume discounts
#2 Take all the fixed costs into consideration (Don’t forget admin and redundancy costs)
#3 Mix and Match Reserved pricing with On-Demand Pricing (Amortize over 3/5 yrs)
#4 Factor usage patterns in your calculation (Spiky, Steady State, Unpredictable)
#5 Intangible cost savings – Take a closer look at what you get as part of AWS
When calculating TCO…

50. © 2011 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.
How customers are
saving money with AWS
AWS Economics Center
TCO Whitepapers
Calculator Tools
Videos
Case Studies
Other Resources

51. © 2011 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.
Whitepapers and Resources from Analysts
AMAZON CLOUD
INFRASTRUCTUR
E REPRESENTS A
70%
SAVINGS
SAP
applications on
AWS provides
infrastructure
savings of up
71%
AWS is
a Price
Leader

52. © 2011 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.
AWS Resources
Whitepapers available at
http://aws.amazon.com/whitepapers
TCO Online Calculator
http://aws.amazon.com/tco-calculator
AWS Simple Calculator
http://aws.amazon.com/calculator

53. © 2011 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.
Thank you!
Jinesh Varia
jvaria@amazon.com - Twitter:@jinman