The objective of this webinar is to help customers understand how AWS can help them save money and resources by reducing Total Cost to Ownership (TCO). Comparing cloud costs and economics to on premises and colocation solutions is not always easy and there are multiple factors to take into consideration. In this webinar we will focus on the components of cloud economics, what to measure and we will cover the fundamentals of cost optimization. Learning Objectives: • Understand the components of TCO analysis • AWS Pricing Fundamentals • Comparing TCO for cloud services vs. on premises/colocation Who Should Attend: • IT professionals, CIO, Financial Analysts, Consultants

1. © 2015, Amazon Web Services, Inc. or its Affiliates. All rights reserved.
Amilcar Alfaro
6.18.2015
Reducing Total Cost of
Ownership (TCO) with AWS
Using the Economics of the Cloud to Reduce Cost

2. Moving to AWS is not just about saving money
but we’ll focus on that aspect today
It’s about gaining Agility & Flexibility while Reducing Risk
Improving Option Value and reducing Opportunity Cost
- Lowering your overall TCO
- Maintaining technology currency vs. “making bets” on technology
- “Failing Fast” on new initiatives
Shifting the Operating Model
- Moving to a demand-driven model rather than traditional forecasting model for IT
- Re-deploying staff and capital to value-enhancing initiatives/activities instead of
building and maintaining infrastructure
Today’s primary focus

3. Comparing TCO isn’t easy
(But we’re going to try)
≠
Traditional Data Center
& Co-Location
AWS Cloud

4. Typical cost drivers for on-premises deployments
are often overlooked or not counted in comparisons
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.
Hardware – Server, Rack
Chassis PDUs, ToR Switches
(+Maintenance)
Software - OS, Virtualization
Licenses
(+Maintenance)
Hardware – Storage Disks,
SAN/FC Switches
Storage Admin costs
Network Hardware – LAN
Switches, Load Balancer
Bandwidth costs
Network Admin costs
Server
Costs
1
Storage
Costs
2
Network
Costs
3
Server Admin
Virtualization Admin
IT Labor
Costs
4
Overhead Cost
Space Power Cooling
Overhead Cost
Space Power Cooling
Overhead Cost
Space Power Cooling

5. 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

6. Inflexible Physical Assets
Large up-front spending on hardware
purchase or lease with inflexible terms
Costs driven by peak, not average
infrastructure requirements
Typically under-utilized environment

7. Costs are Never In Sync
Difficulties keeping up with technology
Timing of upgrades and refresh
Changes in networking technology, software
and virtualization

8. Migration, Expansion Costs and lack of Agility
Per rack cost on an unplanned move
Cost of an incremental move, expansion, or
large scale event
Business continuity strategy
International expansion
Rapid, unexpected growth

9. Unexpected Inefficiencies
Under-deployment, over-deployment
Unexpected high demand or low demand
Non-optimal, non-scalable

10. Initial questions to consider when exploring TCO
Capacity
Planning
1 How do you plan for capacity?
How many servers have you added in the past year? Anticipating next year?
Can you switch your hardware on and off and only pay for what is used?
Utilization
2 What is your average server utilization?
How much do you overprovision for peak load?
Operations
3 Will you run out of data center space some time in the future?
What was your last year power utility bill for the Data Center(s)?
Have you budgeted for both average and peak power requirements?
Optimization
4 Are you on AWS today?
Is your architecture cost-optimized (Auto Scaling, RIs, Spot, Instances turn on/off)?

11. How does AWS help lower TCO? By enabling
customers to reduce both up-front and variable costs
Moving to a lower variable-cost structure
Reducing or eliminating capital-intensive investments in infrastructure hardware
Reducing costs for monitoring, maintenance and license spend
Eliminating data center and co-location overhead costs
Paying only for what you use
Reducing excess, unused capacity
Shifting from a forecast-driven model to a customer demand-driven model
Moving to an agile cost base for expansion (or contraction) of the business
Increased automation and productivity
Reducing or eliminating IT management activities that waste time and resources
Moving staff into differentiated, value-enhancing activities
Traditional
Data Center
Virtualized
Data Center
UPFRONT
COSTS
VARIABLE
COSTS
VARIABLE
COSTS
AWS
UPFRONT
COSTS
UPFRONT
COSTS
VARIABLE
COST
Running
internal IT
more efficiently
Cost savings from
moving to AWS

12. Moving to AWS reduces or eliminates capital-
intensive infrastructure purchases…
On-Premises (or Co-location) AWS Cloud
Physical space
Cabling
Cooling
Power
Networking
Racks
Servers
Storage
Certification
Labor
No infrastructure
to build
to get started

13. …and changes the way you buy and use IT
services
 Drastically reduce and simplify procurement time
 Only pay for what you use
 Flexibility -- change instance types or sell
unused Reserved Instances
Purchasing IT using AWS

14. Analysts have shown that AWS reduces costs
and drives value…
IDC interviewed ten organizations from a cross section of industries using Amazon Web Services (AWS) to measure how AWS impacts their business operations and IT environments. These organizations
are capturing substantial business value by making their operations more efficient and cost-effective, and by better serving their customers with accelerated solution delivery. On average, IDC calculates that
these Amazon customers will capture five-year business benefits worth over $1.5 million per application they are running in the AWS environment, and earn a return on their investment in AWS of 560%.
”
“
”
“ROI of 560%
Average
benefits per
application:
$1.54MN

15. …and that these benefits increase 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

16. Our customers are realizing lower overall TCO…
Decreased monthly
operating costs by 75%
”
“
$34 million saved in
the first two years
”
“
Reduced analytics
cost by over 50%
”
“

17. …and typically find that migrating workloads pays
dividends over the long term
0
2
4
6
8
10
12
14
16
Mth 1 Mth 2 Mth 3 Mth 4 Mth 5 Mth 6 Mth 7 Mth 8 Mth 9 Mth 10 Mth 11 Mth 12
AWS Migration Pay-Back (illustrative)
Current/Do Nothing AWS Environment
Pay-Back Period
Migration Cost
AWS environment cost base will
continue to reduce over time

18. Is AWS more expensive over the long-term and at bigger scale?
No, let’s see a customer example…

19. Customer spotlight: Dow Jones International
From over 40 data centers down to 6
Migration of thousands of applications
Estimated savings of $100M over 3 Years
2. Make business case1. Evaluate infrastructure
costs & architecture
VS
3. Enable decision to
move to the cloud

20. Summary
AWS is more cost-effective than on-premises
environments in both short-term and long-term,
and at scale, for both variable and steady-state
workloads, while also delivering return on
agility and enabling new experiences

21. Lowering TCO with AWS

22. 1
Replace large upfront
expenditures with pay
as you go and only for
what you use.
3
Save more money as
you grow bigger
Tiered Pricing
Volume Discounts
Custom Pricing
2
Pricing model choice
to support variable &
stable workloads
On-Demand
Reserved
Spot
How can you achieve lower TCO with AWS?

23. Pay less per unit when you use more
Volume discounts on overall bill when revenue hits certain thresholds
$0.030
$0.030
$0.029
$0.029
$0.028
$0.028
<1 TB <50 TB 50-500 TB 500-1000 TB 1000-5000
TB
>5000 TB
Storage (S3)
Tiered Pricing
$0.12
$0.09
$0.07
$0.05
1-10 TB 10- 50 TB 50- 150 TB 150 - 500 TB
Data Transfer (Bandwidth)
Tiered Pricing
Pricing as of February 2015

24. TCO example: VM Farm On-premises vs. AWS

25. Where do customers typically see savings? EXAMPLE
Category $ Impact over
60 mos.
(excl. labor)
Cost Driver
Server Hardware
Refresh
32% of total  Bare metal servers and Virtual Machine physical hosts will
need to be refreshed
Data Center
Facilities Costs
20% of total  Monthly operational costs (space lease, power and cooling
costs) and maintenance costs (generators, electrical equip.)
Storage Hardware
Refresh 25% of total
 Storage hardware will need to be refreshed
Server Hardware
Maintenance
9% of total  Annual maintenance costs,15% of purchase price/yr.
Network Hardware
Refresh
7% of total  Network equipment in the data center (routers, arrays,
switches, cabling) will require refresh

26. Pay as you go
Pay less by using more
Pay less when you reserve
Pay less when AWS grows
No up-front investment
Pay per use
AWS Pricing Principles

27. Used IT
Capacity
Idle
Capacity
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
On-Premises IT
Compute capacityTotal
Studies by Gartner, McKinsey and the
Uptime Institute have stated that typical
data centers are on average
less than 50% utilized
www.uptimeinstitute.org
anthesisgroup.com/wp-content/uploads/2014/08/Data-Center-Issue-Paper-final826.pdf
www.nytimes.com/2012/09/23/technology/data-centers-waste-vast-amounts-of-energy-belying-industry-image.html
A typical on-premises compute
environment is massively underutilized

28. Application/Workload drivers
Fluctuating/“Spiky” Part-time Cyclical
Peak
Peak
Peak
Used IT
Capacity
Idle
Capacity
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
On-Premises IT
Compute capacityTotal
Part of this can be explained by buying for “peak
load” requirements with inflexible infrastructure

29. Used IT
Capacity
Idle
Capacity
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
On-Premises IT
Compute capacityTotal
But what else is driving this gap?
 Lengthy procurement process
Common IT purchasing behaviors
and limitations
 Buying everything up-front
 No “trade-ins” or “trade-backs”

30. Providing the best value at competitive prices for
customers is in our DNA
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

31. Online TCO Calculator Demo
Learn more: http://aws.amazon.com/tco-calculator

32. Learn More
AWS Economics Center
http://aws.amazon.com/economics
AWS Pricing
http://aws.amazon.com/pricing

33. AWS Summit – Chicago: An exciting, free cloud conference designed to educate and inform ne w
customers about the AWS platform, best practices and new cloud services.
Details
• July 1, 2015
• Chicago, Illinois
• @ McCormick Place
Featuring
• New product launches
• 36+ sessions, labs, and bootcamps
• Executive and partner networking
Registration is now open
• Come and see what AWS and the cloud can do for you.
• Click here to register: http://amzn.to/1RooPPL