© 2015, Amazon Web Services, Inc. or its Affiliates. All rights reserved.

Amilcar Alfaro

6.18.2015

Reducing Total Cost of

Ownership (TCO) with AWSUsing the Economics of the Cloud to Reduce Cost

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

Comparing TCO isn’t easy(But we’re going to try)

≠Traditional Data Center

& Co-LocationAWS Cloud

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 SwitchesStorage 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

Traditional Capacity PlanningLimitations of traditional data centers:

Inflexible physical

assets

Costs are

never in sync

Migration and expansion

costs are high

Cost of unexpected

inefficiencies

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

Costs are Never In Sync

Difficulties keeping up with technology

Timing of upgrades and refresh

Changes in networking technology, software

and virtualization

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

Unexpected Inefficiencies

Under-deployment, over-deployment

Unexpected high demand or low demand

Non-optimal, non-scalable

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)?

How does AWS help lower TCO? By enabling

customers to reduce both up-front and variable costs

Moving to a lower variable-cost structureReducing 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 useReducing 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 productivityReducing 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

VARIABLECOSTS

VARIABLE COSTS

AWS

UPFRONT

COSTS

UPFRONT

COSTS

VARIABLE COST

Running

internal IT

more efficiently

Cost savings from

moving to AWS

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

…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

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

…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

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%

”

“

…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 PeriodMigration Cost

AWS environment cost base will

continue to reduce over time

Is AWS more expensive over the long-term and at bigger scale?

No, let’s see a customer example…

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

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

Lowering TCO with AWS

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?

Pay less per unit when you use moreVolume 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 1000-5000TB

>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

TCO example: VM Farm On-premises vs. AWS

Where do customers typically see savings? EXAMPLE

Category $ Impact over

60 mos.(excl. labor)

Cost Driver

Server Hardware

Refresh32% of total Bare metal servers and Virtual Machine physical hosts will

need to be refreshed

Data Center

Facilities Costs20% 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

Maintenance9% of total Annual maintenance costs,15% of purchase price/yr.

Network Hardware

Refresh7% of total Network equipment in the data center (routers, arrays,

switches, cabling) will require refresh

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

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

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

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”

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

Online TCO Calculator Demo

Learn more: http://aws.amazon.com/tco-calculator

Learn More

AWS Economics Center

http://aws.amazon.com/economics

AWS Pricing

http://aws.amazon.com/pricing

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