Customers always want to understand how AWS cost models compare to other alternatives. Using the new AWS TCO Calculator, we will outline how AWS breaks down cost drivers when it educates customers who are evaluating cloud vs. looking at other models of computing: on-prem, virtualized, and co-lo. Discussion will also center on best practices to capture the true costs of these alternative computing approaches, and how to have meaningful customer conversations with respect to TCO. • Learn: What is TCO and why it matters • Understand: TCO evaluation Methodology used by AWS • Hear: Best practices around TCO, demonstration of online TCO calculator You can find the recording of this webinar here: http://youtu.be/BaPEf_f0N5U

1. Ian Massingham, AWS Technical Evangelist @IanMmmm
October 6, 2014

2. In this webinar, we will:
• Introduce important concepts related to total cost of ownership
(TCO) and AWS
• Provide you with a methodology to conduct TCO analyses, taken
from real examples
• Share best practices
At the end of this webinar, you should be able to start and drive meaningful
TCO conversations around AWS with your customers

3. What is Total Cost of Ownership exactly?
TCO models the total cost of ownership (acquisition and operating
costs) for running an infrastructure environment along with the
costs of decommissioning and retiring systems in future

4. Why TCO matters to customers, partners, and to AWS
• From a customer perspective, it is common purchasing practice to consider
alternative options and scenarios when buying IT. And it is oftentimes a partner duty
to advise customers on their purchasing choices
• AWS offering is an alternative for existing on premises systems or other options.
However AWS proposes innovative technologies that does not compare like for like
with alternatives
• It is therefore AWS responsibility to provide partners with the tools to conduct an
accurate TCO analysis for their customers
Our goal for today : provide you with the tools to conduct
an effective TCO analysis for your customers
1
2
3

5. TCO analysis is typically used to…
1) Compare the costs of running an entire infrastructure
environment on premises or in a co-location facility versus on AWS
2) Compare the cost of the underlying infrastructure requirements for a
specific workload to the cost of running that workload on AWS
3) Build the business case for moving to AWS

6. Influencers and structural barriers
• TCO engagement may require multiple discussions
with different messages for different audiences:
• Application developer (dev-op environment?)
• IT support team
• Procurement team
• CFO/CIO/Investors
• Each audience will have different perspectives on TCO

7. How do customers lower their TCO with AWS?
1
Replace up-front
capital expense with
low variable cost
“Average of 400
servers replaced per
customer”
Source: IDC Whitepaper, sponsored
by Amazon, “The Business Value of
Amazon Web Services Accelerates
Over Time.” December 2013
2
Economies of scale
allow AWS to
continually lower costs
42 Price
Reductions
3
Pricing model choice
to support variable &
stable workloads
4
Save more money as
you grow bigger
On-Demand
Reserved
Spot
Tiered Pricing
Volume Discounts
Dedicated

8. Analysts have shown AWS reduces costs over long term
In early 2012, AWS commissioned IDC to interview 11 organizations that deployed applications on AWS. Since this study was conducted in early
2012, AWS has introduced price reductions nearly 20 times across Amazon EC2 and Amazon S3. IDC estimated what the impact of AWS's fee
restructuring would be on the organizations that participated in the 2012 study and determined that the overall fees would drop by 21% lowering the
five year TCO from $909,000 to $846,000. Source: IDC Business Value of AWS Accelerates over time

9. Typical TCO-related challenges faced by Enterprise
customers and prospects
§ Developing a credible IT cost baseline for comparison – focus for today
§ Migration challenges
§ Shifting to all OpEx model vs. traditional CapEx + OpEx
§ Lack of “Cloud Readiness”
§ Entrenched IT Organization

10. Our TCO Methodology

11. TCO = Acquisition Costs + Operations Costs illustrative
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 costs
Network Admin costs
Space Power Cooling
Server Admin 4 Virtualization Admin
Facilities Cost
Space Power Cooling
Facilities Cost
Space Power Cooling
Server Costs
Storage Costs
Network Costs
IT Labor Costs
1
2
3

12. TCO = Acquisition Costs + Operations Costs illustrative
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 costs
Network Admin costs
Space Power Cooling
Server Admin 4 Virtualization Admin
Facilities Cost
Space Power Cooling
Facilities Cost
Space Power Cooling
Server Costs
Storage Costs
Network Costs
IT Labor Costs
1
2
3
These costs are modeled on a per Rack per month basis

13. Default Calculations : On-Premises vs. Colocation
On-Premises Colocation
Typical Default Cost/Rack/month = $1,500
Pay power/cooling in addition
Facilities (Space,
Power, Cooling)
Server
(excl. Facilities)
Storage
(excl. Facilities)
Network
(excl. Facilities)
IT Labor
Costs
Typical Default Cost/Rack/month = $2,500
Power/cooling included in this cost
Same Same
Same Same
Flat Bandwidth charge;
Network overhead
Tiered Bandwidth charge;
no network overhead
Same Same

14. These costs are modeled
on a $/rack /month basis
On-Premises Colocation
The Uptime Institute cost model uses two
components -
• The kW component by desired level of
functionality
• Tier I : $11,500/kW of redundant UPS
• Tier II: $12,500/kW of redundant UPS
• Tier III: $23,000/kW of redundant UPS
• Tier IV: $25,000/kW of redundant UPS
• Computer room component - $300/sq.
ft. added in all cases
Assumptions
• Tier III Data center with a 15 yr. useful life
• Standard rack occupies 28 Sq. Ft.
• Standard rack uses 10 kW of power
$/rack /month = ($23,000/kWx10kW +
$300x28)/(15*12) = $1,324
• Cabinet and Cage Pricing*
• $1,490 (monthly recurring charge)
• 30-amp, 208v Single Phase*
• $730 (monthly recurring charge)
• 20- amp, 208v Single Phase
Redundant*
• $365 (monthly recurring charge)
$/rack /month = $2,585
$/rack/month = $1,500 $/rack/month = $2,500
**Cost Model: Dollars per kW plus Dollars per Colocation service Provider
Square Foot of Computer Floor, Uptime
Institute

15. EXAMPLE TCO Comparison:
Three Tier Web App On-Premise vs. AWS

16. TCO Example: Three Tier Web App On-premise vs. AWS
Web App Scenario Overview:
• Application serves approximately 10,000 page views / day
• Underlying Physical Infrastructure:
– 3 web servers
– 3 application servers
– 2 cache servers
– 1 load balancer
– 1 high availability DB server
– 100GB of storage
– 300 GB of data transfer every month
In this scenario, we are going to compare an on premises option
with an AWS alternative

17. TCO Example: Conclusion
TCO Comparison Summary – 3 Years

18. Our total cost of ownership calculator help you make
those calculation easier

19. The AWS online TCO Calculator is accessible
https://awstcocalculator.com/

20. Best Practices

21. In your TCO calculations and analysis…
• TCO message is part of overall AWS message (vs. in
isolation)
• The TCO comparison was built collaboratively with the
customer in multiple iterations
• Make sure you have the right stakeholders in the room
to discuss TCO (Finance, Procurement, IT support,
Engineering)
DOs
DON’Ts

22. In your TCO calculations and analysis…
DOs
DON’Ts
• Focusing purely on pricing and discounts (not comparative
TCO)
• Comparing a duplicate of their on-premises environment –
problematic apples-to-apples comparisons of machines
• Allowing all decisions and vision to be based on the
unchecked TCO analysis of one individual…and failing to
capture the true costs of running IT/datacenter/on-premises
• Bringing up TCO late in the decision-making process

23. TCO best practices (a few)

24. Quiz!
1. An uptick in AWS spend is usually a trigger for
a) A TCO analysis
b) A reserved instance analysis
c) A Cost optimization analysis

25. Quiz!
2. TCO conversations are ideal when the customer has started the
migration process to the AWS cloud
a) True
b) False

26. Quiz!
3. TCO conversations are primarily had with the Finance (CFO) team
a) True
b) False

27. Ian Massingham – Technical Evangelist
@IanMmmm
@AWS_UKI for local AWS events & news
@AWScloud for Global AWS News and Announcements
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