AWS Commercial Management and Cost Optimisation - Dec 2017

© 2017, Amazon Web Services, Inc. or its Affiliates. All rights reserved.
December 2017
AWS Commercial Management
and Cost Optimisation

© 2017, Amazon Web Services, Inc. or its Affiliates. All rights reserved.© 2017, Amazon Web Services, Inc. or its Affiliates. All rights reserved.
What is the savings
potential on AWS?

You can significantly reduce your Total Cost of Ownership on
AWS compared to on-premise infrastructure
“We’ve realized a 52 percent reduction in TCO …
Ultimately these savings are a byproduct of doing the right thing.”
Ben Cabanas, CTO, GE Transportation
“Three years on, we’ve saved over $100 million in
avoided capital and are about 65% in the cloud.”
Dominic Shine, CIO News Corp
Leveraging the AWS platform, we’ve been able to
seamlessly scale our infrastructure, better serve our
customers across the globe, and reduce our fixed costs
by 75% and operational costs by 83%.
Valentino Volonghi, CIO AdRoll

How can I realise
these savings?
(technical perspective)

The Five Pillars of Cost Optimization
Right Sizing Your
Instances
Pick the Right
Pricing Model
Increase
Elasticity
Mechanisms for
Optimisation
Match Usage to
Storage Class

Pillar 1: Right Sizing
Right Sizing
• Selecting the cheapest instance while meeting
performance needs
• Look at CPU, RAM, storage, and network
utilization to identify instances that could be
downsized

87%
Saving
Right Sizing example
m4.4xlarge
$1.72 per hr
m4.large
$0.215 per hr
2. Check (CPU,
RAM, network, disc)
1. Migrate/provision
& Run
3. Right Size
5. Save!4. Review Performance

Right Sizing tools
Cost Optimization:
EC2 Right Sizing
https://aws.amazon.com/answers/account-
management/cost-optimization-ec2-right-sizing/
AWS trusted advisor
Comes with Business and Enterprise
support

Pillar 2: Increase Elasticity
“You can hug your workloads, instead of your servers!”
AWS allows you to fit cost to today’s demand.
Traditional IT typically needs you to fit cost to expected peak demand in
3-5 years.

Best practice tip for Elasticity
Non-production instances are:
1. Automatically turned off at night with manual turn-on in the morning 
2. Have scheduled on-off 
3. Excluded from turn-off by exception due to workload needs
Fun fact:
RDS can be
turned off too

Elasticity Tools
EC2 Instance Scheduler
Semi managed option
https://aws.amazon.com/answers/infrastructure-
management/ec2-scheduler/
Lambda Start-Stop guide
Cheap DIY option
https://aws.amazon.com/premiumsupport/knowle
dge-center/start-stop-lambda-cloudwatch/
GorillaStack
Fully managed 3rd party solution
https://aws.amazon.com/documentation/
autoscaling/
Guide to autoscaling
Netflix Janitor Monkey
Open source, cleans environment
removing unused resources
https://medium.com/netflix-techblog/janitor-monkey-
keeping-the-cloud-tidy-and-clean-d517ad74d648

Pillar 3:
Leveraging the Right Pricing
Model
Reserved Instances
EC2 Spot
On-Demand

What are Reserved Instances (RIs)?
RIs are like discount coupon booklets
• Each RI gives one coupon per hour per instance being reserved over
the term of the RI (e.g. a 1 year RI provides 24*365 coupons)
• The coupon provides a discount in exchange for commitment
• Each individual coupon expires at the end of each hour
• RIs are a financial construct/layer on top of your AWS infrastructure
RI coupon

RI
coverage
Total use
Key
Reserved Instances for one financial services customer
resulted in 39% decrease in unit cost
Reserved Instance
purchase

RIs are best used for Always-On instances
(can still be used to save for non-always on)
Commitment level
1 year (approx. payback 7-9 months)
3 year (approx. payback 10-18 months)
AWS services offering RIs
Amazon EC2 & EC2 Hosts
Amazon RDS
Amazon Redshift
Amazon ElastiCache
Amazon DynamoDB*
Amazon CloudFront*
*Discount for commitment, but not a RI

EC2 RI matching properties
• Instance type: m4.xlarge
• Operating System: Linux/UNIX, Windows, Windows with
SQL Server Standard, etc.
• Region: ap-southeast-2 (Sydney)
o or AZ: ap-southeast-2a
• Tenancy: Shared, dedicated

Understanding the different EC2 RI types
1 year 3 years
Standard Regional
(with Linux/Unix Size Flex)
Regional
AZ-Specific
(with capacity reservation)
AZ-Specific
Convertible Regional Regional
AZ-Specific AZ-Specific
Note: can easily switch between Regional and AZ-Specific at no cost
Shaded items affect pricing

Which EC2 RIs give greater discount?
Greater discountLess discount
All upfrontPartial upfrontNo-upfrontPayment option
3 year1 yearDuration
Linux/UnixOthers (typically)Operating System
Newer gen.Older generations (typically)Instance type
StandardConvertibleClass

Understanding Convertible Reserved Instances
With a Convertible Reserved Instance, you can modify
your existing reservation across:
Instance families
Instance sizes
Operating Systems
Tenancy

Understanding Convertible Reserved Instances
You are committing to:
1 or 3 yrs (not refreshed on conversion)
Region
EC2 on AWS
Spend (convert to equal or greater $)

Understanding Instance Size Flexibility
• Effective March 1, your existing Regional RIs are even
more flexible!
• All Regional Linux/UNIX RIs with shared tenancy now
apply to all sizes of instances within an instance family
and AWS region.
• E.g. 1 m4.xlarge RI can apply to:
2 m4.large instances or
½ an m4.2xlarge instance

RIs have priority to apply to instances in the same
account as the RI
http://docs.aws.amazon.com/awsaccountbilling/latest/
aboutv2/consolidated-billing.html
RI can live here and this
account will get priority
to use it first
RIs can also live here and this account
will get priority to use the RI.
Be sure to have RI console access to
modify RIs if needed & billing console
access to check RI utilisation

Use Cost Explorer to track your RI utilization
(higher utilisation = greater savings realization)

Use Cost Explorer for EC2 RI recommendations

The very simple rules of EC2 Spot
Markets where the price of
compute changes based on
supply and demand
You’ll never pay more than your
bid. When the market exceeds
your bid you get a 2 minutes to
wrap up your work

Spot can be used for
• Production & non-production workloads
• Queue and Batch based processing
• Hadoop / Spark / Big Data workloads (EMR)
• Stateless Applications (e.g. web tiers)
• CI/CD pipelines
• Containerised workloads powered by Spot Fleet
• Video transcoding
• See http://bit.ly/whenToUseAWSSpot
EC2 Spot provides incredible savings for the
right workloads

Recent EC2 Spot updates
• New price algorithm
(smoother price)
• T2 on Spot
• Higher spot bids no longer
take priority over lower bids
• Spot stop or hibernate &
resume
Smoother price starting
Dec 2017

EC2 Spot resources to help you get started
Getting started with EC2 Spot Instances:
http://aws.amazon.com/ec2/spot/
http://aws.amazon.com/ec2/spot/getting-started/
EC2 Spot Labs:
https://github.com/awslabs/ec2-spot-labs

Pillar 4:
Leveraging the Right
Storage Class
Elastic Block Store
Simple Storage Service

Use appropriately sized Elastic Block Store (EBS)
https://aws.amazon.com/ebs/details/
Provisioned IOPS
SDD (io1)
General Purpose
SDD (gp2)
Throughput
Optimized HDD (st1)
Cold HDD
(sc1)
Default
Even cheaperCheaper

Storage Classes on Simple Storage Service (S3)
Active data Archive dataInfrequently accessed data
Standard (default)
Hot
Standard - Infrequent Access
Warm
Amazon Glacier
Cold

S3 Analytics provides additional functionality over
standard S3 lifecycle policies
http://bit.ly/s3analytics
Lifecycle policies also
clean up incomplete
multi-part uploads to S3

Summary: The Five Pillars of Cost Optimization
Right Sizing Your
Instances
Pick the Right
Pricing Model
Increase
Elasticity
Mechanisms for
Optimisation
Match Usage to
Storage Class

There are many more …
Containerisation
Consolidated
billing
Automation via AWS
CloudFormation
Release unused
Elastic IPs
Serverless &
AWS Lambda
ELB to Application Load
Balancer (typically)
Deliver content with
AWS CloudFront
Migration to open source
platforms & databases
AWS Cloud9 AWS GuardDuty

How can I maximise
these savings at scale?
(strategic perspective)

Mechanisms for
Optimisation

Define, agree, and enforce
cost allocation tagging

Define and agree mandatory (cost) tags with
stakeholders from the Business
Tagging -> Allocation -> Showback -> Chargeback -> Ownership ->
Drive responsibility and efficient behaviour

Accurate tagging is crucial to cost allocation and
enabling technical levers of optimisation
https://bit.ly/co17_tag
Potentially maintained in
external database for lower
tagging effort and ease of
changing values.
Exceptions to the rule can
be stored in the tag.

Address improper tagging
???
App
BU
Owner

AWS tools can address with missing or misspelt tags
https://bit.ly/co17_tag2
2. AWS Config + Lambda1. AWS Tag Editor
Unfortunately, these will not be sufficient at scale and not get you to 100% tagging

Atlassian’s open source tool for tagging remediation
https://bitbucket.org/atlassian/dbr-pp/overview
Assigns default cost allocation to accounts & corrects misspelling

Capital One’s Cloud Custodian open source tool enables
advanced tagging compliance and remediation
Scripts:
https://github.com/capitalone/cloud-custodian
Documentation:
http://www.capitalone.io/cloud-custodian/docs/

Define metrics, set targets,
and review at a reasonable
cadence

% spend reduction cannot be used to measure optimisation
unless apps are tagged or running a static environment
We optimised some apps this month!
The bill increased though …
We definitely are turning our apps on-off more …
though we also launched some new apps
There has to be a better way to do this …

100-level metrics (few hours per month to measure)
1) General spend trending via
AWS Cost Explorer (split by
BU, account, service, tag
where relevant)
What’s changed & why?
2) % Right Sized using
Right Sizing tools
Am I picking resources fit to
business need & utilising
them well?
3) Elasticity: ratio of weekday
vs. weekend average spend for
EC2 and RDS instances via
AWS Cost Explorer
Are costs turning on-off as
expected?
4) % RI coverage, % RI
utilisation, % Spot use via
AWS Cost Explorer
Am I paying less for the same
capacity & am I using that
capacity I paid for?

Metrics: 200-level and beyond
Static month-on-month spend
can be tracked and optimised
via 100-level metrics
Dynamic spend should be
nomalised against demand for the
service/application.
E.g. > $ per request
> $ per customer minute
AWS re:Invent 2015 | (ISM309)
Efficient Innovation: High-Velocity Cost
Management at Netflix
https://bit.ly/co17_video4

Time (months)
% of
Linux/Unix
(incl. CentOS)
instances
Time (months)
% of
non-prod
turned off
daily
Last month’s corresponding daily
burn rate = $1,600
Team’s daily burn rate = $1,400
Last month’s tagging %
= 85%
Engineer focused dashboards can help focus
engineering effort & show results
Tagging % = 89%

Estimating optimisation impact can justify investment
Dimension Target Score
(org level or BU level)
Savings impact p.m.
Enterprise Programs 100% 100% $100k
Reserved Instance Coverage 70% 65% $52k
Reserved Instance Utilisation 95% 97% ($2k)
EC2 Spot 5% 2% $2k
Cloud native services (e.g. Lambda) 5% 1% $9k
Tagging and cost allocation 90% 85% N/A
Right sizing % 95% 99% $20k
EC2, RDS Elasticity 50% 55% $250k
EBS Storage % of EC2 Instances 90% 85% $15k
S3-IA % of S3 20% 25% $6k
Targets met 5 of 10 $452k (X% of bill)

Use 3rd party tools to accelerate your reporting & tooling
See: https://aws.amazon.com/aws-cost-management/ for AWS native tools

Enable teams to
architect for cost

What does this look like in practice?
Incentivisation through positive
reinforcement (raises bar), visual
feedback, gamification, etc.
Chargeback of costs to users
resulting in business teams caring
about operational efficiency
Removal of optimisation
process barriers
$
Cloud best practice
on-boarding / training program

Practices that control cost but risks agility and innovation
Central architectural review will catch inefficient design, but risks
creating a bottleneck risk.
Balance by setting criteria for review and ways to opt out.
Leadership pressure can result in budget limits, reduced agility, and
reduced ability to innovate.
Leadership support can promote best practices and a lean culture.
Mandating strict orchestration controls supports cost management
but creates administrative work and potential bottlenecks.
Differentiate treatment of standard out-of-the-box app
orchestration vs. new app development.

Once teams are enabled to architect for cost, optimisation
becomes BAU with little need for resource/time investment
Incentive,
skills, time
investment
Business/
functional
outcomes
Speed to
customer
Performance
Security
Reliability
Cost
Optimisation
Tactical optimisation
investment
Strategic
value realization
Activities
Customer Maturity on AWS

Sample training resources to inspire your teams
AWS re:Invent 2016: Cost Optimizing Your Architecture:
Practical Design Steps For Savings (ARC310) Serverless book

Assigned optimisation
responsibility

Optimisation Responsibility can be assigned to the
Cloud Center of Excellence
Define metrics, set
targets, and review
Enable teams to
architect for cost
Define or inform IT and
cloud strategy

Summary of Mechanisms for Optimisation
Define metrics, set
targets, and review
Enable teams to
architect for cost

Finance team considerations

Potential solutions used by commercially mature
customers
Traditional IT Assumption Potential cloud solution
Costs are largely static and
predictable once they reach the
BAU budget
101: Ask for $ forecast from engineers
201: Adjusted budgeting for non-static cost and
measure efficiency via $ per revenue, $ per dev.

customers
BAU budget
Approvals for projects and
associated cost occur upfront
101: Put in place approvals for any spend
201: Place approval gate at transition from project
spend to BAU spend based on whether business
value drivers were met

customers
BAU budget
Approvals for projects and
associated cost occur upfront
101: Put in place approvals for any spend
201: Place approval gate at transition from project
spend to BAU spend based on whether business
value drivers were met
IT is treated as a cost center 101: Tagging & Enforcing tagging
201: Running all reports off the same cost-allocated
data and assigning ownership through chargeback

Thank You

Appendix:
Commercially Relevant
2017 AWS Updates

1 Year EC2 Convertible Reserved Instances
Convertible Reserved Instances with a 1-year term are now available.
This will give you more options and more flexibility; you can now
purchase a mix of 1-year and 3-year Convertible Reserved Instances
(CRIs) in accord with your needs.
Organisations (especially startups) often find this low-commitment
option attractive.
https://aws.amazon.com/blogs/aws/ec2-convertible-reserved-instance-update-new-1-year-cri-merges-splits/

Merging and Splitting Convertible RIs
Split
Split CRIs into the part that you want to keep and the part that you want to exchange. Select the CRI, click on
Modify Reserved Instances. Create desired configuration and click on continue. Review the request and click
on Submit Modifications. The state of the CRI changes to indicate that it is being modified. After a moment or
two it will be marked as retired, replaced by a pair that are active.
Merge
You can also merge two or more Convertible Reserved Instances together and then use them as the starting
point for an exchange. To do this you simply select two or more existing CRIs, click on Action, and choose
Exchange Reserved Instances. You can see the total remaining upfront value of the selected CRIs and
proceed accordingly. You can merge CRIs that have different start dates and/or term lengths. The merged
CRI will have the expiry date of the RI that is furthest from the date of exchange. Merging CRIs with different
term lengths always produces a 3-year CRI.
https://aws.amazon.com/blogs/aws/ec2-convertible-reserved-instance-update-new-1-year-cri-merges-splits/

AWS Credit and RI Discount Sharing
AWS launches new billing preferences that give you control over how AWS credits and RI discounts are
shared among the accounts in your organization.
Historically, AWS has maximized customer savings by applying credits and RI discounts first to the account
that owned the credit or RI lease and then distributing the remainder, if any, to qualifying usage incurred by
accounts in the same organization. While this approach had the potential of lowering the overall bill,
customers were unable to control if, and how, discounts were applied across organizational lines.
To provide greater flexibility, customers can now disable AWS credit sharing across all accounts in their
organization. This ensures that only the account that owns a credit, or has previously redeemed a credit,
receives the associated benefit.
Similarly, you can now disable RI discount sharing across your organization to ensure that only the RI owner
receives any associated discounts. You can also designate a set of accounts for which RI discount sharing is
disabled, while continuing to share RI discounts among the rest of the accounts in your organization.
https://aws.amazon.com/about-aws/whats-new/2017/11/customize-your-organizations-aws-credit-and-
reserved-instance-ri-discount-sharing-using-new-billing-preferences/

AWS Cost Explorer API
AWS Cost Explorer helps you visualize, understand, and manage your AWS costs and usage over time. This
is done via an intuitive interface that enables you to quickly create custom reports (including charts and
tabular data) and analyses of your cost and usage data, both at a high level and for highly-specific requests.
Starting today, you can directly access the Cost Explorer API, the low-latency ad-hoc query service that
powers the Cost Explorer web application.
The Cost Explorer API gives you programmatic access to the full Cost Explorer dataset, including advanced
metrics (e.g., Reserved Instance utilization) and your cost allocation tags. To start, you can leverage the Cost
Explorer API to break down your costs by grouping your data up to two levels. For example, you can return all
of your Amazon EC2 Running Hours cost and usage data segmented by Instance Type and your “project”
tag. Further, you can query for highly-specific data, such as all costs associated with Amazon EC2 Running
Hours in the m4 instance family that are not tagged as “project: secretProject.” With the Cost Explorer API,
you can now build interactive, performant cost management applications that suit your organization’s needs
without having to set up or maintain any analytics infrastructure.
https://aws.amazon.com/blogs/aws/new-aws-price-list-api/

AWS Price List API Update
The original AWS Price List API gave you access to prices in JSON and CSV form by way of structured URLs. While
this worked well for some types of cost management tools, the size and complexity of the files made them difficult to
download and tedious to parse.
As of November 2017, we have updated the API by adding new functions that allow you to perform fine-grained price
queries that return only the prices that you need. This will allow you to make use of the prices in mobile and browser-
based applications.
The new functions are:
• DescribeServices – Returns sets of attribute keys that are used to define products within a service. For example,
the keys returned for EC2 will include physicalProcessor, memory, operatingSystem, location and tenancy.
• GetAttributeValues – Returns all of the allowable values for a given attribute key. For example, values for the
operatingSystem key include Windows, RHEL, Linux and SUSE; values for the location key include US East (N.
Virginia) and Asia Pacific (Mumbai).
• GetProducts – Returns all of the products, along with their public prices, that match a filter expression based on
service name and attribute value.
The new functions are available now and you can access them from the AWS SDKs at no charge.
https://aws.amazon.com/blogs/aws/new-aws-price-list-api/

Per-Second Billing for EC2 and EBS
Effective 2nd October 2017, usage of Linux/Unix instances that are launched in On-Demand, Reserved and
Spot form will be billed in one-second increments. Similarly, provisioned storage for EBS volumes will be
billed in one-second increments.
Per-second billing also applies to Amazon EMR and AWS Batch.
By billing usage down to the second we are enabling you to level up your elasticity, save money, and
customers will be positioned to take advantage of continuing advances in computing.
This change is effective in all AWS Regions and was effective October 2, for all Linux instances that are newly
launched or already running. There is a 1-minute minimum charge per-instance.
Per-second billing is not currently applicable to instances running Microsoft Windows or Linux distributions
that have a separate hourly charge for the operating system. It is applicable to underlying instances used via
the AWS Marketplace.
List prices and Spot Market prices are still listed on a per-hour basis, but bills are calculated down to the
second, as is Reserved Instance usage (you can launch, use, and terminate multiple instances within an hour
and get the Reserved Instance Benefit for all of the instances).
https://aws.amazon.com/blogs/aws/new-per-second-billing-for-ec2-instances-and-ebs-volumes/

On Demand With Reserved Instance
Impact of Per-Second Billing with and without RIs
Instance 10am - 11am Before After
A 30 minutes RI RI
B 20 minutes OD RI
C 9 minutes OD RI
D 0.5 minutes OD RI
Total 59 mins 30 secs 3 hrs OD
1 hr RI billed
1 hr RI billed
Instance 10am - 11am Before After
A 30 minutes 1 hour 30 minutes
B 20 minutes 1 hour 20 minutes
C 9 minutes 1 hour 9 minutes
D 0.5 minutes 1 hour 1 minute
Total 59 mins 30 secs 4 hrs billed 1 hr billed

Stop/Hibernate & Resume EC2 Spot
EC2 users have long had the ability to stop running instances while leaving EBS volumes attached, opening the door to
applications that automatically pick up where they left off when the instance starts running again.
Now you can set up Spot bids and Spot Fleets that respond by stopping (rather than terminating) instances when
capacity is no longer available at or below your bid price.
EBS volumes attached to stopped instances remain intact, as does the EBS-backed root volume.
When capacity becomes available, the instances are started and can keep on going without having to spend time
provisioning applications, setting up EBS volumes, downloading data, joining network domains, and so forth.
Stopped Spot Instances do not incur any charges for compute time; space for attached EBS volumes is charged at the
usual rates.
This feature is available now and you can start using it today in all AWS Regions where Spot Instances are available. It
is designed to work well in conjunction with the new per-second billing for EC2 instances and EBS volumes, with the
potential for another dimension of cost savings over and above that provided by Spot Instances.
Hibernate is only supported on popular newer instance families and if your OS has hibernation support.
https://aws.amazon.com/about-aws/whats-new/2017/09/amazon-ec2-spot-can-now-stop-and-start-your-spot-instances/
https://aws.amazon.com/about-aws/whats-new/2017/11/amazon-ec2-spot-lets-you-pause-and-resume-your-workloads/

RDS Instance Size Flexibility
RDS Reserved Instances (RIs) are now more flexible and easier to use, helping you get the most out of your
RI discount. RIs give you the option to reserve a database instance for a one or three year term, and in turn
receive a significant discount compared to on-demand instance pricing.
Beginning with the October billing period, the discounted rate of all new and existing RDS RIs automatically
applies to usage of any size in the DB instance family using the same database engine. The RI discounted
rate also applies to usage of both Single-AZ and Multi-AZ configurations for the same database engine and
DB instance family.
The discounted rate is automatically applied to usage, so it reduces the management overhead of trying to
match RI discounts to running DB instances. Since you’re no longer tied to a specific DB instance size or
Multi-AZ configuration, you can enjoy the discount even if your database needs change.
Amazon RDS Reserved Instance size flexibility is offered in all regions for the MySQL, MariaDB, PostgreSQL,
and Amazon Aurora database engines, as well as the “bring your own license” (BYOL) edition of the Oracle
database engine.
https://aws.amazon.com/about-aws/whats-new/2017/10/amazon-rds-reserved-instances-offer-instance-size-flexibility/

RDS Instance Size Flexibility Example
• Available for Amazon Aurora RDS
• Pricing scales linearly – double the size, double the price
• 1 db.r3.2xlarge applies to any of the following usage in
the same Region:
• 1 x db.r3.2xlarge
• 2 x db.r3.xlarge
• 4 x db.r3.large
• ½ x db.r3.4xlarge (50% is RI, 50% is On Demand)
• ¼ x db.r3.8xlarge (25% is RI, 75% is On Demand)

T2 unlimited
We are extending the burst model that we pioneered with the T2, giving you the ability to sustain high CPU
performance over any desired time frame while still keeping your costs as low as possible. You simply enable
this feature when you launch your instance; you can also enable it for an instance that is already running. The
hourly T2 instance price covers all interim spikes in usage if the average CPU utilization is lower than the
baseline over a 24-hour window. There’s a small hourly charge if the instance runs at higher CPU utilization
for a prolonged period of time. For example, if you run a t2.micro instance at an average of 15% utilization
(5% above the baseline) for 24 hours you will be charged an additional 6 cents (5 cents per vCPU-hour * 1
vCPU * 5% * 24 hours).
You can switch each of your instances back and forth between T2 Standard and T2 Unlimited at any time; all
credit balances except CPUSurplusCreditsCharged remain and are carried over. Because T2 Unlimited
instances have the ability to burst at any time, they do not receive the 30 minutes of credits given to newly
launched T2 Standard instances. Also, since each AWS account can launch a limited number of T2 Standard
instances with initial CPU credits each day, T2 Unlimited instances can be a better fit for use in Auto Scaling
Groups and other scenarios where large numbers of instances come and go each day.
https://aws.amazon.com/blogs/aws/new-t2-unlimited-going-beyond-the-burst-with-high-performance/
T2
Unlimited

AWS Commercial Management and Cost Optimisation - Dec 2017

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AWS Commercial Management and Cost Optimisation - Dec 2017