AWS Cloud Economics-Transform your business at lower costs

1. © 2016, Amazon Web Services, Inc. or its Affiliates. All rights reserved.
Krishnan Kannan, Head-Cloud Economics-India, Amazon Internet services (P) Limited
28th June 2017
Cloud Economics: Transform your business, at lower costs

2. Agenda
Introduction to Cloud Economics2.
Why the Economics of Cloud is Different?3.
Benefits categories4.
Beyond TCO and how to quantify beyond TCO5.
Introduction to Cost optimization and five
pillars of Cost Optimization.
6.
AWS Diffrentiation and global infrastructure1.

3. AWS Global Infrastructure
16 Regions – 42 Availability Zones – 87 Edge Locations
Region & Number of Availability Zones
AWS GovCloud (2) EU
Ireland (3)
US West Frankfurt (2)
Oregon (3) London (2)
Northern California (3)
Asia Pacific
US East Singapore (2)
N. Virginia (5), Ohio (3) Sydney (3), Tokyo (3),
Seoul (2), Mumbai (2)
Canada
Central (2) China
Beijing (2)
South America
São Paulo (3)
Announced Regions
Paris, Ningxia, Stockholm, Hong Kong
US govt cloud(US-East)

4. Account
Support
Support
Managed
Services
Professional
Services
Partner
Ecosystem
Training &
Certification
Solution
Architects
Account
Management
Security &
Pricing
ReportsTechnical
Acct.
Management
Marketplace
Business
Applications
DevOps
Tools
Business
Intelligence
Security
Networking
Database &
Storage
SaaS
Subscription
s
Operating
Systems
Mobile
Build, Test,
Monitor
Apps
Push
NotificationsBuild,
Deploy,
Manage
APIsDevice
Testing
Identity
Enterprise
Application
s
Document
Sharing
Email &
Calendaring
Hosted
Desktops
Application
Streaming
Backup
Game
Developme
nt
3D Game
Engine
Multi-player
Backends
Mgmt.
Tools
Monitoring
Auditing
Service
Catalog
Server
Managemen
t
Configuratio
n Tracking
Optimization
Resource
Templates
Automation
Analytics
Query Large
Data Sets
Elasticsearc
h
Business
Analytics
Hadoop/Spar
k
Real-time
Data
Streaming
Orchestratio
n Workflows
Managed
Search
Managed
ETL
Artificial
Intelligence
Voice & Text
Chatbots
Machine
Learning
Text-to-
Speech
Image
Analysis
IoT
Rules
Engine
Local
Compute and
Sync
Device
Shadows
Device
Gateway
Registry
Hybrid
Devices &
Edge
Systems
Data
Integration
Integrated
Networking
Resource
Managemen
t
VMware on
AWS
Identity
Federation
Migration
Application
Discovery
Application
Migration
Database
Migration
Server
Migration
Data
Migration
Infrastructure Regions
Availability
Zones
Points of
Presence
Compute Containers
Event-driven
Computing
Virtual
Machines
Simple
Servers
Auto Scaling Batch
Web
Applications
Storage
Object
Storage
Archive
Block
Storage
Managed
File Storage
Exabyte-
scale Data
Transport
Database MariaDB
Data
Warehousin
g
NoSQLAurora MySQL Oracle SQL ServerPostgreSQL
Application
Services
Transcoding
Step
Functions
Messaging
Security
Certificate
Managemen
t
Web App.
Firewall
Identity &
Access
Key Storage
&
Managemen
t
DDoS
Protection
Application
Analysis
Active
Directory
Dev Tools
Private Git
Repositories
Continuous
Delivery
Build, Test,
and Debug
Deployment
Networking
Isolated
Resources
Dedicated
Connections
Load
Balancing
Scalable
DNS
Global CDN
The
AWS
Platfor
m

5. Artificial Intelligence fully integrated in AWS
Application Developers
Amazon Rekognition
Amazon Machine Learning
Amazon Polly
Amazon Lex
Natural Language Understanding (NLU)
& Automatic Speech Recognition (ASR)
Image Recognition & Analysis
Text-to-Speech
Managed Machine Learning
AWS Deep Learning AMI
Use and scale deep learning
frameworks quickly and easily
Data Scientists & Researchers

6. Introduction to Cloud Economics

7. Different sides of Cloud Economics
Cloud Economics
TCO & Business Value Cost Optimization

8. TCO-Total cost of ownership

9. What is TCO exactly and why does it matter ?
Definition: Comparative total cost of ownership analysis (acquisition
and operating costs) for running an infrastructure environment end-to-end
on-premises vs. AWS.
Used for:
1) Comparing the costs of running an entire infrastructure environment or
specific workload on premises or in a co-location facility versus on AWS.
2)Budgeting and building the business case for moving to cloud
3) Paralleling an existing AWS workload with an on premises or co-location setup

10. How do customers lower their TCO with AWS?
Source: IDC Whitepaper, sponsored
by Amazon, “The Business Value of
Amazon Web Services Accelerates
Over Time.” December 2013
1
“Customers will have spent
63.4% more on average on-
prem or in co-location”
Remove over
provisioning and
move to pay for what
you use model
2
61 Price
Reductions
Economies of scale
allow AWS to
continually lower costs
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

11. Continually lowering prices for customers is in
our DNA
Reduced
Prices
More
Customers
More AWS
Usage
More
Infrastructure
Economies of
Scale
Lower
Infrastructure
Costs
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

12. A typical on-premises compute environment is
massively underutilized
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

13. Part of this can be explained by buying for “peak
load” requirements with inflexible infrastructure
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

14. 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”
Used IT
Capacity
Idle
Capacity
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
On-Premises IT
Compute capacityTotal

15. Typical TCO considerations
Hardware – Server, Rack
Chassis PDUs, ToR
Switches (+Maintenance)
Software - OS,
Virtualization Licenses
(+Maintenance)
Facilities Cost
Hardware – Storage
Disks, SAN/FC Switches
Software - Backup
Network Hardware – LAN
Switches, Load Balancer
Bandwidth costs
Software – Network
Monitoring
Server Admin, Virtualization Admin, Storage Admin, Network Admin, Support Team
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.
Space Power Cooling
Project planning, Advisors, Legal, Contractors, Managed Services,
Training, Cost of capital
Business Value:
Cost of delays
Risk premium
Competitive abilities
Governance
Etc.
IT Labor Costs
Network Costs
Storage Costs
Server Costs
4
1
2
3
Extras5
Facilities Cost
Space Power Cooling
Facilities Cost
Space Power Cooling

16. Traditional Capacity Planning
Limited Value, Wasted $, Increasing Cost
Initial Fixed
Capacity
Utilization
Unused Capacity = Wasted $
Downtime, Lost Customers, Lost Revenue (Impossible to measure)
More Wasted $
Time

17. 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)?

18. Why the economics of cloud
are different

19. What are the key benefits categories?
• Unit Price of Infrastructure
• Ability to match supply & demand
• Reinvention is continuous – a true efficiency dividend
• A pathway to optionality
• An elastic Cost Base
• Transparency drives a lean mindset
Operational Costs

20. What are the key benefits categories?
Workforce Productivity
• Automation drives maintenance efficiencies
• Reduced cost of planned and unplanned outages
• Increased Developer Productivity

21. What are the key benefits categories?
Cost Avoidance
• Elimination of hardware refresh programs
• Elimination of maintenance programs

22. What are the key benefits categories?
Operational Resilience • Reduced Risk Profile/Reduced cost of Risk
Mitigation
• Revenue & margin improvements due to
reduced outages

23. What are the key benefits categories?
Business Agility
• Reduced Time to Market
• Increased operational agility (new market
penetration, divestiture, acquisition)
• Reduced cost & increased Pace of
Experimentation

24. What are the key benefits categories?
Operational Costs
Workforce Productivity
Cost Avoidance
Operational Resilience
Business Agility

25. RESOURCE EFFICIENCYCOST SAVINGS OPERATIONAL RESILIENCE BUSINESS AGILITY
80% reduction in software R&D times
(Apeejay Stya & Svrán)
Time to launch digital campaigns cut from
weeks to 24 hours (91App)
Calc and reporting time cut from 10 days to
10 minutes (Aon Benfield)
Time to market cut from weeks to hours
(FlyDubai)
Clinical simulations 98% faster than on-
premise (Bristol-Myers Squibb)
Time to deploy IT compute reduced to <
5minutes (Alcatel-Lucent)
R&D RFS times reduced from 6 months to 1
day (NewsCorp)
Provisioning time cut from 3-4 weeks to 2
days (ENEL)
Test-run time cut to 10 minutes, from up to
two hours (Yelp)
Launch new products 75% faster (Unilever)
5M financial investment policies recalculated
in minutes instead of overnight (ABSI)
Examples of Value Realized
DC footprint from 13 to 6 (The Weather Co.)
DC footprint reduced from 8 to 3 by 2018
(CapitalOne)
Storage costs reduced by up to 60% (ENEL)
Migrated 500 servers, 1PB storage, &100 DB
servers in 3 months to AWS (Condé Nast)
Over 50% reduction in TCO (GE)
DC footprint from 45 to 6 (News Corp)
50% reduction in app costs (Time Inc)
Cost savings of $20M p.a. (FINRA)
Computational cost reduced by 20%+ (ENEL)
Cloud deployment has saved US$34 million in
CAPEX and reduced OPEX by 85% (Samsung)
Queries run on 450,000 online subscribers 98
percent faster and 80 percent cheaper (FT)
Cost reduction of $40k p.a. (Dow Jones )
Savings of $1.5M p.a. (Trainline)
30% reduction in OPEX (MacMillan)
12% reduction in OPEX (RWE Czech)
Scaled to handle a 400% increase in page
views (Kurt Geiger)
Improved security posture (CapitalOne)
8600 transactions/second (McDonalds)
Transfer of over 750 TB of data from pipeline
inspection machinery (GE)
Processing over 75 billion market events daily
(FINRA)
Critical applications run in multiple AZs, x-
Regions for robust disaster recovery (Expedia)
Supports over 300,000 requests per minute to
its API (Easy Taxi)
60% reduced downtime (Trainline)
Migration of SAP on Oracle to AWS with zero
unplanned downtime across five countries
(Kellogg’s)
SAP availability boosted to 100% (MacMillan)
Over 200 Solutions Architects trained
in cloud (Hitachi)
Energy Marketing business prepared
for acquisition in only 6 months rather
than 12 (Hess Corp)
Performance targets over-achieved
by 43-66% (McDonalds)
IT Infra consolidation completed in
20% of expected time (Hearst)
25,000 Amazon Workspaces cloud-
based desktops deployed (Johnson &
Johnson)
Over 500 hours per year of server
configuration time saved (Sage)
39 years of Computational chemistry
condensed into 9 hours (Novartis)

26. Case Studies

27. GE Oil & Gas on AWS

28. Benefit Categories of Cloud Computing
Operational CostsWorkforce ProductivityCost AvoidanceOperational ResilienceBusiness Agility
• Reduced Risk
Profile/Reduced
cost of Risk
Mitigation
• Revenue & margin
improvements due
to reduced outages
• Reduced Time to
Market
• Increased
operational agility
(new market
penetration,
divestiture,
acquisition)
• Reduced cost &
increased Pace of
Experimentation
• Elimination of
hardware refresh
programs
• Elimination of
maintenance
programs
• Unit Price of
Infrastructure
• Ability to match
supply & demand
• Reinvention is
continuous – a true
efficiency dividend
• A pathway to
optionality
• An elastic Cost Base
• Transparency drives
a lean mindset
• Automation drives
maintenance
efficiencies
• Reduced cost of
planned and
unplanned outages
• Increased
Developer
Productivity

29. GE Oil & Gas experienced business benefits across
all categories
Operational CostsWorkforce ProductivityCost AvoidanceOperational ResilienceBusiness Agility
• 98% reduction in
P1/P0’s
• 77% faster to deliver
business applications
• 52% average TCO
savings
• 35% reduction in
compute assets (792)
• 15 automated bots
developed
• 80% cloud first
adoption
• 15 cloud services
created
• 50 applications
decommissioned
• 8 cloud migration
parties
• Improved security
posture
• Shift to self-service
culture
• Rapid
experimentation
• Reduced technical
debt
• 14M YOY Savings
• Improved
Performance
• Streamlined M&A
Activity
• DevOps in Practice
Progress
14.2M
Investment
Focus
18
Months
311 Apps
in Cloud & 14M YOY
Savings

30. Commercial Levers

31. What levers are available to customers to drive down
costs?
Matching Supply and Demand – Right-sizing
Matching Supply and Demand – Elasticity
Lowering the Unit Price – Reserved and SPOT Instances

32. We have identified additional AWS savings by
modeling both optimization and re-platforming
On-
Premises
Lift & Shift Instance Right-
Sizing
Improved
Elasticity
Storage
Optimization
Optimized Lift
and Shift
Measure
Monitor and
Improve
Serverless
Architecture
Managed
Services
Replatformed
AWS
Optimized
Traditional TCO Comparisons

33. Beyond TCO – What Else?

34. When do you go Beyond TCO?
Business
Drivers
Cost
Reduction

35. Business value

36. AWS Business Value Drivers
TCO
Resource Efficiency
Business
Value
Specificity
Accelerate Application
Deployment
Global Expansion
M&A or Divestures
Risk Mitigation
Business
Drivers
IT Drivers
Director of IT Executive Level

37. Driver #1:TCO - What is TCO and how do we
do it?
Comparing TCO isn’t easy
Traditional Data Center
& Co-Location

38. Driver #1: TCO
Definition: a cost comparison of a customer’s on-prem infrastructure vs a
lift-and-shift onto AWS.
AWS has different tools that helps us compare the cost of servers,
storage, network & labor.
Typically this results in a 30%+ savings.

39. Driver #1: TCO Examples
Three years on, we’ve saved
over $100 million in avoided
capital and are about 65% in
the cloud.
- Dominic Shine, CIO News
Corp1
(1) Geekwire, December 2016
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, CTO,
AdRoll2
(2) AWS Public Case Study
We’ve realized a 52 percent
reduction in TCO. That stems
from a number of factors... [a
push for self-service, dynamic
storage, using lower cost VMs]
Ultimately these savings are a
byproduct of doing the right
thing.
– Ben Cabanas, CTO, GE
Transportation3
(3) AWS Blog, May 2016

40. Driver #2: Resource Efficiency
Definition: a comparison of staff time spent performing functions and
tasks in the legacy IT organization versus AWS
Common Measures:
1) Database Administrators eliminating time spent on DB patches
and upgrades
2) Storage Managers no longer required to test or “burn in”
additional object storage arrays before operating them

41. Driver #2: Resource Efficiency Examples
“[Our staff] spends 60% of work
on things like data proliferation,
lack of standards, security
hardening.. AWS is addressing
these needs…”
- Raji Arasu, Senior VP of Platform
and Services, Intuit1
(1) Geekwire, December 2016
Pharma Services
Industry Customer
51%efficiency improvement
in Compute related functions
20%improvement in
Application Development functions

42. Driver #3: Accelerate Application Deployment
Definition: Shortening the amount of time to deploy new applications &
features. (Hint: Think DevOps as a first step)
Common Measures: “time to deploy to production,” “deployment
frequency” or similar variants.

43. Driver #3: Accelerate Application Deployment
• Deployment cycle time reduced: 4 days
to hours
• +240% improvement in speed-to-market
• Customer functionality delivered 5x
faster
• Shortened it’s Build Phase by 90 daysPharmaceutical
Services Provider

44. Driver #4: Risk Mitigation
• Heightened security
• In the event of power failure
• Natural disaster
• Quick data recovery on AWS
• Greater administrative and security control using AWS IAM, cloud watch and cloud trail
• Greater security and performance improvements by using VPC and direct connect.
https://aws.amazon.com/solutions/case-studies/seaco/

45. Driver #5: Global Expansion
Definition: Improved capability to experiment rapidly with new products or to
expand in new regions/markets .
What’s the value?
• Rapid entry into a new market
• Lower cost of expansion
• Minimize exit costs

46. $(2,000,000)
$(1,000,000)
$-
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
1 2 3 4 5
On-Prem v. AWS Global Expansion
AWS 5-year Forecast On-Prem 5-year Forecast
Driver #5: Global Expansion
• Expansion time down
reduced in half
• Eliminated $2.4M in
global expansion costs
• Recognized additional
$5M in revenue
Net financial impact of leveraging AWS for was $8.4M over base case
Automotive Services Provider

47. Driver #6: M&A or Divestitures
Definition: Accelerating the value of bringing on new businesses or shedding
of assets to accelerate a customers’ business goals.
What’s the value?
• Speed to market
• Faster transition time
• Lower transition costs

48. Driver #6: Divestiture Example
1. Accelerate focus on
upstream business.
2. Reduce transition timeline
from 12 to 6 months
3. Sold the business for $2.6b
to reinvest in upstream
business.
“We had an obligation to Hess to make
sure that infrastructure could be
handed off in short order, both legally
and physically. Using the cloud enabled
us to meet these requirements and we
are thrilled with the results.”
- Jim McDonald, Lead Architect
Customer Benefits Impact

49. Business value of AWS – An independent
report
Source: https://d0.awsstatic.com/analyst-reports/IDC_Business_Value_of_AWS_May_2015.pdf

50. So you’re feeling pretty good.

51. Until your CFO shows up with the bill

52. Cost optimization is…
going from…
to…
pay for what you provision
pay for what you need

53. The Five Pillars of Cost Optimization
Right-Sizing Your
Instances
Pick the Right
Pricing Model
Increase
Elasticity
Measuring &
Monitoring
Match usage to
storage class

54. Video Resources (found on YouTube)
• re:Invent 2015 | (ISM402) Cost Optimisation at Scale
bit.ly/co17_video1
• re:Invent 2016 | (ARC310) Cost Optimising Your Architecture:
Practical Design Steps For Savings
bit.ly/co17_video2
• re:Invent 2016 | (ENT202) Driving AWS Cost Efficiency at Your Company
https://youtu.be/D3uRBcb81uE
• re:Invent 2014 | (ARC201) Cloud-Native Cost Optimisation
bit.ly/co17_video3
• re:Invent 2015 | (ISM309) Efficient Innovation:
High-Velocity Cost Management at Netflix
bit.ly/co17_video4

55. Other TCO and CO Resources
1. Online TCO Calculator: https://awstcocalculator.com
2. AWS Economics Center:
http://aws.amazon.com/economics/
3. Slide share: Value, TCO & Cost Optimization
https://www.slideshare.net/AmazonWebServices/value-tco-cost-optimisation-
on-aws

56. Thank you!
kaykrish@amazon.com