Total Cost Of Ownership

Total Cost of Ownership (TCO)

On-premises versus cloud comparison:
- Traditional Infrastructure
  - Equipment
  - Resources and administration
  - Cost
  - Contracts
  - Scale up and down
- AWS Cloud
  - No upfront expense—pay for what you use
  - Improve time to market and agility
  - Self-service infrastructure
What is Total Cost of Ownership (TCO)?
- “Financial estimate to help identify direct and indirect costs of a system”
- Why use TCO?
  - To compare costs of running infrastructure on-premises versus on AWS
  - To budget and build business case for moving to cloud
TCO considerations include:
- Server Costs
  - Hardware: Server, rack chassis, PDUs, TOR switches (and maintenance)
  - Software: OS, virtualization licenses (and maintenance)
  - Server administration costs
  - Facilities cost: Space, Power, Cooling
- Storage Costs
  - Hardware: Storage disks, SAN or FC switches
  - Storage administration costs
  - Facilities cost: Space, Power, Cooling
- Network Costs
  - Network hardware: LAN switches, load balancer bandwidth costs
  - Network administration costs
  - Facilities cost: Space, Power, Cooling
- IT Labor Costs
On-premises versus all-in-cloud example:
- Sample comparison shows 96% savings by moving to AWS
- 3-year total savings: $159,913
- On-premises solution continues to incur costs whether capacity is used
- AWS solution commissioned when needed and decommissioned when resources no longer in use
AWS Pricing Calculator
- Estimate monthly costs
- Identify opportunities to reduce monthly costs
- Model solutions before building them
- Explore price points and calculations behind estimate
- Find available instance types and contract terms that meet needs
- Create and name groups of services for organization
Reading an estimate:
- First 12 months total - combined upfront and monthly estimates
- Total upfront - pay as you set up AWS stack
- Total monthly - spend every month while running AWS stack
- Within groups, see service-specific costs
Additional benefit considerations:
- Hard benefits
  - Reduced spending on compute, storage, networking, security
  - Reductions in hardware and software purchases (capex)
  - Reductions in operational costs, backup, disaster recovery
  - Reduction in operations personnel
- Soft Benefits
  - Reuse of services and applications
  - Increased developer productivity
  - Improved customer satisfaction
  - Agile business processes that quickly respond to opportunities
  - Increase in global reach
Delaware North case study:
- Background:
  - Growing global company with 200+ locations
  - 500 million customers, $3 billion annual revenue
- Challenge:
  - Meet demand to rapidly deploy new solutions
  - Constantly upgrade aging equipment
- Criteria:
  - Broad solution to handle all workloads
  - Ability to modify processes to improve efficiency and lower costs
  - Eliminate busy work (such as patching software)
  - Achieve positive ROI
- Solution:
  - Moved on-premises data center to AWS
  - Eliminated 205 servers (90%)
  - Moved nearly all applications to AWS
  - Used 3-year Amazon EC2 Reserved Instances
- Results:
  - $3.5 million savings over 5 years
  - Enhanced 24/7 business operations
  - Resource optimization (security compliance, disaster recovery)
  - Speed to market (1 day vs. 2-3 weeks to provision new businesses)
  - Operational efficiency (minutes vs. weeks to deploy services)

TCO analysis helps organizations compare on-premises and cloud costs, considering both hard and soft benefits. AWS Pricing Calculator provides tools to estimate costs and identify savings opportunities.