The Economics of AWS

For the past several years, many people have claimed that cloud computing can reduce a company's costs, improve cash flow, reduce risks, and maximize revenue opportunities. Until now, prospective customers have had to do a lot of leg work to compare the costs of a flexible solution based on cloud computing to a more traditional static model. Doing a genuine "apples to apples" comparison turns out to be complex — it is easy to neglect internal costs which are hidden away as "overhead".

We want to make sure that anyone evaluating the economics of AWS has the tools and information needed to do an accurate and thorough job. To that end, today we released a pair of white papers and an Amazon EC2 Cost Comparison Calculator spreadsheet as part of our brand new AWS Economics Center. This center will contain the resources that developers and financial decision makers need in order to make an informed choice. We have had many in-depth conversations with CIO's, IT Directors, and other IT staff, and most of them have told us that their infrastructure costs are structured in a unique way and difficult to understand. Performing a truly accurate analysis will still require deep, thoughtful analysis of an enterprise's costs, but we hope that the resources and tools below will provide a good springboard for that investigation.

Here's what we are releasing:

The Economics of the AWS Cloud vs. Owned IT Infrastructure. This paper identifies the direct and indirect costs of running a data center. Direct costs include the level of asset utilization, hardware costs, power efficiency, redundancy overhead, security, supply chain management, and personnel. Indirect factors include the opportunity cost of building and running high-availability infrastructure instead of focusing on core businesses, achieving high reliability, and access to capital needed to build, extend, and replace IT infrastructure.

 

The Amazon EC2 Cost Comparison Calculator is a rich Excel spreadsheet that serves as a starting point for your own analysis. Designed to allow for detailed, fact-based comparison of the relative costs of hosting on Amazon EC2, hosting on dedicated in-house hardware, or hosting at a co-location facility, this detailed spreadsheet will help you to identify the major costs associated with each option. We've supplied the spreadsheet because we suspect many of our customers will want to customize the tool for their own use and the unique aspects of their own business.

 

The second white paper is a User Guide for the Amazon EC2 Cost Comparison Calculator. This document is intended for use by financial decision makers as a companion to the calculator. The document and the associated calculator identifies and focuses on the direct costs of IT infrastructure and skips the indirect costs, which are far more difficult to quantify.

All these resources and tools are available in our AWS Economics Center. As always, feedback is always appreciated.

-- Jeff;

Comments

[Michael E. Driscoll]

Jeff,

An unappreciated cost, and one that could probably be quantified, is the cost of CPU 'rentorship' -- that is, the time and effort developers expend launching and killing instances.

This why, for example, reserved instances make more economic sense that is apparent by a simple calculation of 'percentage utilization' of the instance. There is quantifiable value in having an instance that is always available.

It's also why it's great to see Amazon release tools that ease the pain of kill/launch cycles, such as allowing for hibernation of instances in EBS.

In general, tools that allow for web-scale "engineering by example" -- e.g. create an instance, tune it, clone it, pause it / hibernate it -- will be yet another step that EC2 takes in saving the most precious resource on earth: developer time.

[Michael Versace]

Hi Jeff -

In the cost calculator, where would one find "compliance costs"? These would be cost associated with things like the performance of risk assessments, controls testing and certification, and information discovery.

Thanks
Mike