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Cloud Cost Optimization with AWS

AWS regularly cuts customer cost by reducing the price of their services.  This happened most recently with the price reduction of C4, M4 and R3 instances.  These instances saw a 5% price cut when running on Linux.  This was their 51st price reduction.  Customers are clearly benefiting from the scale that AWS can bring to the market.  Spot Instances and Reserved Instances are another way customers can significantly reduce the cost to run their workloads in the cloud.

Sometimes these cost savings are not as obvious, but they need to be understood and measured when doing a TCO calculation.  AWS recently announced Certificate Manager.  Certificate Manager allows you to request new SSL/TLS certificates and then manage them with automated renewals.  The best part is that the service is free!  Many vendors charge hundreds of dollars for new certificates, and AWS is now offering it for free.  The automated renewal could also save you time and money while preventing costly outages.  Just ask the folks over at Microsoft how costly a certificate expiring can be.

Another way AWS reduces the cost to manage workloads is by offering new features in an existing service.  S3 Standard – Infrequent Access is an example of this.  AWS offered the same eleven 9s of durability while reducing availability from four 9s to three.  Customers who are comfortable going from 52 minutes of downtime a year to 8.5 hours of downtime per year for objects that don’t need the same level of availability can save well over 50%, even at the highest usage levels.  When you add features like encryption, versioning, cross-region replications and others, you start to see the true value.  Building and configuring these features yourself in a private cloud or in your own infrastructure can be costly add-ons.  AWS often offers these add-ons for free or only charges for the associated use, like the storage cost for cross-region replication.

Look beyond CPUs, memory, and bytes on disk when calculating the savings you will get with a move to AWS.  Explore the features and services you cannot offer your business from within your own datacenter or colocation facility.  Find a partner like 2nd Watch to help you manage and optimize your cloud infrastructure for long-term savings.

-Chris Nolan, Director of Product

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Introducing the Scheduled Reserved Instance

Amazon Web Services will continue to lower its prices for IaaS (Infrastructure as a Service) and PaaS (Platforms as a Service) for a number of different reasons. But that doesn’t mean that your public cloud costs will go down over time. Over the past 2 years I’ve seen SMB’s and Enterprise firms surprised by rising cloud costs despite the falling rates. How does this happen? And how can your business get ahead of the problem?

Let’s examine how AWS can lower its rates over and over again.

First is the concept of capacity planning, which is much different in the public cloud when compared to the traditional days of voice and data infrastructure. In the “ole days” we used the 40-60-80 rule. Due to the lengthy lead times to order circuits, rack equipment, run cables and go-live, enterprise IT organizations used 40-60-80 as triggers for when to act on new capacity building activities. At 40% utilization, the business would begin planning for capacity expansion. At 60% utilization, new capacity would be ordered. At 80% utilization, the new capacity would be turned up and ready for go-live. All this time, IT planners would run around from Business Unit to Business Unit trying to gather their usage forecasts and growth plans for the next 12-24 months. It was a never ending cycle. Wow – that was exhausting!

Second is the well-known concept of Economies of Scale, which affords AWS cost advantages due to the sheer size, scale and output of its operations globally. Simply put, more customers will lead to more usage, and Amazon’s fixed costs will be spread over more customers. As a result, the cost per unit (EC2 usage hour, Mbps of Data Transfer, or Gigabyte of S3 storage) will decrease. A lower cost per unit allows Amazon to safely lower its prices and lead the market in public cloud adoption.

In the public cloud world, Amazon can gauge customer commitment, capacity planning and growth estimates by offering reservations for its infrastructure – otherwise known as Reserved Instances. Historically Reserved Instances come in six different types – No Upfront, Partial Upfront and Full Upfront (referring to the initial down payment amount) and offered in a 1-year or 3-year commitment. No Upfront RI’s have the lowest discount factor over the commitment term, and Full Upfront RI’s have the highest discount factor. With the help of Reserved Instances, AWS has been able to plan its capacity in each region by offering customers a discount for their extended commitment. Genius!

But it gets better. In January, AWS released a new type of Reserved Instance that gives the customer more time control and also provides Amazon with more insight into what time of day the AWS resource will be used. Why is this new “Scheduled Reserved Instance” important?

Well, a traditional RI is most effective when the instance runs all day and all year. There is a breakeven point for each RI type, but for simplicity let’s assume that the resource should be always-on to achieve the maximum savings.

However a Scheduled Reserved Instance allows the customer to designate which hours of which day the resource will run. Common use cases include month-end reporting, daily financial risk calculations, nightly genome sequencing, or any regularly scheduled batch job.

Before the Scheduled RI, the customer had 3 options – (1) run the compute on-demand and pay the highest price, (2) reserve the compute with a Standard RI and waste the time when the job’s not running (known as spoilage), or (3) try to run it on Spot Instances and hope their bid is met with available capacity. Now there’s a fourth option – The Scheduled Reserved Instance. Savings are lower, typically in the 5-10% range compared to on-demand rates, but the customer has incredible flexibility in scheduling hours and recurrence. Oh yeah – and did I mention that AWS can now sell even more excess capacity at a discount?

With so many options available to AWS customers, it’s important to find an AWS Premier Partner that can analyze each cloud workload and recommend the right mix of cost-reducing techniques. Whether the application usage pattern is steady state, spiky predictable, or uncertain-unpredictable, there is a combination of AWS solutions designed to save money and still maintain performance. Contact 2nd Watch today to learn more about Cloud Cost Optimization Reports.

-Zach Bonugli, Managed Cloud Specialist

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