What can a cloud practitioner use the AWS Total Cost of Ownership TCO calculator?
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Organizations often assume that switching to Amazon Web Services (AWS) will automatically reduce their on-premises spending. Certainly, cloud-based services like AWS' Infrastructure-as-a-Service (IaaS) can offer significant cost savings. Yet overspending on AWS is quite common. How can you tell if moving to AWS is the right decision? What figures would you use to quantify and justify that choice to decision-makers? Enter Total Cost of Ownership (TCO) on AWS. We have previously discussed what is and how to perform a cloud TCO. This guide focuses specifically on calculating TCO on the AWS public cloud. Table Of Contents
What Is AWS Total Cost Of Ownership?An AWS Total Cost of Ownership analysis calculates the various costs associated with migrating, hosting, running, and maintaining applications, workloads, and data on the AWS public cloud. It involves adding up all the costs associated with using AWS resources and comparing the result to the TCO of an alternative platform, either on-premises or cloud-based. Each organization's costs will vary according to the AWS services used, the type of workloads, and the method of purchasing AWS resources. Why Is It Important To Monitor TCO On AWS?An organization can determine if moving to the cloud is a better business decision by comparing on-premises and AWS TCO. As an organization monitors TCO on AWS, it can better understand AWS’ lifetime costs and value. This can indicate the actual return on investment in deploying AWS cloud infrastructure. Organizations also often calculate TCO over three to five years. The goal is usually to compare the costs of deploying on AWS with its alternatives, such as on-premises setups, Azure Cloud Services from Microsoft, and the Google Cloud Platform (GCP). Here's an angle you might not have considered. When you are a cloud-based organization that overspends monthly, you might want to consider the AWS TCO before repatriating your workloads or choosing a hybrid cloud approach. So, how do you calculate Total Cost of Ownership on AWS? Since the cloud is inherently dynamic, calculating TCO can be challenging. That said, it is less daunting when you know where to begin. Here are the steps you can take to calculate your AWS TCO. Step 1: Calculate your existing infrastructure costConsider your current infrastructure budget. Has it included all direct and indirect costs of supporting your existing on-premises infrastructure? If yes, you already have a good idea of your current on-premises TCO. If not, here’s how to go about it. Start by estimating your current workload. This includes network bandwidth, servers, storage, and databases. Next, calculate the cost of each of these cost centers:
Step 2: Consider the existing system’s opportunity cost and hidden costsThis step urges you to take a deep look at hidden costs you incur from issues such as downtime and slow speeds — and the cost implication of losing those hours. Those are intangible hidden costs that could give your competitors an advantage. They also include buying extra hardware to meet periodic workload surges. Consider that some of the capacity you buy could sit idle during "normal" and off-peak operations. Now consider that using those funds to finance new features or a better customer experience would have increased revenue and customer retention. It may also be necessary to completely renovate a physical data center if you want to upgrade its hardware and software to support a new service, add a product feature, or improve performance. The old system's components would need to be disassembled, disposed of, or recycled as well. Step 3: Calculate AWS migration costAn AWS migration comprises three phases, each with its unique costs: Credit: AWS
Also included are the costs specific to your chosen AWS cloud migration strategy. Consider this. A lift and shift approach may limit how many cloud-native capabilities you can utilize. But it is a faster and less costly strategy than refactoring, which involves re-architecting your application to take full advantage of cloud-native technologies that the AWS infrastructure supports. Step 4: Calculate monthly AWS chargesThree factors will affect your organization's monthly AWS bill:
After analyzing the types of workloads you'll be deploying and the appropriate AWS resources you'll need, you can use the AWS pricing calculator to estimate how much you can expect to spend. Include fees for consultation, training, and other personnel and support services you need. Step 5: Compare AWS TCO vs. current on-premises TCOOnce you have the AWS TCO versus existing on-premises TCO figures, it is easy to compare them side-by-side. However, you need to consider the intangibles as well. We’ll explain. If you have a lot of idle capacity that's always on, an on-premises solution will be more forgiving than the public cloud. Like many companies, you may also not want to move every workload to the cloud. Credit: Virtana You might also be among the organizations that would never shift certain workloads to the cloud: Credit: 2021 State of Hybrid Cloud and FinOps You might also keep specific workloads in-house due to security reasons, maintenance concerns, or compliance requirements. On the other hand, you might want to consider the intangible benefits of migrating to AWS. AWS provides nearly limitless cloud computing capacity. On-demand. This is excellent for instant scalability, but spinning up instances at the speed of the cloud can quickly spiral costs out of control. But:
So, considering indirect costs as part of each TCO calculation can help you decide which environment to go with. 3 Tools For Calculating AWS TCOGetting all the TCO data, compiling a comprehensive comparison, and comparing both sets of total costs can be overwhelming. Fortunately, automation can save you time, effort and minimize errors. 1. CloudZeroCloudZero helps calculate Total Cost of Ownership on AWS in a unique way. It empowers AWS Migration Acceleration Program (MAP) customers by providing visibility throughout the AWS migration process. It enables them to ensure they are correctly tagging infrastructure to take advantage of all available incentives and savings. CloudZero is for you if you want to keep track of migration expenses in real-time to prevent cost surprises. You can drill down to any workload, account, or service to view the cost of each, empowering you to respond accordingly. Also, CloudZero's Cloud Cost Intelligence solution provides real-time cost monitoring post-migration. Teams can use it to slice and dice cloud costs into granular insights, like cost per customer or cost per feature. Besides, CloudZero sends your team members timely alerts about cost anomalies via Slack to help prevent overspending. 2. AWS Total Cost of Ownership (TCO) Calculator (AWS Pricing Calculator)Credit: Parktpub This native TCO calculator enables users to see how AWS calculates the prices for its services. The tool shows prices per group of services or per service, broken down by different parts of the user’s architecture. Results are sharable, revisitable, and downloadable as CSV files for further analysis. 3. CC AnalyzerCloudChomp’s CC Analyzer is an AWS migration assessment tool. It promises to help users build a business case for cloud migration based on Total Cost of Ownership. One of its key features is automated discovery tools for collecting data in on-premises data centers. It also calculates on-premises TCO, target resource right-sizing, and license analysis. Lower Your TCO With CloudZero’s Cost Intelligence PlatformEnsuring a lower TCO in cloud computing, in the long run, means applying cloud optimization best practices to ensure that your cloud costs stay within control. Companies often move to the cloud with the notion that it’s going to be cheaper. However, the on-demand nature of cloud services means your cloud bill could easily spiral out of control, so your monthly bill could be the same or more expensive than your on-premise costs. CloudZero is a cost intelligence platform that enables a deep understanding of your cloud unit economics and provides a continuous feedback loop to your engineering team while you migrate. With CloudZero’s Migration Cost Monitoring, you can monitor costs and track progress in real-time as you move workloads to AWS. Your engineers can then see the cost impact of their decisions almost immediately, making them more cost-conscious and eager to reduce costs. Additionally, for AWS MAP customers, CloudZero offers a standalone dashboard to track credits and maximize savings — available in the AWS Marketplace. CloudZero's Cloud Cost Intelligence approach enables organizations to connect cloud costs to specific business indicators, such as the cost per customer, feature, and development project. Engineers and finance can use this breakdown to understand how their activities impact the company and to find ways to optimize spending. to see the power of CloudZero for yourself. What is AWS TCO used for?To assist potential customers with planning a migration, TSO Logic (an AWS company) provides data-driven Total Cost of Ownership (TCO) and cost modelling analysis, so customers can plan for their ideal future state on AWS.
Which of the following statements about the total cost of ownership TCO calculator is accurate?Which of the following statements about the Total Cost of Ownership (TCO) calculator is accurate. The TCO calculator will make suggestions and recommendations on appropriate resource types based on the user's input values and settings.
What is TCO calculator in AWS?AWS Pricing Calculator allows you to explore AWS services based on your use cases and create a cost estimate. You can model your solutions before building them, explore the price points and calculations behind your estimate, and find the available instance types and contract terms that meet your needs.
What costs are included in AWS TCO?AWS costs depend on three key components: compute, outbound data transfer, and storage. The AWS pricing model and the product's specific characteristics determine the charges for each of these components. Generally, AWS does not charge for inter-service data transfer within a region or inbound transfer.
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