PH2- Cloud Economics and Billing

Prelim Handout 02

The type of model AWS pricing is based on, in which customers pay for the resources they consume.

A utility-style model

What the specific pricing amount depends on, per the handout.

The service, configuration, usage level, and pricing option selected

The three fundamental drivers that commonly influence cloud costs, according to the handout.

Compute, storage, and outbound data transfer

The typical basis of charge for the Compute cost driver.

Charged by the hour or second, depending on the service and instance type

The typical basis of charge for the Storage cost driver.

Typically charged according to the amount of data stored, usually per gigabyte

The typical basis of charge for the Data Transfer cost driver.

Inbound transfer is generally free, while outbound transfer is commonly charged per gigabyte and aggregated across services

What is often free but may have exceptions, regarding data transfer between services.

Data transfer between services in the same Region

Why customers should verify current rates before deploying a solution.

Pricing rules differ among services and locations

What the AWS pricing philosophy is built around.

Flexibility

What customers can do without being required to enter long-term contracts for on-demand resources.

Start or stop using services when needed

The four principles that summarize the AWS pricing philosophy.

Pay for what you use, pay less when you reserve, pay less when you use more, and pay even less as AWS grows

The pricing principle where customers pay only for the services and resources they consume.

Pay for What You Use

What Pay for What You Use reduces the need for, regarding large upfront spending.

Large upfront spending on servers, software licenses, facilities, and other physical infrastructure

What Pay for What You Use allows organizations to redirect time and resources toward.

Innovation, application development, and other business priorities

The pricing principle where customers can reserve capacity and receive a lower price than equivalent on-demand usage.

Pay Less When You Reserve

AURI

All Upfront Reserved Instance

The reserved option with the largest upfront payment and generally the largest discount.

All Upfront Reserved Instance (AURI)

PURI

Partial Upfront Reserved Instance

The reserved option where part of the cost is paid upfront, with a lower discount than AURI.

Partial Upfront Reserved Instance (PURI)

NURI

No Upfront Reserved Instance

The reserved option with no upfront payment and a smaller discount than the other reserved options.

No Upfront Reserved Instance (NURI)

What reserved capacity can help organizations manage more predictably, and support policies that require longer-term commitments.

Budgets

The pricing principle where some services provide volume-based discounts.

Pay Less When You Use More

Under this pricing structure, the cost per unit decreases as usage increases.

Tiered pricing

What storage services may offer several options based on, enabling customers to balance cost, performance, security, and durability.

Access frequency and performance requirements

The pricing principle where AWS can reduce the cost of providing services as it expands its infrastructure and improves operational efficiency.

Pay Even Less as AWS Grows

How savings from economies of scale may be passed on to customers, per this pricing principle.

Through lower prices or through higher-performing resources that replace earlier resources without an additional charge

Pricing that can be made available for high-volume projects with unique technical or business needs.

Custom Pricing

Gives new customers an opportunity to gain hands-on experience with selected services and usage levels.

AWS Free Tier

What may result in charges if a customer exceeds them under the AWS Free Tier.

Usage beyond eligible services and specified limits

AWS services that do not have a direct service charge, examples given in the handout.

Amazon VPC, AWS Identity and Access Management (IAM), AWS Elastic Beanstalk, AWS CloudFormation, automatic scaling services, AWS OpsWorks, and consolidated billing

Although automatic scaling has no separate charge, what is billable regarding this service.

Additional compute instances launched by the service

What on-premises environments involve, according to the handout.

Facilities, equipment, software, contracts, maintenance, and administrative responsibilities

What cloud environments use, that can scale with demand.

Provider-managed infrastructure and consumption-based costs

Whether on-premises infrastructure requires purchases of equipment, software, licenses, facilities, and maintenance resources, or uses infrastructure built and maintained by the cloud provider.

On-Premises Infrastructure - requires these purchases

Whether cloud infrastructure includes fixed capital expenses and long planning cycles, or uses consumption-based costs generally avoiding large upfront expenses.

Cloud Infrastructure - uses consumption-based costs

Under on-premises infrastructure, why scaling up may be costly and time-consuming, and why scaling down may not reduce this.

Fixed costs

Under cloud infrastructure, how resources can be increased or reduced.

More easily according to demand

Under on-premises infrastructure, what organizations manage and refresh.

Physical resources

Under cloud infrastructure, what organizations use, allowing them to focus more on applications and business outcomes.

Self-service infrastructure

TCO

Total Cost of Ownership

A financial estimate used to identify the direct and indirect costs of a product, system, or infrastructure environment.

Total Cost of Ownership (TCO)

What TCO includes together with the purchase or service cost.

The costs associated with operating, administering, maintaining, and supporting the solution

What organizations use a TCO comparison for, per the handout.

Budgeting and for building a business case for migration or another deployment decision

The examples of costs listed under Server Costs in the TCO Considerations table.

Server hardware, rack chassis, power distribution units, switches, operating systems, virtualization licenses, maintenance, and facilities

The examples of costs listed under Storage Costs in the TCO Considerations table.

Storage disks, storage networks or switches, storage administration, power, cooling, and space

The examples of costs listed under Network Costs in the TCO Considerations table.

LAN switches, load balancers, bandwidth, network administration, facilities, power, cooling, and space

The examples of costs listed under IT Labor Costs in the TCO Considerations table.

Server, storage, network, security, application, and operations administration

The type of costs that include visible expenses such as power, floor space, hardware, software, and operations.

Direct costs

The type of costs that include supporting network and storage infrastructure, administrative work, upgrades, maintenance, security, taxes, and other expenses that may be difficult to isolate.

Indirect costs

A planning tool used to estimate the monthly cost of a proposed AWS solution.

AWS Pricing Calculator

What AWS Pricing Calculator allows customers to do before building a solution.

Model a solution before building it, explore price points and calculations, compare configuration alternatives, and identify instance types or contract terms that meet their requirements

A capability of AWS Pricing Calculator related to reducing costs.

Identify possible opportunities to reduce costs

A capability of AWS Pricing Calculator related to organizing services.

Organize services into named groups based on departments, cost centers, products, or architectures

The three figures a calculator estimate commonly displays.

The total for the first 12 months, the total upfront payment, and the estimated monthly cost

ROI

Return on Investment

What organizations may examine to understand the broader value of cloud adoption beyond a TCO analysis, including hard and soft benefits.

Return on Investment (ROI)

The type of benefits that are direct and visible savings or efficiency improvements.

Hard benefits

The type of benefits that are more difficult to quantify but may create substantial organizational value through speed, flexibility, productivity, and improved service delivery.

Soft benefits

A hard benefit example listed in the handout regarding compute, storage, networking, and security spending.

Reduced spending on compute, storage, networking, and security

A hard benefit example listed in the handout regarding hardware and software.

Reduced hardware and software purchases

A hard benefit example listed in the handout regarding backup and disaster recovery.

Reduced operational, backup, and disaster recovery costs

A hard benefit example listed in the handout regarding operations work.

Reduced need for some routine operations work

A soft benefit example listed in the handout regarding services and applications.

Reuse of existing services and applications

A soft benefit example listed in the handout regarding developers.

Increased developer productivity

A soft benefit example listed in the handout regarding customers.

Improved customer satisfaction

A soft benefit example listed in the handout regarding business processes and reach.

More agile business processes and increased global reach

A free account management service that enables customers to consolidate multiple accounts into an organization and manage them centrally.

AWS Organizations

What AWS Organizations supports, to help address budgetary, security, and compliance requirements.

Account management, policy-based controls, automated account creation, and consolidated billing

What an organization begins with, in AWS Organizations' structure.

A root

OU

Organizational Unit

Containers for accounts that may also contain other OUs, creating a hierarchy similar to an inverted tree.

Organizational units (OUs)

In the AWS Organizations hierarchy, what plays the role of the top, the branches, and the leaves respectively.

The root at the top, OUs as branches, and accounts as the leaves

The number of OUs each account can belong to, and the number of parents each OU has.

One OU per account, and one parent per OU

How policies attached to a node in the AWS Organizations hierarchy flow, affecting the OUs and accounts beneath that node.

Downward

A key feature of AWS Organizations related to centrally controlling access to AWS services across multiple accounts.

Create service control policies

A key feature of AWS Organizations related to payment and charges.

Use one payment method and a consolidated view of charges across accounts

A key feature of AWS Organizations related to pricing discounts.

Benefit from aggregated usage and possible volume pricing discounts

SCP

Service Control Policy

What AWS Organizations does not replace, since it works alongside this for controlling access within an account.

AWS Identity and Access Management (IAM)

Control access for users, groups, and roles within an account, allowing or denying access to a service, a specific resource, or an individual API action.

IAM policies

Operate at the organization level, allowing or denying access to services for individual accounts or groups of accounts in an OU.

Service control policies (SCPs)

What an attached SCP affects within the affected account, including the account root user.

The IAM users, groups, and roles

What SCPs establish, while IAM policies grant or restrict permissions within an account.

Organizational guardrails

The first step in setting up an AWS organization, involving the current AWS account.

Create your organization with your current AWS account as the primary account

The second step in setting up an AWS organization, regarding organizational units.

Create two organizational units in your new organization and place the member accounts in those OUs

The third step in setting up an AWS organization, involving restrictions on delegated actions.

Create service control policies

The fourth step in setting up an AWS organization, involving signing in as different role users.

Test your organization's policies

The tool that can alternatively be used to test and troubleshoot IAM and resource-based policies attached to IAM users, groups, or roles in an AWS account.

The IAM policy simulator

The methods through which AWS Organizations can be managed.

The AWS Management Console, the AWS Command Line Interface, software development kits, and the HTTPS Query API

Used to pay bills, monitor usage, analyze spending, and plan future costs.

AWS Billing and Cost Management

Provides a high-level view of month-to-date expenditures and cost trends.

The AWS Billing Dashboard

Shows the amount spent during the previous month, estimated month-to-date costs, and the forecasted total for the current month.

The Spend Summary

Shows which services account for the largest portion of spending.

The Month-to-Date Spend by Service view

Lists costs incurred during the previous month for each service, broken down by Region and linked account.

The Bills page

Displays cost and usage data through charts and reports, helping customers visualize spending over time.

AWS Cost Explorer

A capability of AWS Cost Explorer related to forecasting.

Forecast likely spending for upcoming months

A capability of AWS Cost Explorer related to dimensions.

Analyze cost and usage according to dimensions such as account or Availability Zone

Uses cost visualization data to show the current status of budgets and forecast estimated expenses.

AWS Budgets

What customers can create with AWS Budgets, with custom start and end dates.

Monthly, quarterly, or yearly budgets