Understanding Cloud Costs Gets Easier: Amazon Web Services Rolls Out New TCO Calculator

Dave Bartoletti
Vice President, Principal Analyst
June 4, 2014

Two years ago, I published one of my most popular reports, Understand The True Cost Of Cloud Services. In it I laid out a model to help compare current infrastructure costs against the costs of running equivalent workloads at a traditional hosting provider and in the AWS public cloud. This type of comparison is often the first step in a company’s journey to cloud. Before you start moving workloads to any cloud provider, are you sure the cost savings are really there? The answer isn’t always obvious, and depends on measuring a set of critical metrics, including:

·       Your application load patterns

·       Your current operations team staff costs

·       Your virtualization consolidation ratio

·       Your storage and network hardware, license and administrative costs

·       Your facilities (space, power, cooling) costs

The problem with cloud cost modeling is that it can be hard to get accurate estimates for current costs – find the right people, ask them for cost details, work through the numbers, verify accuracy, project future costs, etc. – and things that take too long just don’t get done. In our model, we used our Relative Cost of Operations methodology to simplify analysis and focus on what changes when you shift to cloud infrastructure. I also faulted some of the public cloud providers for low-balling cloud costs or hiding assumptions in their own on-line cost comparison tools.

Amazon Web Services has just released an updated version of its own AWS TCO (Total Cost of Ownership) Calculator, and I like what I see. Amazon has created a comprehensive – yet transparent and flexible – on line calculator that makes it easier to get to a realistic comparison of on-prem to cloud instance costs without spending months gathering data or creating your own spreadsheet models. It offers reasonable and validated assumptions where they make sense, and takes into account hardware consolidation you’ve already achieved with virtualization. (The previous AWS calculator only compared AWS instance costs to an equivalent number of physical servers.)

By starting with a simple set of inputs, then clearly explaining the assumptions made and offering ways to tweak on-premise management costs and on-premises vs. colocation comparisons, the calculator should make it easier to answer the lingering question, “is it really cheaper to run in AWS?” Of course, a cost comparison is just the first step in your cloud journey. Your second step should include a strategic rightsourcing exercise to identify applications best suited for outsourcing to traditional or cloud service providers. Download James Staten’s updated Strategic Rightsourcing Application Portfolio Analysis Tool to get started.

And watch this space: I’ll be updating Forrester’s cloud cost modeling tool later this year, adding guidance for comparing costs of infrastructure services as well as software-as-a-service applications. 


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