Blog_Is your corporate capital expenditure rising

IT Costs Shifts from Fixed to Variable

In past corporate scenario, hardware capital expenditure costs were huge upfront costs for the company, and they make purchasing and cost models predictable. However, this usually results in a waste of IT resources because the company must purchase enough servers to support their busiest hours, and unfortunately, these servers were idle for most of the year.

From experiences in the past, hardware purchase plans and costs were calculated every quarter or year, but with the cloud, customers can now adjust computing resources and services anytime, anywhere, and only pay for the services they use . Because the cloud enables companies to scale on demand, they pay only for the resources they use, which minimizes waste and shifts from a fixed cost model to a variable cost model.

Cost Optimization Method for Cloud Environment

Cost optimization is a continuous improvement and refinement process in your cloud environment. From the initial architecture design to the actual service operation, you can achieve cost optimization through the following suggestions during the process of maintaining your workload:


1.Adjust Your Service Specifications

Proper sizing is using the lowest AWS service resources, but still meeting the technical specifications of a specific workload; you can optimize the cost by adjusting the size of the resources. The tuning activity takes into account all the resources of the system and all the attributes of each individual resource. Specifications adjustment may be a continuous improvement process, triggered by changes in usage patterns and external factors such as falling AWS prices or new AWS resource types.

AWS provides APIs, SDKs, and other features, which can modify resources according to changes in demand. For example, on Amazon EC2, you can perform a stop and start operation to allow changing the instance size or type. On Amazon EBS, Elastic Volume allows you to increase the volume size or adjust performance while still in use. It can provide higher performance by increasing per IOPS and / or throughput, or reduce cost by changing the volume type.


2.Save Cost Through Reserved or Spot Instance Mechanism

Reserved Instance Mechanism

Reserved Instances (RI) allow customers to pre-invest in usage for the next year or next three years, and the cost can be up to 75% lower than on-demand.

With the standard reserved instance type, customers can obtain the maximum discount if they ensure the deployed instances match the RI instance. In addition, when multiple accounts are billed under the state of consolidated billing, RI’s pricing discount can be shared  by the purchasing account with other accounts.

When you purchase RI, the more you prepay, the more discounts you get. There are three ways to pay in the reserved instance mechanism:

(1) No upfront: No upfront payment is required, and RI is billed on a monthly basis.

(2) Partial upfront: Partial upfront payment is made in advance, and no matter whether RI is used or not, the hourly discount will be used for the usage hours.

(3) All upfront: Full payment in the beginning, no additional costs are required regardless of how many hours it is used within the purchased RI usage period.


EC2’s reserved instances are divided into standard and convertible types:

(1) Standard Reserved Instance (Standard RI): Allows customers to modify the Availability Zone (AZ), network platform, and instance size of Linux RI.

(2) Convertible Reserved Instance (Convertible RI): Allows customers to convert a convertible RI into another instance with new attributes.

Amazon CloudFront

The CDN service in AWS is Amazon CloudFront. Amazon CloudFront provides developers and enterprises a simple way to publish content to end-users through a global network of nodes to achieve low-latency high-speed data transmission. With Amazon CloudFront services, there is no minimum usage limit, which effectively controls the cost of content delivery and distribution for customers, providing flexibility and speed. You can also link Amazon CloudFront with S3, EC2, and ELB on AWS. If you use these services as the original AWS server, you do not need to pay for the transfer between these services and Amazon CloudFront.


Following are some benefits of Amazon CloudFront

Fast: Caches your copy of static content through Edge Locations near the viewer’s nodes around the world, shorten the download delay for viewers, and complete large-scale content delivery tasks instantly.

High integration: It can be connected to services on AWS, such as S3, EC2, ELB, Route 53, and Elemental.

Affordable: No commitment on minimum usage, suitable for any content type, such as static content, dynamic content, streaming media, or apps.

Reliable: Automatically route end users to the nearest available Edge Locations as required by network conditions. The original request from the Edge Location to the original server is transmitted through a continuously monitored network path and optimized for availability and performance.


Spot Instance Mechanism

Spot Instance allows customers to use spare Amazon EC2 computing power at discounted prices up to 90% over on-demand pricing. If the auction price exceeds the customer’s highest bid or capacity is unavailable, Spot instance will be terminated or stopped. The Spot price is determined by long term trends in supply and demand for EC2 spare capacity. AWS uses the describe-spot-price-history command and the AWS management console to publish the current bid price and historical price of the auction instance. Spot Instance can meet your workload requirements well. These workloads can be interrupted by on-demand instances and replaced with on-demand instances without backing up and restoring data, or you can continuously save data to permanent storage services. You can use Spot Instance to save costs for services that are not as important to the company (for example: experimental service operations, services that can be interrupted).


3.Analyze costs and usage through AWS services

Amazon CloudWatch: Monitors resources and alarms to provide the correct data for sizing adjustment. You can use CloudWatch and Amazon CloudWatch Logs custom logs to perform resource analysis. In these custom logs, you can capture custom metrics for any component in the system and use them to perform correct size analysis.

AWS Trusted Advisor: Examines your AWS environment and find opportunities to bring your environment to AWS best practices by eliminating unused or idle resources and suggesting improvements.

Cost Explorer: Allows you to analyze historical AWS expenditure data using a graphical interface. Cost Explorer provides you with interactive graphical reports, allowing users to more easily view and analyze your historical spending on AWS. The information behind these reports is updated every day, so you can view the latest expenses information.

Next-Generation AWS Cloud Managing Services and Cost Optimization

Cloud platforms provide tremendous opportunities to increase agility, accelerate innovation, and reduce total cost of ownership (TCO). The most successful organizations migrating from on-premise to the cloud are often those that have developed a comprehensive strategy to adopt this new IT operating model before the move. Transitioning from a large number of up-front investment models for data centers in the past to AWS models based on consumption patterns requires changes in tools, processes, and ways of thinking to ensure effective cost management.

When customers choose AWS MSP partners to help you manage the cloud environment, they help customers to continuously monitor performance, usage conditions and patterns to discover opportunities to save money, improve performance, and utilize new tools that were released.

For example, the next-generation AWS MSP uses cost management tools to determine that your company can use Amazon EC2 Reserved Instances to save costs, or discover that you may not need to open instances at specific times during the day, such as test / development instances.

AWS MSP partners will guide customers to view their detailed cloud usage and performance reports, and proactively provide cost optimization strategies to help you save costs and improve performance.