Domain 1.0: Cloud Concepts
1.4. Understand concepts of cloud economics
1.4 Understand Concepts of Cloud Economics
AWS Cloud economics refers to understanding how cloud financial models can bring cost-efficiency and financial benefits compared to traditional IT infrastructure.
Key Concepts in Cloud Economics:
- OpEx vs. CapEx:
- Capital Expenditure (CapEx): Traditional IT investments require upfront costs for hardware, software, and infrastructure, which depreciate over time.
- Operating Expenditure (OpEx): Cloud services follow a pay-as-you-go model, eliminating large upfront investments. Organizations pay only for what they use.
Cost Management Strategies
- AWS Pricing Models:
- On-demand pricing: Pay for resources on an hourly/secondly basis without long-term contracts.
- Savings Plans and Reserved Instances (RI): Commit to longer-term usage for a lower hourly rate. Reserved Instances offer discounts of up to 72%.
- Spot Instances: Bid for spare AWS capacity at significantly lower prices, suitable for flexible, non-critical workloads.
- AWS Free Tier:
- Allows customers to experiment with AWS services for free, helping businesses evaluate cloud services before committing to spend.
- TCO (Total Cost of Ownership) Calculator:
- AWS provides a tool to estimate cost savings by migrating workloads to AWS, comparing on-premises environments to cloud-based deployments.
AWS Cost Management Tools:
- AWS Cost Explorer: Visualize, understand, and manage AWS costs and usage patterns.
- AWS Budgets: Set custom cost and usage budgets for better financial planning.
- AWS Trusted Advisor: Provides real-time cost optimization recommendations.
- AWS Pricing Calculator: Allows customers to estimate costs for various AWS services.
Economies of Scale
- AWS leverages massive economies of scale, offering more competitive pricing compared to self-hosted infrastructures. As AWS grows its data centers and improves efficiencies, those cost savings are passed down to customers.