Question

This is Project #5 question from Part C: Financial Analysis Tools on page 513 of Scott Tilley, Harry J. Rosenblatt, Systems Analysis and Design, 11^th Edition:

5. Explore the TCO calculator shown in Figure C-1 that Amazon.com provides for estimating value in migrating to the cloud using their AWS infrastructure for a hypothetical product. Comment on the usefulness of such a tool to the systems analyst.

Figure C-1 shows a TCO calculator to compare the costs of running applications on-premises or in the cloud using Amazon.com's AWS infrastructure. Because migrating to the cloud is a complex activity, such calculators can greatly help the systems analyst make informed decisions. Google, IBM, Microsoft, and other vendors provide similar TCO guidance related to the cloud and other types of large-scale IT projects. Figure C-1 Amazon.com offers a calculator to compare the TCO of running applications on-premises or in the cloud using AWS AWS Total Cost of Ownership (TCO) Calculator Use this calculator to compare the cost of running your applications in an on-premises or traditional hosting environment to AWS. Describe your on-premises or hosting environment configuration to produce a detailed cost comparison with AWS. w 654 004 1. Describe your existing or planned on 2. Get an instant summary report which 3. Download a full report including premises or hosting infrastructure in hows you the three year TCO four steps, or enter detailed configurations. detailed cost breakdowns, Methodology comparison by cost categories. Assumptions, and FAQ or store the report in Amazon S3 for sharing with others. Source: Amazon Web Services, Inc.

Answer 1

A system analyst is the person who analyses and design techniques to solve problems using IT. He also researches problems, plans solutions, recommends software and systems and train and motivate others to use those systems. TCO is an estimate of all the direct and indirect costs involved in acquiring and operating a product or system over its lifetime. It typically includes the actual costs of procurement, management, maintenance and decommissioning of hardware resources over their useful span for some certain period of time. Sometimes, it becomes more difficult to come up with accurate TCO model since we have different hardware configurations today. The customers too struggle in comparing the two models especially when they are trying to compare the TCO of a web application scenario that includes compute, storage, network access, load balancing and all the complements of the architecture.

Let us consider an example that if I want to refresh hardware and to renew contract with same facility, let the below specifications be my existing infrastructure:

Database server: MySql, 16 Gb RAM

Web server: ubuntu linux, 4 Gb RAM

Storage: 4TB san

Network: Firewalls, switches and telecom providers based on needs

Usage: cyclical usage pattern

An accurate calculation of this is really going to be difficult.

Using this TOC calculator tool, we can exactly input the above said configurations and we can adjust accordingly based on our assumptions. This tool should help anyone with even a base level of familiarity with infrastructure to generate a fact-based apples-to-apples TCO comparison for on-premises and AWS infrastructure. The tool is simple to use and allows you to adjust your assumptions based on your current data center setup.

Let's have a look starting on-premises cost calculations:

1. Server costs:

The calculator assumes that your servers have 8 core CPUs with 96 GB/256 GB RAM. Reducing the server count will reduce rack space, associated overheads and in-turn the on-premises cost. Admin / IT labor cost is assumed to be a part of overhead costs.

2. Storage cost:

Prices for SAN and Object Storage are calculated per GB, whereas if you calculate the same on a per TB basis because your storage requirements are in several TBs or more, the prices will drop significantly. However, the calculator does mention that the model assumes higher prices to account for the price of Host Bus Adapters (HBA), Fiber Channel Adapters, Optical or Fiber Channel Cables and other storage equipment.

3. Network cost:

You will need Internet connectivity to access your environment here. The bandwidth requirement would vary depending on the size of the environment and type of your applications used here and this will also gets added up to the total cost. Using firewalls, load balancers, etc. will also increases the cost.

4. Labor cost:

Running applications here will not eliminate all the labor costs. We need a team which will manage and maintain the VM's and ensure it’s available whenever required.

In conclusion, while the AWS TCO Calculator gives you good information on various components, the model and assumptions. If you are going to minimize your total cost of ownership, you first have to understand it. Let’s assume you have an on-premises application you want to move to the cloud. The first step is to examine every aspect of the cost of that application, which includes IT staff, hardware, storage, licensing and maintenance, real estate and power.Then you can work with Amazon to get an exact estimate.