4. EC2 Pricing in Detail
Hey everyone, and welcome back to the Knowledge Portal video series. So in today’s lecture, we will be looking into the pricing aspect of the EC2 instance. Because most people in most organizations will be using EC2 instances, EC2 costs will be the most expensive part of an AWS account. As a solution architect, we must understand the EC-related pricing aspect in great detail so that we can tune it to our environment and provide a cost-effective solution. So let’s go ahead and understand more about the two EC pricing options that are available. So as of now, there are four models available. The first is an on-demand instance, while the second is a reserved instance. Third is a spot instance, and fourth is a dedicated instance. So let me just show you because we are just going into the theoretical part. So if you go into the EC2 console, you’ll see that within the instances, there are four types of instances that are present. The first is the on-demand instance, followed by the spot instance, the reserved instance, and the dedicated instance.
And as a solutions architect, we should understand each of these instances as well as the advantages and disadvantages that each of them brings to our organization. So let’s go back to our PBT presentation. So we looked at four types of instances. Let’s go ahead and talk about each one of them. Now, when we talk about on-demand instances, we basically mean that we pay for the compute capacity per hour or, more recently, per-second based billing depending on the instances that are running. Now, this is a very important factor because if you are running your instance for, let’s assume, 2 hours, then you pay only for 2 hours, and this is what on-demand instances are all about. Now, one of the big benefits of running an on-demand instance is that there are no upfront payments that we have to make. So we don’t have to pay anything upfront to Amazon whenever we want it. We can run our instance, we can stop it, and we will only be charged for the amount of time the instance is running. This is one benefit. The second benefit is that we can increase or decrease the capacity whenever it is needed. This is also very important. Today, I’m running an on-demand instance with 2 GB of RAM, and tomorrow I’ll discover that 2 GB of RAM isn’t enough to make the website fast. So I go ahead and upgrade it to 4 GB of RAM.
So this flexibility is there in on-demand instances. Now, there are certain challenges with on-demand instances that everyone should know. Now, let’s take an example for this. So on Monday, there were 500 customers using 16 GB of RAM on the demand server individually. So this is the perspective of the cloud service provider. So let’s assume that I have a cloud environment and I have 500 customers who are using 16GB RAM servers individually. Now, this is Monday. Now, when you talk about Venezuela, you have only ten customers using 16 GB of RAM on demand servers individually. So within two days, you see there is a great deal of difference. On Monday, there were 500 customers who were running 16 GB of RAM servers; however, on Wednesday, it was just ten customers. So as a cloud provider, it becomes extremely difficult to have a capacity plan because if 500 customers are able to run 16 GB of RAM on individual servers, it is definitely a good thing that the cloud service provider has so many servers available. So when you look at the cloud service provider perspective, a CSV will not have a clear picture of how many servers they should provision because even a service provider needs to buy the servers.
And if the cloud provider does not know what is going to be used in the future, it becomes very difficult to do capacity planning. If a cloud service provider brings a large number of servers, there will be many unused resources and money will be wasted. However, if the cloud service provider purchases fewer servers, the person will be unable to provision new servers, or the customers will be unable to do so, resulting in a financial loss for the cloud service provider. So in both cases, the cloud service provider is losing money, and this is the reason why, ideally, a cloud service provider does not really like on-demand instances, but this is one of the features that customers like, so they provide it. So this is the first type. The second type is the reserved instance. Now this is very important to understand because reserved instances provide us with a significant discount of up to 70% compared to on-demand instance pricing. This is very important to understand. Reserved instances provide a huge discount, but there is one caveat that we have to tell the cloud service provider beforehand: that for one year or for three years, we will be needing a certain amount of capacity. So this is something that cloud providers really need, and this is the reason why they provide good discounts. When you choose a reserved instance, it is assigned to a specific availability zone and provides capacity preservation for AWS easy to instance.
Now, this is very important because many times when you try to launch an on-demand instance, you might get an error saying that the resources have reached their limit. So you’re not able to create more servers because the cloud provider does not have a resource. And if you’re running it in production and you’re not able to launch the server during critical times, this leads to a lot of issues. This is why you should use the Reserve instance, which also offers capacity reservation. So what are the things that you need to tell your cloud provider if you are opting for a reserved instance?
Is that if you know you’ll always have 20 servers of type “m” four “x” large, “p” will reserve an instance for them. So if you are sure that your production server will be a minimum of 20 of this specific type, then you can buy a reserve instance of it, and AWS will give you a significant amount of discount for those reserve instances. However, one thing that you have to make sure of is that you have to commit for at least one year, and it ranges from one year to three years. So you have to commit a minimum of one year for the reserve instance that you will be looking for. Let’s take a look at the reserve instance and on demand instance pricing now. So the assumed price on demand is zero dollars, or $4. So this was for M, a large base instance. If you calculate the total three-year cost of running an on-demand instance, you get $0.4 per hour in 26280 R. So these are the results of three years. When you multiply it, it becomes $10,500. As a result, the cost of running an M-4 large instance continues for another three years.
Now, what happens when you buy a three-year, all-upfront, reserved instance? Then the hourly cost reduces tremendously. So you see, it becomes zero point $17, the amount that you have to pay after three years is $4,200, and the total savings that you will have is $65. So if you will see, there is a huge amount of savings that you can look forward to, provided you are going for the reserved instances. Now, let me just show you on.How can you calculate this? Now there is one really nice website called the Simple Monthly Calculator. So this is the URL calculator’s third Amazonaw.com index HTML. So what you need to do over here is just click on the row here and select the instance type. Now let me select the instance type as “m four by large.” You click on “close” and save. And in the billing option, you see the monthly cost is $146. So this is the price of OnDemand. So if you’re running four instances based on on-demand pricing, then you’ll have to pay $146. Now, if you click over here, there are various options you have on demand, and then you have “reserved.” So, within reserved, there are various subsections of reserved instances, but we’ll ignore those for now. So let’s look at the three-year, all-upfront reserved instances.
So, what you basically do here is say to AWS that you need this info XL instance for three years, and you pay the money at the start of the cycle. And this is what is called a “three-year all upfront reserved” instance. And now, the effective hourly cost is zero points seventy-five dollars. And the monthly cost, if you can find it, is $54.89. Let’s round it up to $55. So, a reserved instance for a three-year-old costs $55 up front. However, the on-demand instance costs $146. As you can see, the reserved instance is $55, while the demand instance is $146. As a result, there is a significant difference between a reserved instance and a demand instance. And it is for this reason that understanding these is critical. Because most of the organisation will need a cost-cutting initiative, And this is where your cost-related skillset will be helpful as a solutions architect. Perfect. So we looked into two of them. Now let’s look at the third type, which is called the spot instance. So, what basically happens is that Spot instances allow us to bid on spare, easily computed capacity for up to 90% of the OnDemand cost. Now, it might happen; let’s assume that I am a cloud service provider and that I have 256 GB of RAM available all the time.
Now, my customers are only using 120 GB of RAM. So, effectively, I have 140 GB of free RAM that no one is using. So instead of no one using it and me not gaining any money, what I can do is give an additional discount to the customer, saying that you can use these resources like 120GB of RAM for a very minimal cost. As a result, it accounts for up to 90% of on-demand costs. So this is how AWS works. So, if AWS has spare resources, you can get those spare resources at a very huge discount. But one caveat is that we have to do bidding. It’s not like you can just go straight to the Spot instances. You must bid, and the highest bid will win the spot instance. So let me show you exactly how that would work. So, if you go into the Spot instances over here, click on “Request Spot Instance,” and if you go down over here, you see I have an instance type of “C” for “dot live.” So this is the instance type that I am looking for. You have to specify the VPC as well. And within your last option, you see there is a maximum price. And here you can set your maximum price. So here I am, putting a 0 on $11. Now, if someone bids less than I did, they will not get the instance. However, if my bid is the highest, then the Spot instance will come to me. And this is how things really work. As a result, in spot instances, you must do a lot of bidding.
Now, there is one caveat: if someone bids higher than you after you have launched your Spot instance, then your instance will get terminated at that time only. So this is very important to understand. So far, we’ve discussed the Spot instance. Remember, a spot instance is recommended for applications that can have flexible start and end times. So if you have to be very sure that your application will not be affected if your Spot instance gets terminated after five minutes or after ten minutes, So that is something that you have to look forward to. However, the advantage is that you get a huge discount when you run Spot instances. So, this is the third type, and the fourth type is called a dedicated host. A dedicated host is basically a physical ECTwo server dedicated for your use only. Now, generally, what happens in a virtualization environment is that there is a single server, and within the single server there is virtualization software like KVM or Zen. And on top of that, there are multiple virtual servers that are created. So if this is a single dedicated server, when you install virtualization software, you might have ten virtual machines on top of it. The issue here is that these virtual machines will not have very fast performance, and for certain use cases, you need raw performance directly, which is why you use a dedicated host. Now, one good thing about dedicated hosting is that it can be purchased on demand as well as in reserve instances.So that’s the end of the EC-2 pricing option.
I hope you understood the basics about the various pricing models that are available. And if you’re running infrastructure on AWS, and if you are planning to continue to run infrastructure on AWS, then you should definitely opt for on demand, not opt for on demand instances, and instead go for reserved instances. So, I have gone through many of the startups, and one of the major factors is that they are struggling with the infrastructure costs. And when I look into the infrastructure, it is definitely evident that most of the instances that are created are based on demand. And that is where the issue lies. So that’s all there is to this lecture: one simple exam preparation to help you understand the types of questions that may be asked about pricing. So, take a look at this slide, where you have a CFO who is concerned about the increased cost of your AWS account. Now you, as a solutions architect, have been assigned to decrease the monthly cost. It has been discovered that the EC2 instances that are launched account for 80% of your total costs. Now, how will you reduce the cost? This is a scenario that you will encounter in many of the organizations where you work. And one of the simplest answers if this is an exam is to switch to reserved instances.
5. AWS Support Plans
Hey everyone, and welcome back to The Knowledgeable via C’s. And in today’s lecture, we’ll be speaking about the AWS support plan. Now, AWS support is something that has really seen most organisations enrol because of the benefits that it really provides. So let’s go ahead and understand more about AWS support. So, AWS support is one of the most direct ways in which customers can interact with AWS cloud support engineers to understand and troubleshoot their problems. So, consider a very simple use case in which you are deploying a specific service in AWS and following the exact documentation that has been provided. Even after that, something is not working right, and your application has failed to deploy it.Now, how will you troubleshoot it? One option is to consult with your coworkers. The second option is to seek assistance from the community. So you can post the questions in the server fault or stack overflow, and maybe someone will respond with the right solution. So that’s quite good. However, one of the best ways is to directly contact the AWS technical support guys. So those are the people who will be able to assist you in the idlest way.
So, what exactly is AWS support, and who really needs it? So first, it is really required for people who are experimenting with AWS. So if you are new to AWS and you have quite a lot of questions or are finding it difficult to launch a certain service, AWS support is for you because if you raise a support ticket, they will be able to exactly look into your scenario and guide you to the right solution. So this is the first and very important use case. The second is for production and business-critical use. This is very important because I have seen a lot of scenarios in which this is the issue at the AWS site. So the production environment was working perfectly during certain hours, but there was a lot of disc stalling, which was caused by an issue on the AWS site.
So during those times, I have really seen AWS Support to be very beneficial because they can actually coordinate with the back-end guys and help you understand how you can mitigate those issues. So definitely, AWS support is not something that comes for free because you are utilising the time of the cloud support engineers at AWS. So there are four major types of AWS support plans. The first is fundamental, the second is developer, the third is business, and the fourth is enterprise. So you can consider them at a high priority level. So the enterprise support plan will provide you with the most benefits from AWS support, followed by the business, developer, and basic plans. So, depending on the type of use case workloads and the criticality of the application that you are running in AWS, your organisation can select one of the plans listed above. So let’s go ahead and understand more about these specific plans. So I’m in the AWS documentation, which basically compares the AWS support plan. As you can see, you have two options: basic developer business and enterprise.
So one of the important things that you can see over here is—let me go a bit down—the technical support that we were speaking about. So if you look into the basics, there is no technical support directly from the AWS cloud support engineers. So when you go with developers, remember that Basic is free. It comes de facto when you open your AWS account; if you want, you can then switch to developer, which is a paid one. So, from Developer to Business to Enterprise, these are the support plans for which you must pay. So what happens once you pay the developer? You can raise a support ticket via email, and the AWS support guys will be able to help you there. When you move to business, you can actually see that business has 24/7 access to cloud support engineers via email, chat, and phone. So you can even call AWS, like AWS will call you when you raise a support ticket, and you can solve your doubts through calls as well. So this is something that is quite interesting. Let me just show you before we get more confused. So, I have two AWS accounts open. One is something that is mine, and the second is something I borrowed from a colleague to just show you how business support would really work.
So I’m running the free tied account from this account. As you can see, the associated support plan is Basic. So, if I click “Create a Case,” you can open a case for account and billing support. But when you talk about technical support, technical support is something that you cannot have as far as the Basic Support Plan is concerned. So if you launch the AC 2 instance and something is not working and you want technical support, the basic plan is something that you cannot go forward with. So for technical support, you need to have a higher-level plan. So if I click on change over here, let me just show you. So again, it shows you the comparison between various support plans. So if you look into the developer one, it starts at $29 per month, and then you go for the business one, starting at $100 a month. And then you have the enterprise one as well. So if you are a beginner or if you need help, maybe you can go to a developer or even to a business. From what I have seen, small startups often opt for a developer or business support plan. Mostly it is business; it is not very expensive, but it is quite worth it.
So this is about the basics. Now let me just show you one more AWS management console. So this is something that I borrowed from my colleague, so let me show you how business support works. Here you see the support plan. is business, so when I click on “Create a Case Over Here,” you see the technical support bar is highlighted. Now when you want technical support, you have to select which service you want to have technical support for. So let’s say I want technical support for CO pipeline. You select a category, let’s say general guidance, and you select a severity. So severity is like “general guidance system impaired,” “production system impaired,” or “production system down.” So if you select the priority as “production system down,” your ticket will have a higher value, and you will get the support representative in as fast a time as possible. And then you can put in your description. Web chat or phone support are also available. You can even select a phone and give your phone number, and the AWS representative will contact you by phone about the issue that you are facing. It is quite interesting, and this is why I really like the business support plan, and this is why most startups go for the business support plan.
Finally, as you can see over here, the enterprise definitely enterprise provides support via email, chat, and phone. The distinction is that in business, you have cloudsupport engineers, whereas in enterprise, you will have senior cloudsupport engineers assisting you. Now, one of the other important things that you need to remember is that specifically during the enterprise, you will have a dedicated Tam. Tam, or an account manager, or a technical account manager, will act as a single point of contact for you. So if something is not working in AWS, you can simply call him and say, “Hey, this is not working.” Please escalate it from the AWS site and get it working for us. So something similar, because I’ve worked in various organisations with enterprise support, and there are certain situations where AWS support isn’t as quick, which impacts your production or business. So if you are enrolled with the enterprise, you have a dedicated contact whom you can call and ask him to escalate the issue from his side so that things get working for you. So this is about Support Page page one.The response time is also important, especially since you will be paying a lot for enterprise support. The response time for business-critical applications will be down to 15 minutes as well, and during the enterprise, you will get dedicated guidance for your architecture to help you improve as well.
6. The TCO calculator
Hey everyone, and welcome back to the Knowledgeable Video series. And in today’s lecture, we’ll be speaking primarily about the total cost of ownership. This is an extremely important topic, especially when it comes to pricing during the transition to a newer infrastructure structure. So that is where the total cost of ownership really comes into the picture. So let’s understand it with a simple example. Assume I have a requirement of staying in a city, Bangalore, for five years and needing a car for commuting.
So I want to know what the total cost of ownership of that specific car will be. So let’s assume that the price of the car is five lakh rupees. Now, I cannot really say that my total cost of ownership would be five lakh rupees because, since I want to drive that car for five years, there will be a lot of other things involved, like taxes, maintenance, and insurance. So when you combine all of them together, then you get the total cost of ownership. So this is very important to remember. So let’s take a simple example. So when you talk about the real cost of car ownership, because this is one of the very familiar examples that you might have to go through other than buying a car, you actually have to know a lot of other things, like the depreciation value, the fuel cost, the interest, and the taxes. You have unscheduled maintenance, you have insurance, and you have repair costs. You have very miscellaneous things that are involved. So when I talk about the total cost of ownership of a car for five years, not only do I have to look at the cost of the car, but I also have to add these values like fuel cost, repair cost, maintenance, and insurance, and together they become the total cost of ownership. So there is a nice little calculator for the total cost of ownership.
So basically, it lasts for five years. So, I’ve chosen a Volkswagen Polo with a monthly mileage of 500 km; let’s calculate the TCO of this vehicle. So this is a very nice calculator. So, basically, it tells you the total price. It also tells the average cost per kilometer, so I’ll be spending Rs 21 per kilometer. It also tells me various things about insurance costs, such as how much money I have to pay for the first, second, third, fourth, and fifth years. So this is basically the total cost of ownership. Now, if you’ll see over here, when you look at the TCO, there are a lot of other things that are added, like fuel costs, insurance, and maintenance, and this all combined becomes the total cost of ownership. So coming back to the PowerPoint presentation, the PCO also applies to the organization as far as infrastructure, networks, etc. are concerned. So business always needs to thrive upon the definitive goals that have been set. So this is very important. So if you have a goal, business needs to go towards that. However, cost is a major factor that affects the direction in which the business goes. So, to better understand this, consider a simple Kpops use case. So, Kplab is an educational startup, and it intends to revolutionise the feed of technical education with easy-to-understand videos that are both affordable and easily accessible. So this is what the startup is all about. Now, there are a lot of things involved.
So when I actually make videos, first you have to make the PowerPoint presentations. Sometimes the PowerPoint presentation actually takes 3 hours to create. As a result, the cost of electricity and internet access are also factors. Then I actually bought a brand new laptop just for recording. So that is the additional cost. Then comes the cost of recording studios like Camtasia studio.Then I have my microphone, and I have my camera, through which I record my videos. And after all of these, I have to upload these videos to the website. So if I have my own website, then I have to pay for the servers, the software, the security, and so on. So all of them together form the total cost of ownership. So this is what the TCO is all about. So whenever you are developing a business case to move to a different infrastructure, TCO is something that the hiring manager, management, or CEO is all interested in. So in order to develop that, there are a few important things to remember. One is the business demand. So you have to understand what the current business demand is. So as far as the KP Labs are concerned, we have around 20 to 30 students who subscribe to the course every day. So that is the current business demand. How do you expect to grow in the long term? The more video courses that we launch, the more students might subscribe to them. So this is what future growth and demand really talk about.
Then, is there flexibility in terms of infrastructure to meet those demands? So currently, if there are 30 students who are subscribing to the course and watching videos actively, after a few months there might be 50 or 60 students who are watching videos actively. So is my infrastructure quite flexible enough to reach or use that amount of demand? So that is the business demand. According to that, you have to do capacity planning. Like, what is the average server utilisation right now? How much is the overprovision for peak load? So it might always happen that you do a promotion, and during that promotion, a lot of students will subscribe to the course. Are you really ready for overprovisioning in terms of peak load is concerned?And then come the operational challenges, like whether storage capacity is good or whether the infrastructure is highly available because videos do need storage capacity. So that is one aspect. Then the second aspect is whether the infrastructure is highly available, because if the server goes down, no one will be able to watch the videos. And this is in terms of time because when I was designing KP Labs a long time ago, these things were a real pain because working on infrastructure troubleshooting takes a long time. Then you don’t really have time to develop new courses. And this is the reason why a lot of instructors decide to move toward a much more managed platform.
So let me give you an example of a teachable moment. So this is a very nice website. So you see, they have various plans. The first plan is $39, and what you do is you just upload the videos here, and the students can subscribe and watch the videos. You don’t really have to worry about high availability or the storage going down. The servers are working slowly. All of those things don’t really require you to worry; just put down the $39 and risk; everything else is managed for you. So this is what I mean by “moving from one platform to another.” So when you move from one platform to another, this is where the TCO comes into the picture. So I say that when I was in the data center, I had to pay like $200. But now if I move to another, I just pay $39 as a TCO as far as the infrastructure and networking are concerned. So when the CEO here says, “Okay, from two hundred to thirty-nine dollars,” that is a good amount of money that is getting saved. So let’s get started on moving the infrastructure. As far as the certification is concerned, it is expected that you know the TCO between a datacenter and AWS at a high level overview.One of the best features is the “pay as you go” model. Because when you talk about data centres, you actually have to buy the servers, and you cannot say, “I just want to use the server for 1 hour; I’ll pay only for 1 hour.” That is not really allowed in the data center. However, for AWS, it is available. So stop guessing capacity. In a data center, you have to predict the capacity. In AWS, you don’t really have to worry.
As in example S-3, you don’t have to worry. You just pump in the data to S3, and that is it. You don’t have to worry about capacity. Then you have a lower overall cost and greater scalability. So in the data center, you don’t really have agility. Like today, I have one server; tomorrow, I want to launch 50 servers. In the data center, you will not be able to do that for a bit. I’ll be able to do that. then go global in minutes. Definitely possible. Because in the data center, it actually takes like two or three weeks for procurements and approvals. A lot of challenges are involved, but in AWS, you just create an account, create your AC instances, and you have global. So that’s easy. It is between the data centre and AWS. So, as you might have expected again, you have a TCO as well. So you have a nice AWS TCO calculator, which basically tells you the total cost of ownership. Because, as you’re probably aware, launching a server in a data centre necessitates purchasing or renting the server, both of which are prohibitively expensive. Let’s take a look at the AmazonAWS total cost of ownership calculator. So this actually gives you the difference in PCO when you move from a data centre to AWS. So if you are a manager and you want to convince your CEO or CTO to move from a data centre to AWS, you have to show him the numbers on how much money we will be saving when we move to AWS. And this is where the TCO calculator comes into the picture. So let’s do one thing.
Let’s call the app “Kplash,” set the number of VMs to 10, the number of CPU cores to 4, and the memory to 16 GB. Hypervisor, let me put the KVM, which is the free storage; I’ll put it at 500 GB, and let me calculate the TCO. Perfect. So now, if you look at the TCO, AWS actually gives you a difference between on-premises versus AWS as far as the cost thing is concerned. So your three-year total savings will be $90318. So this is quite a huge amount. And this is actually true because whenever you choose a data center, there is a lot of costing involved, which leads to powering the servers themselves, the high availability, the internet, the overall bandwidth, and a lot of other things are involved.So you see, there is a great deal of difference in PCO when it comes to on-premises versus AWS. And this is what is important, and this is what you need to show your management, saying that if we move from the data centre or from on-premises to AWS, this is the TCO that we will be saving in the next three years. And once your management sees this, they will be impressed, and they might give you approval to move to AWS. And this is what the total cost of ownership, as far as AWS is concerned, is all about. And this is what AWS expects students to know.
7. AWS Whitepapers & Documentations
Hey everyone, and welcome back. So in today’s lecture, we will have a very high-level overview related to the AWS White Papers and AWS documentation. As a result, as is required in the majority of the services provided, documentation becomes one of the most fundamental and important aspects. So when you talk about AWS, as we have already discussed, AWS has a lot of services. As you can see, AWS offers a wide range of services, each with its own set of documentation. So let’s click on EC 2. So, if I go into the ECTwo, I can find various documentation related to the various aspects. So the first aspect is related to maybe launching the EC2 instances and similar areas.
Then you have the EC2 Systems Manager, and then you have a guide specifically for those who want to migrate to EC Two.You have HTML, PDF, and Kindle. Let me just select the HTML version so that we can see that here. So within the documentation, you have various tutorials. So for various services, AWS will give various tutorials, which maybe you can practise at your end. As you can see, it all starts with Amazon EC2. Then there are certain little tutorials, like launching an EC2 instance with a certain stack; then it goes into much more detail, and then it goes into the troubleshooting aspect that you might face. So this is what AWS documentation is all about. Now, from what I have seen, either the documentation is really, really good, because many times when you enrol for a service, the documentation is not very nice and you will not really know how to do things. But as far as AWS is concerned, I have been going through the documentation for the past four years and doing things, and they are very precise. So this is one aspect. The second aspect is the white papers. White papers are very, very important, specifically when it comes to your certification exams.
So AWS has a lot of white papers related to, well, architecture and framework. You have AWS, security, best practises related to pricing, et cetera. So you see, if I go down, there are a lot of white papers, and these white papers will give you a great understanding of the work as well as the best practises that you might want to have. So here are the AWS Security Best Practices. White Paper where AWS will actually tell you what you should be doing in your environment. So you see, you have your Identity Federation. So we went over it in greater depth in our Professional Architect and Security Specialty Video Course. If you want to implement security within your AWS organization, you can read the white paper and implement the recommendations in it to improve your security posture. Similarly, if you want to have an overview of how well you can architect your infrastructure, Then there’s AWS’s excellent whitepaper on the AWS well-architected framework. Well, it basically speaks about a few major pillars like operational excellence, security, reliability, performance, efficiency, and cost optimization.
And within each of these pillars, there are certain questions that you might have to answer, like, “How do you design your workload to enable operability?” And similar questions are being asked for each of these pillars. Anyways, we will be discussing in great detail these white papers whenever the time is right. But as an overview, I just wanted to show you that AWS does have a great set of documentation and a great set of white papers. Now, the question that really comes up is: What really happens? Many times, you will not understand the things that are part of the documentation. There will always be a lot of doubts. Now, how will you solve the doubts? First, you can post the question in the AWS community forum, and a second, more direct approach is to contact AWS support. So AWS support is something that is really great. And in the upcoming lecture, we will be discussing more about what AWS support is all about and how AWS support will help you understand, mitigate, and even troubleshoot use cases that you might have while using the AWS services. So, this is it for this lecture. I hope this has been informative for you, and I look forward to seeing you in the next lecture.
8. AWS Organization & Consolidated Billing
Hey everyone, and welcome back to the Knowledge Pool video series. And in today’s lecture, we’ll be speaking more about consolidated billing. Consolidated billing is a very useful feature provided by AWS, and it is something that most organizations with multiple AWS accounts should use. So let’s go ahead and understand more about it. So as we have discussed, lots of organisations nowadays follow the approach of having multiple AWS accounts. So by this, I mean that many organizations have separate AWS accounts for development environments, separate AWS accounts for staging, and even separate AWS accounts for production. Now, this is one of the best practices, and it helps make sure that things remain separate. It now provides numerous advantages, not only in terms of security but also in terms of cost. Now I do consulting for many startups, and one of the most recent startups is having costing issues; they have three to four accounts set up individually, and they have never done consolidated billing, so they are dealing with a lot of cost-related factors. So consolidated billing is something that we are in the process of achieving for that startup, and it will help them a lot as far as the cost factor is concerned.
So let’s go ahead and understand what benefits consolidated billing would bring to a typical organization. So, using a startup as an example, this is one of the use case scenarios in which a startup has three AWS accounts and pays for each individual AWS account separately. So at the end of the month, they get three separate bills, and they pay for each and every account individually. So they receive the bill for account A, which they pay separately, the bill for account B, which they also pay separately, and the bill for account C, which they also pay separately. And this is one of the scenarios in which you will find a lot of organisations with multiple AWS accounts. So this is the typical scenario; let’s look at what consolidated billing would really look like. So what happens in consolidated billing is that we need to link all of our AWS accounts with the central billing account with the help of AWS organizations. So you have three AWS accounts, and you link all of these AWS accounts with a central paying account with the help of the AWS organization. Now, in most cases, this central paying account is also an AWS account.
And when you link all of these accounts to the central account—this is known as “consolidated billing”—the bill for all of these accounts can be seen in the central account, which has a lot of advantages. So before we go into the benefits, let me show you exactly how this can be done. So if you go to the AWS organizations, you will see there is a button called “create organization.” Earlier, actually, consolidated billing was part of the billing section. Let me just open up the billing dashboard. So, if you see “consolidated billing” as an option and it now says “consolidated billing has now been replaced by AWS organization,” So we need to go to the AWS organisation if we want to work with consolidated billing. So when you go ahead and click on “Create Organization,” there are two major features. One is for enabling all the features, and the second is for enabling only consolidated billing. So if I just enable the consolidated billing and create the organisation now, it will actually show you only the current account, but you can actually add multiple accounts within the AWS organization. So as said, a paying account is also an AWS account, and within the paying account, you go to AWS Organization and add another account that will be linked. So if I have account A, I’ll click on “Invite Account” and put the account ID of this account that I have. So we will be looking into this in the upcoming lectures, but I hope you understand how we can add new accounts to a central bank account. So speaking about the benefits that consolidated billing gives us, the first is that it gives us one bill per link, the AWS account. We’ll be looking into this when we do.
The practical second is that it becomes quite easy to allocate costs and budgets because we can actually get a single bill for account A, a single bill for account B, and a single bill for account C. So if this is a development, If this is a production, and if this is staging from the paying account, we can easily see that the development account is costing us $1,000. Production is costing us, say, $5,000. So it becomes quite easy to allocate costs and budgets. So if the development account is costing us $1,000, we can maybe say, “Okay, it’s time to reduce the costing expenditure of the development account.” So that way, it becomes much easier. Third, it brings a lot of benefits related to volume pricing. When you increase your usage of AWS, you will reap numerous benefits. So this is one of the AWS S3 pricing options. So you see, the first 50 TB per month have a cost of $0.023 per GB. If you use more than 50 TB until you reach 450 TB, the amount is reduced to zero at 00:22. Furthermore, as you go higher or use more, the usage charge decreases significantly. So the more you use, the less you need to pay, and this helps a lot, specifically when you do consolidated billing. So, when you do a consolidated billing, the three charges are combined together. So, the first 50 terabytes cost $0.0023 per month. So let’s assume that the production account is using 45 terabytes and the development account is using six terabytes.
You will now be charged for a total of 50 1 terabytes in your paying account. So, for the first 50 terabytes, we’ll pay $3 per GB, and for the next 1 terabyte, we’ll pay nothing. So the volume pricing is actually combined for all the linked accounts. This is an important point to remember, and last but not least, the benefits of consolidated billing are applicable even for reserved instances. So let’s look into how exactly that would work. So I have one account and two linked accounts. So this is the consolidated billing that we have achieved. Now, in their account, I have six instances running on demand, and in my production account, I have six reserved instances that I brought, with only three instances running. So let’s assume that all of these are of the same instance type and family. So now what will happen is that, in broad terms, you will see that only three instances are running. However, I have the capacity for six reserve instances. So six reserve instances are getting unutilized in the production account. So, if you use consolidated billing, the unused three reserve instance pricing would now apply to the developer count as well. So as far as the total cost is concerned, you will only be paying for the three OnDemand instances pricing.Because I have six reserved instances and am only using three in consolidated billing, the remaining three reserved instance pricing will also apply to the developer count. So, if you subtract three from nine, you will only be charged on demand for the three instances.
So these are some of the benefits of using consolidated billing. So I hope you understood the overview of what consolidated billing is all about. And there are certain important pointers and best practices. In terms of the exams, keep in mind that whatever the paying account is, it is recommended that it be used only for billing purposes. Do not deploy or create any resources in the paying account. Second, by default, we can have a maximum of 20 linked accounts. As a result, these accounts linked to the central account have a default limit of 20, which can be increased. And third, which is a very important point as far as exams are concerned, is that even when linked, the paying account is individual and does not have access to the resources of other accounts. This is very important. So whenever you are working with consolidated billing, even if account A and account B are linked to the paying account, this means that the paying account does not have access to the resources of any of the accounts. So you have to remember that even if they are linked, a paying account will not have access to the resources of each of these linked accounts
