Reducing Costs on AWS

Reducing Costs on AWS

One of the requests I get from growing or larger AWS customers is “how do I reduce my Amazon Web Services bill”? There are a lot of analysis tools available – this post is not going to focus on those. Instead I’ll be focusing a lesser known option for reducing cost – working with an Amazon Web Services Reseller or buying direct from Amazon.

How it works?

Typically AWS sells directly to distributors (avnet, datapipe, Ingram) which then sell to resellers – this resale is typically done at a percentage reduction off of a monthly Amazon bill. The distributors then sell to resellers, who then sell directly to AWS customers. The resellers typically have a small percentage markup as they have to handle billing and issues that might arise. The resellers also know that the AWS service itself is a commodity – so they strive to provide some additional benefit:

  • A managed service contract, where they offer monitoring or incident response.
  • Cost analysis or other tooling.
  • Suggestions to help you further lower your costs – they know you’ll leave if they aren’t acting in your best interests.

Which customers benefit?

Depends on the customer’s needs – if the customer benefits from a resellers value add(s), then working through a reseller is a good option. However, if cost savings is the entirety of a customer’s interest, larger or quickly growing customers tend to benefit the most. When reselling AWS, the reseller has to take on the additional overhead of billing and waiting for payment – this is a fixed cost (the cost of collection) and some risk (the risk of non-payment). As the reseller typically adds some percentage when reselling to AWS customers, larger accounts generate more revenue for a reseller (compare a 2% markup on a $100,000/mo account and a $10,000/mo account) – thus, resellers may be more willing to offer large discounts to larger accounts, whereas offering a discount to a smaller AWS customer may not be in anyone’s interest.

What if I am a small customer?

Smaller customers might be able to take advantage of an AWS Activate package, which are geared toward smaller startups with a particular degree of pedigree.

What are the discount amounts?

Short answer: I don’t have the freedom to be specific and I can not find discount percentages publicly available online.

Long answer: With the lack of transparency (apparently this is called “information asymmetry”) the entire process feels like purchasing a car in the United States. I’d be happy to make myself available If you have questions about the ecosystem or how to negotiate the best deal – ask in person or send me an email at colin@cloudavail.com.

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