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AWS Economics- Reap Economic Benefits From Amazon Web Service

AWS Economics- Reap Economic Benefits From Amazon Web Service

Choosing the best-fit hosting provider and the best plan for your business is a significant and tough task while planning your website/portal. Nowadays, we see two trends in a market for server hosting services -

  1. Dedicated servers
  2. Cloud Servers

Though both services offer great computing capabilities and remarkable performance, most of the businesses have begun to move to the Cloud due to limitations identified on the dedicated servers. Amazon Web Service (AWS) is one among such Cloud service providers. It is popular for its innovation, stability, and diversity in their services. This blog highlights the economics of the AWS Cloud.

Before moving ahead, let us explore the basics of dedicated servers and Cloud servers.

Dedicated Servers/In-House Servers &Infrastructure:

A dedicated server either provides server and hardware on a rental basis or is purchased directly as per their needs. You have full control over your server and services, and the hardware is dedicated for your applications. This type of services are suited for large organizations who deal with big data or organizations who need to maintain high-end data security.

Owning a dedicated server demands requires a dedicated team towards server & infrastructure management and you are solely responsible for the server management and maintenance. In addition, it requires dedicated network infrastructure and staff for network management. Managing space for infrastructure incurs daily costs. Hardware maintenance demands other utilities like electricity, backup power supply, A.C., etc. Furthermore, you need to maintain servers over multiple physical locations to ensure disaster recovery services during natural calamities or technical glitches.

By considering all the above parameters and costs, most businesses venture to find an alternate solution to manage it in a better way. They look for prospects for decreasing the monthly recurring costs.

So, what is the most cost effective solution for our servers, storages, and networks? This is where Cloud services come into picture. 

Cloud Servers

Similar to dedicated servers, a Cloud server provides servers with full control & security, but the server is managed by hosting service providers. You can easily enhance your IT performance with this low-cost infrastructure when compared to a dedicated server option.

Businesses can’t predict beforehand the computational, storage, network resources they will require in the future to cater to the expanded audience and increase the traffic of the website/portal. In this scenario, the Cloud servers offer an option to increase their infrastructure and computational power during business peak hours and decrease it in duration when traffic is less. As such, it saves the billing cost and ensures run time scalability based on the nature of the business, which is not possible with the dedicated server option.

The Cloud offers compute services, storage services, and network infrastructure services with essential software and O.S. Infrastructure without demanding physical servers, staffing for server management, floor/physical space and other utilities for server & network hardware.

Amazon Web Service Economics

Let us explore how AWS services offers cost-effective solutions & options for customers. Here is a list of services provided by AWS, which are cost-effective, pay per use charges and easy to scale up or scale down on-demand:

  • Compute: Elastic compute service
  • Storage: Different types of storage services
  • Network: Different types of Network infrastructure services
  • S. & virtualization software: Built-in images provided
  • Staffing for server & network hardware management: Not needed
  • Floor space: Not required at your end
  • Utilities: Not required

You no need to bother about physical space, O.S. & virtualization Software, Staffing & other utilities. You can consider below parameters for Data centers:

  • Durability:999999999 in AWS
  • Availability: High availability based on regions and edges.
  • Physical security: Not needed to be managed by you.

AWS manages many parameters at their end, and decreases customer’s cost like Staffing, Hardware Management, Physical location with floor & space for server infrastructure setup, O.S. & other software, AC, Power supply, etc.

The three AWS fundamental core areas that charge the customers are:

  1. Data transfer
  2. Storage
  3. Compute 
  1. Data Transfer -Generally, pricing for data transfer can fluctuate depending upon the variety of factors. In AWS, data transfer within various AWS services is free of cost. Say, for example, data transfers between EC2 and S3 is provided free of charge.

For data, which is going out of the AWS platform is charged with data transfer fees and it depends upon the region. We can say only the data transfers from AWS to the public internet platform are subject to data transfer fees and mostly it is unidirectional. Charges will vary depending on the location’s market, taxes and utility costs. Depending on the bandwidth requirement, customers can select tiered pricing for data transfer.

  1. Storage- Pricing for storage is based on customers’ requirements. Customers can take advantage of some discount policies like AWS S3 discount based on usage.
  2. Compute - There are different types of EC2, which are designed for different purposes and tasks within the AWS Cloud platform.

The other purchasing options of Amazon EC2, which allow optimizing your costs, are as follows:

On-demand Instances

  • Pay for the compute capacity by the second with no long-term commitment
  • Includes free-tier option
  • Charges based on O.S. & size of the instance

Reserved Instances

  • Reserved instances offer a substantial discount - up to 75% when compared to on-demand pricing
  • Three possible purchase options for reserved instances are
  1. All upfront
  2. Partial upfront
  3. No upfront

All upfront option offers greater discounts whereas no upfront offers less discount, but enables you to free up funds to spend on other tasks.

  • Always available for a term from 1 to 3 years

Schedule Instance

  • Always available for a specific recurring schedule for the 1-year term

Spot Instance

  • Allows customers to bid unused Amazon EC2 capacity
  • Price of spot instances is set by Market supply & demand
  • Spot instances are terminated either by customers or when the spot price exceeds above the maximum bid price

Spot instance can be terminated at any time and subject to interruption. Hence, for the mission-critical workloads, spot instances are not the preferred candidates.We can choose this option when we have tasks that include flexible start-ups & shutdowns like data analysis, batch job, or any other background processes.

Dedicated Hosts

  • Pay only for a physical EC2 server fully dedicated for our running instances. We can reduce costs as it enables to use of our existing per-socket, per-core, or per-VM software licenses.

Dedicated Instances

  • A dedicated instance for customers and not shared with hardware used for other tasks. It includes two components for pricing:
  1. Hourly per instance usage fee
  2. Dedicated per region fee


AWS enables businesses to access Cloud services at economical prices and meet their business needs. No matter whether you are running a large enterprise or a small startup, you can leverage the features of the Amazon Cloud to improve performance and enhance productivity.


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