AWS Cloud Practitioner Guide: Domain 1 - Cloud Concepts (Part 3)

Introduction

This is the last topic in Domain 1, where we explore cloud economics. It focuses on why cloud computing is cost-efficient compared to managing on-premises infrastructure. The goal is to help organizations understand the financial benefits of moving to the cloud.

Actual Billing, Pricing, and Support of AWS will cover in Domain 4.

Understand concepts of cloud economics

1. Understanding the role of fixed costs compared with variable costs

If you remember from Part 1, we discussed the six benefits of cloud computing, including 'trading fixed costs for variable costs.' Here's how this works:

- Fixed Costs : Data center setup, hardware, software licenses—managed by the organization.

- Variable Costs : Cloud pricing is based on usage, eliminating upfront expenses. Pay only for what you use.

In the cloud, AWS handles infrastructure setup, so organizations don’t have to worry about building and maintaining their own IT infrastructure.

2. Understanding costs that are associated with on-premises environments

Let’s consider an example: Suppose you want to start an organization that deploys applications in an on-premises environment. You need to:

- Purchase infrastructure – Hardware, servers, storage, networking, etc. - Estimate demand – If you over-purchase, resources go unused, wasting money. If you under-purchase, you risk downtime. - Hire IT staff – To set up, manage, and maintain infrastructure, increasing operational costs.

These challenges make on-premises infrastructure expensive and complex. In future blogs, we’ll explore more about on-premises vs. cloud setups.

3. Understanding the differences between licensing strategies

What Licensing strategies?

A licensing strategy is the approach a company takes to manage software licenses when using cloud services. It determines how software is purchased, used, and managed in the cloud while ensuring compliance with vendor policies.

Why is a Licensing Strategy Important?

* Helps businesses control costs (avoid paying for unnecessary licenses).
* Ensures compliance with software vendors (Microsoft, Oracle, etc.).
* Provides flexibility in how software is used in the cloud.

AWS offer licensing strategies:

1. Bring Your Own License (BYOL) Model

Organizations can migrate their existing software licenses to AWS, maximizing past investments. This is useful for companies with long-term software agreements.

2. AWS License Included (LI)

AWS provides instances where the cost of the software license is bundled with the service, simplifying deployment and ensuring compliance. This approach is ideal for organizations seeking a straightforward, pay-as-you-go model without the complexities of license management.​

3. Utility Pricing Model with Support Package

In this model, software is offered on a pay-as-you-go basis, allowing organizations to pay only for what they use. This flexible approach is complemented by support packages from Independent Software Vendors (ISVs), ensuring that businesses receive the necessary assistance for deployment and maintenance.​

4. ISV SaaS-Based Cloud Service

Some ISVs offer their software as a service (SaaS) on AWS, charging a subscription fee. This model provides quick implementation, standard APIs, and web-based interfaces, making it a convenient option for many organizations.

AWS License Manager now allows you to easily change license types between AWS provided licenses (license included) and bring-your-own-license (BYOL) with your own licensed media of EC2 instances for Windows Server and SQL Server workloads.

Resource: Microsoft Licensing on AWS

4. Understanding the concept of rightsizing

Rightsizing in cloud computing means selecting the right-sized resources to match your actual needs.

This prevents over-provisioning (wasting money on unused resources) and under-provisioning (causing performance issues). AWS Trusted Advisor and Cost Explorer help with rightsizing recommendations.

5. Identifying benefits of automation

What is automation?

Automation means using technology to perform tasks with minimal human intervention. In cloud computing, automation helps manage infrastructure, deploy applications, and optimize resources efficiently and consistently.

Automation in cloud computing means using technology to handle tasks with minimal human effort. It improves efficiency, reduces manual errors, and optimizes costs.

Benefits

• Saves Time – No need for manual setup; tasks run automatically.

• Reduces Errors – Eliminates mistakes in repetitive tasks.

• Improves Efficiency – Scales resources automatically.

• Optimizes Costs – Automatically adjusts resources based on demand.

Examples of AWS Automation

• AWS CloudFormation – Automates infrastructure setup (servers, databases, networks).

• AWS Auto Scaling – Automatically adjusts the number of instances based on traffic.

• AWS Lambda – Runs code in response to events without servers.

• AWS Systems Manager – Automates patching, updates, and security tasks.

6. Identifying managed AWS services

What are Managed Services?

Managed services in AWS are cloud services where AWS takes care of infrastructure management, maintenance, scaling, security, and operational overhead. This allows users to focus on building applications instead of managing servers, storage, or databases.

Why Use AWS Managed Services?

• Reduced Operational Overhead → AWS handles maintenance, security, and updates.

• Scalability → Services scale automatically based on demand.

• High Availability & Reliability → AWS manages failovers and backups.

• Security & Compliance → Built-in security features with compliance certifications.

• Cost-Effectiveness → Pay-as-you-go pricing eliminates upfront infrastructure costs.

Example of managed AWS services

Here are some key managed services provided by AWS:

1. Compute Managed Services

   • Amazon Elastic Beanstalk → Automatically deploys and manages web applications.

   • AWS Lambda → Serverless compute that runs code only when needed, without provisioning servers.

   • Amazon ECS & Amazon EKS → Managed container orchestration for Docker workloads.

2. Database Managed Services

   • Amazon RDS (Relational Database Service) → Managed databases (MySQL, PostgreSQL, SQL Server, etc.).

   • Amazon DynamoDB → Managed NoSQL database with automatic scaling.

   • Amazon ElastiCache → Managed caching for performance improvement (Redis, Memcached).

3. Storage Managed Services

   • Amazon S3 → Object storage that scales automatically.

   • Amazon EFS (Elastic File System) → Managed file storage that scales across instances.

   • Amazon FSx → Managed Windows and Lustre file systems.

4. Networking Managed Services

   • Amazon Route 53 → Managed DNS service for domain name resolution.

   • AWS CloudFront → Content Delivery Network (CDN) for faster content delivery.

   • AWS Transit Gateway → Connects multiple VPCs and on-premises networks.

5. Security & Monitoring Managed Services

   • AWS IAM (Identity and Access Management) → Securely manages users and permissions.

   • AWS Shield → Managed DDoS protection.

   • AWS CloudTrail → Logs AWS API activity for security and compliance.

6. Automation & DevOps Managed Services

   • AWS CloudFormation → Automates infrastructure deployment using templates.

   • AWS CodePipeline → Continuous integration and deployment (CI/CD) service.

   • AWS Systems Manager → Automates operational tasks like patching and monitoring.

This just overview of managed services. Soon in upcoming blog I'm going to perform hands-on praticals.

Key Takeaways

1. Cloud vs. On-Premises Costs

   • Cloud computing shifts from high upfront costs to pay-as-you-go, reducing financial risks.

   • On-premises environments require hardware, IT staff, power, and maintenance costs, making them expensive and less flexible.

2. Fixed vs. Variable Costs

   • Fixed Costs: Data center setup, servers, and software licenses managed by the organization.

   • Variable Costs: Cloud pricing is based on actual usage, optimizing expenses.

3. Licensing Strategies in AWS

   • Bring Your Own License (BYOL): Migrate existing licenses to AWS.

   • AWS License Included (LI): Pay for licenses as part of AWS services.

   • Utility Pricing Model: Pay-as-you-go software with vendor support.

   • ISV SaaS Model: Subscription-based software from third-party vendors.

4. Rightsizing to Optimize Costs

   • Choosing the right-sized AWS resources prevents over-provisioning (wasting money) and under-provisioning (performance issues).

   • AWS Trusted Advisor and Cost Explorer help identify the best resource configurations.

5. Benefits of Automation in the Cloud

   • Saves Time – Automates infrastructure setup.

   • Reduces Errors – Minimizes human mistakes.

   • Improves Efficiency – Handles scaling automatically.

   • Optimizes Costs – Uses resources dynamically based on demand.

6. AWS Managed Services for Cost Efficiency

   • Compute: ECS, EKS, Lambda, Elastic Beanstalk (no server management).

   • Databases: RDS, DynamoDB, ElastiCache (fully managed DB solutions).

   • Storage & Networking: S3, EFS, FSx, Route 53, CloudFront.

   • Security & Monitoring: IAM, Shield, CloudTrail (built-in security).

   • Automation & DevOps: CloudFormation, CodePipeline, Systems Manager.

Final thoughts: Moving to AWS reduces operational costs, simplifies IT management, and provides scalability while offering flexible pricing models and automation for cost savings.

What’s Next?

With this, we’ve completed AWS CCP Domain 1: Cloud Concepts.

In the next blog, we’ll begin AWS CCP Domain 2: Security and Compliance, where we’ll explore AWS security best practices, compliance frameworks, and identity management. Stay tuned!