Amazon S3: Show me the money
UPDATE 4/30/07: This post was written in November 2006, so these numbers are a little out of date. It’s now been 12 months and we’ve saved almost exactly $1M. You can see the most recent numbers, as of April 2007, in my ETech slides.
I still have some more Web 2.0 Summit stuff to write up if I get a few minutes today, but let me talk about Amazon’s S3 for a minute. At the conference, I was chatting with Michael Arrington of TechCrunch fame (who perfectly handled a blogosphere mini-explosion last week, I thought) and we got to talking about S3. He was impressed with how we were using it, but joked that our $500K saved number sounded like “complete bullsh*t”. I laughed along with him and assured him it was true, but on the way home I got to thinking that it IS a really big number to throw out there without details.
So here are the cold hard facts:
- Our estimate, as you can see in BusinessWeek’s cover story, is that we’re saving $500K per year. We’ve been using S3 for almost 7 months so far (we launched it on or around April 14th), so for my $500K estimate to be in the right ballpark, we should be somewhere near $291K saved to date (well, we don’t grow linearly, so less than that … but let’s do easy math, shall we?).
- We had roughly 64,000,000 photos when we launched S3. We now have close to 110,000,000 photos. Yes, that’s ~72% growth in 7 months.
- To sustain our pre-S3 growth, we were buying roughly $40,000 per month in hard disks plus servers to attach them to. We’re not talking about EMC or other over-priced storage solutions. We’re talking about single processor commodity Pentium 4 servers attached to really cheap Apple Xserve RAID arrays. Not quite off-the-shelf IDE disks, but once you factor in the reliability and managability, the TCO comes out to be in a similar ballpark (We’ve done it both ways).
- If you’re doing the math at home, $40K may seem a little high until you realize how our architecture works: We use RAID-5, with hot spares, and we have two entirely separate storage clusters. That means we have to buy 1.4TB of raw disk to store an actual 500GB.
- To sustain our current, Nov 2006 growth rate, we’d need to buy more like ~$80K per month. Let’s assume over the 7 months, it ramped from $40K to $80K linearly (it was actually more of a curve, but this makes the math easier). $40K + $46K + $53K + $60K + $66K + $73K + $80K = $418K
- Our datacenter space, power and cooling costs for those arrays is ~$1.36/month for every $100 of storage. (~$544month @ $40K, ramping to ~$1088/month @ $80K). $544 + $626 + $721 + $816 + $898 + $993 + $1088 = $5,686.
- It’s cost us some manpower to move everything up to S3. So while I expect to save money on manpower in the long run, currently it’s probably break even – I don’t have to install, manage and maintain new hardware, but I’ve had to copy more than 100TB up to Amazon. (We’re not done copying old data up yet, either)
- Total amount NOT spent over the last 7 months: $423,686
- Total amount spent on S3: $84,255.25
- Total savings: $339,430.75
- That works out to $48,490 / month, which is $581,881 per year. Remember, though, our rate of growth is high, so over the remaining 5 months, the monthly savings will be even greater.
- These are real, hard numbers after using S3 for 7 months, not our projections. They closely match (but are actually slightly better) than our projections.
So there you have it.
But wait! It gets even better! Because of the stupid way the tax law operates in this country, I would actually have to pay taxes on the $423K I spent buying drives (yes, exactly like the money I spent was actually profit. Dumb.). So I’d have to pay an additional ~$135K in taxes. Technically, I’d get that back over the next 5 years, so I didn’t want to include it as “savings” but as you can imagine, the cash flow implications are huge. In a very real sense, the actual cash I conserved so far is about $474,000.
But wait! It gets even better! Amazon has been so reliable over the last 7 months (considerably more reliable than our own internal storage, which I consider to be quite reliable), that just last week we made S3 an even more fundamental part of our storage architecture. I’ll save the details for a future post, but the bottom line is that we’re actually going to start selling up to 90% of our hard drives on eBay or something. So costs I had previously assumed were sunk are actually about to be recouped. We should get many hundreds of thousands of dollars back in cash.
I expect our savings from Amazon S3 to be well over $1M in 2007, maybe as high as $2M.
Perhaps most important, though, is the difficult-to-quantify time, effort, and mental thought we’re saving. We get to spend both that money and all of our extra time and effort on providing a better customer experience and delivering better customer service. Storage was a necessary evil that’s now been nearly removed as a concern.
Want more? I have some other posts on the subject:
And I’ll continue to post with more hard details, including our technical architecture and some of our code, as well. And yes, we’re starting to consume other Amazon services like EC2.