Cloud Economics Basics Part One
Cloud Economics Basics Part One

This course provides an introduction to cost management in AWS. It starts by looking at the economics of the cloud in general, including economies of scale and total cost of ownership, and you'll also learn why cost optimization is important.

We'll also cover the AWS Pricing Calculator and the AWS Well-Architected Framework and how these allow you to optimize your AWS environment and also calculate how much it will cost. We round off the course by taking a look at terminology across areas including software development, DevOps, finance, and general AWS terminology.

Learning Objectives

  • Get a foundational understanding of cost optimization in AWS
  • Learn the fundamentals of cloud economics including economies of scale, total cost of ownership, and why cost optimization is important
  • Learn about the AWS pricing calculator
  • Learn about the AWS Well-Architected Framework and how it can help to make your AWS environment more efficient and cost-effective
  • Understand a range of terminology linked to cost management in AWS

Intended Audience

This course is intended for cloud architects, business management, or anyone looking to manage their costs effectively in AWS.


To get the most out of this course, you should already have some experience with the AWS platform.


Welcome to your very first Lecture “Understand how AWS Billing works.” Here we’ll give you the basics you need to understand AWS Billing.

We take you on a journey through the development from the classic data center to today's public cloud. 

In addition to important information about the modern Cloud Economy, we also show you the problems with the Public Cloud. 

Cloud costs affect everyone, so it is important that IT, Finance, and Executive Departments understand each other. We convey the most important terminology from these areas and ensure mutual understanding. 

Even though we are fans of practical learning, this will be a theoretical lesson to lay the foundations for the rest of the course.

Please join me into the first lecture.

Let's take a look at where we actually come from. Until the year 2006, companies still relied on their own IT. IT costs were fixed, also called Capital Expenses or CapEx. 

That has changed with the move to the cloud. IT and cloud costs are now much more variable and difficult to plan than before. We have moved to operational expenses, also known as OpEx. No worries if you don’t know exactly what these terms mean, we’ll cover them later.

We are currently at a tipping point where more is already being spent on cloud resources than on-premise. And the trend is rising. Forecasts predict that by 2022 we will have a total cloud spend of around 360 billion dollars.

In addition to many advantages, the cloud also has its downsides and we can see what these are in this graphic. At re:Invent 2019 310 business and IT executives were asked where their biggest problems lie in cloud operations. 

The graphic speaks for itself, 29% stated that cost management is their biggest challenge. 

This is still underpinned by a survey by Gartner. According to the survey, 80% of companies will overrun their Infrastructure as a service budget in 2020. 

Reason enough to bring the knowledge about cloud cost optimization to the world, right?

Working in the Cloud comes with many benefits and variable expense control. However, due to the often new and unfamiliar environment, many users end up with paying more and struggling with cost management.

About the Author

Oliver Gehrmann is a FinOps Consultant and CEO of kreuzwerker Frankfurt, a German consulting firm with a strong focus on AWS, software engineering, and cloud financial management. He's worked in IT for over 10 years, facilitating the migration from physical servers in data centers to modern cloud infrastructures.
He and his team have experienced first-hand that costs in the cloud are becoming more and more of a challenge when about 2.5 years ago more and more customers approached them with this topic. Costs ran out of control and could not be addressed to business values.
Since that time, we have worked extensively on the topic of cloud financial management and have already been able to save our customers many millions of dollars. He now shares this knowledge in order to help others.